Apple this week finally put numbers around its long-delayed TV+ subscription-video service, including a price, $4.99 a month. It’s a bargain, but delivers only a handful of shows at launch.
The offerings will presumably fill out quickly; after all, the company did order $6 billion worth of programs, like The Morning Show with Reese Witherspoon, Jennifer Aniston and Steve Carrell. Even all of Cupertino’s production meddling won’t permanently delay the appearance of most of those shows soon.
A bargain price for high-profile shows from top talent will attract some customers, no doubt. But Apple’s real opportunity to quickly become the world’s second-biggest video-streaming service after Netflix is due to a little-noticed deal.
That deal: Buy a Mac laptop or desktop computer, an iPad, or an iPhone and you get TV+ free for a year. It could be a game-changer in the business of streaming, even if most observers seem to treat the deal as an afterthought.
But it’s no afterthought. Here’s why: Last year, worldwide, Apple sold 217.8 million iPhones. The three new iPhones didn’t get a rapturous response last week, but I’m betting they’ll sell many tens of millions of the $699 flagship iPhone11, and the $599 holdover from last year, the XR, for a lot of excellent reasons.
Last year, Apple also sold more than 44 million iPads. It now offers a wide array of iPads at various price points and form factors, including the nicely featured new $329, 10.2-inch model that should move a bunch of units.
And finally, Apple shipped 18 million Mac desktop and laptop computers last year, according to estimates provided by market analysts IDC. Shipping isn’t the same as sales, but it’s safe to say most of those machines were sold. With long-overdue refreshes of the MacBook Air, MacBook Pro, and Mac Pro in the past year, they should still continue to sell a solid number of computers.
Altogether, that’s 280 million units of Apple hardware out the door, a number Apple will almost certainly match in the coming year or so.
Figure that there’s significant overlap between people buying the various Apple hardware, in part because of the usability dividends provided by tight interactivity between the devices through the company’s software.
So let’s say Apple indeed sells hardware of one sort or another to around 225 million unique customers, each of whom will now get a free TV+ subscription. At that point, TV+ is moving well into Netflix territory (it has 152 million subscribers right now).
Just for reality’s sake, let’s further cut the number in half, figuring that, as with Amazon Prime, only half of the customers getting free video access can figure out how to watch it, and choose to do so.
Then we can add in some portion of the existing owners of 1.4 billion other Apple devices as paying subscribers. Maybe they don’t buy hardware this year, but want access to The Morning Show or Ron Moore’s next sci-fi blockbuster series. If, somehow, Apple persuaded even 1 percent of those device owners to subscribe, that would be another 14 million accounts.
That’s around 125 million subscribers, both paying and free.
For perspective, Morgan Stanley sent Disney stock up 4 percent when it projected that combined, all three of that company’s streaming services would hit 130 million… by 2024.
Amazon Prime has more than 100 million subscribers, but again, estimates are that only about half of those subscribers take advantage of its fine array of included video programming alongside Prime’s free shipping, music, reading, and other benefits.
CBS All Access and the streaming version of corporate sibling Showtime have a combined base of 5 million subs. HBO Max won’t launch until April, and will cost around three times as much as Apple TV+.
Comcast, whose still-unnamed service finally got a general manager last week, also won’t launch until next year. It reportedly may do the same throw-in deal with its programming for its 22 million pay-TV subscribers, or 25 million Internet customers, but that still leaves it orders of magnitude behind Apple’s potential reach.
And No. 2 cable provider Charter Spectrum is doing an increasing amount of free or ad-supported programming exclusively for its customers, from news channels to police procedural series.
These back-of-the-envelope calculations show that Apple could add many tens of millions of subscribers in its first year, in a way that its big-media competitors can’t duplicate. It could quickly outstrip just about all the competition, and grab a fast and substantial lead in subscribers, the major metric used to measure success.
And after they’ve had the service for a year, for free, with more and more shows coming online, what are the chances that many of those subscribers will object, or even notice, that $4.99 fee on their monthly bill?
It’s easy to dismiss TV+ after its stuttering start and short list of programs at launch. But by giving away an inexpensive premium service to all its hardware-buying fans, Apple again is upending an industry, in this case, the nascent SVOD business. How are we going to value the competition when they have a tenth of Apple’s subscribers, or less, a year from now?
