Apple Inc.'s new streaming video service is a smart way to appeal to its existing user base, but it might not offer enough compelling features to gain footing in a saturated market, analysts said.
Apple this week unveiled its highly anticipated Apple TV+ subscription streaming service that will launch Nov. 1 for $4.99 per month. The service, which features exclusive original video content from A-list celebrities such as Jennifer Aniston and Oprah Winfrey, will be available free for one year to consumers that buy iPhone, iPad, Mac or Apple TV devices.
Apple TV+ 's price tag is cheaper than other streaming subscriptions, such as Netflix Inc., which charges monthly streaming fees ranging from $8.99 to $15.99, and The Walt Disney Co.'s upcoming Disney+ streaming service that is set to launch Nov. 12 for $6.99 per month. While analysts believe Apple's strong ecosystem could help the company attract Apple TV+ viewers early on, they note the service faces tough competition from rivals that are more established in the streaming space and have more robust content offerings.
Apple's upcoming series, "The Morning Show."Source: Apple Inc. |
Ryan Reith, an analyst with research firm IDC who has expertise in mobile phones, tablets and wearable technology, said Apple has an advantage over competitors due to its loyal customer base, which allows the company to wrap more services around its entire ecosystem.
"Apple brings along a very, very strong ecosystem that continues to grow," Reith said in an interview.
But Reith noted that it will still take time for Apple to prove itself as a solid contender in the streaming industry, as it will need to deliver popular programming and add more viewers.
Apple TV+ will be available in over 100 countries with a slate of original series, including "The Morning Show," starring Aniston, Steve Carell and Reese Witherspoon, that offers a behind-the-scenes look at the production of a morning TV show; "Dickinson," starring Hailee Steinfeld, which examines the life of American poet Emily Dickinson with a modern spin; and "See," with actor Jason Momoa telling the story of a group of people trying to survive in a world where humans have lost sight.
Speaking at the Sept. 10 event where the company unveiled Apple TV+, Apple CEO Tim Cook said the purpose of the service is to introduce viewers to stories that help them find "inspiration" and that are "grounded in emotion."
Evercore ISI IT hardware analyst Amit Daryanani said Apple TV+ highlights Apple's continued efforts to monetize its massive global customer base and could boost iPhone sales in a year when consensus estimates are calling for a decline in iPhone revenue. But determining the streaming service's long-term financial success will be more difficult, he said.
"The financial opportunity for TV+ is difficult to estimate with a lot of uncertainty around conversion from free to paid subs and the potential high churn of service with a limited number of shows," Daryanani wrote in a Sept. 10 research report.
For his part, Nomura Instinet communications analyst Jeffrey Kvaal believes it is unlikely that Apple TV+ will be attractive enough to drive "meaningful hardware upgrades," and said the service's low price and free one-year promotional offer could eat into Apple's margins.
"We see negative margin implications given the free year and low price of Apple TV+ compared to its likely high content costs," the analyst wrote in a recent report.
Given how "similar" Apple TV+ seems to other streaming services, it is unlikely it will be able to steal meaningful share from other competitors, said Daniel Morgan, a senior portfolio manager at financial services firm Synovus Trust, who covers the technology sector. The key to attracting new streaming subscribers, the analyst said, is a greater focus on content and getting viewers "hooked on series."
"Netflix still has a tremendous advantage as its $8 [billion]-$9 billion content budget overshadows Apple's $1 billion spend rate," Morgan said.

Apple's upcoming series, "The Morning Show."