On Monday, Bloomberg posted an article containing several details about Apple’s upcoming subscription video-on-demand (SVOD) platform, Apple TV+. The publication spoke to insiders who claim that the corporation will officially launch its streaming service in November. However, the report notes that the iPhone maker is still unsure about its SVOD’S content distribution strategy and pricing.
New Apple TV+ Details
In March, Apple revealed that it had funded the production of a slew of platform-exclusive movies and TV shows. But according to Bloomberg, the company is unsure how to release that content. The firm’s leadership is debating if Apple TV+ will release an entire season at once, a la Netflix, or utilize a staggered release schedule similar to Hulu and Amazon.
Apple is also considering how to price monthly access to its movie and TV offerings.
The firm is reportedly considering a launch price of $9.99 per month. As such, Apple TV+ would be more expensive than Netflix and Hulu, which start at $8.99 and $5.99 respectively. However, the service would be the same price as Amazon Prime and $5 cheaper than HBO Now. The company is also weighing the notion of offering a free trial as it rolls out the release of its content.
Apple might run into trouble, however, as Disney is also planning to launch its SVOD in November. In addition to being $3 less than Apple TV+, Disney+ will open with a much bigger content library. Although the Cupertino-based corporation has trained its customer base to pay a premium for its products, a lack of content might make the service less appealing.
Furthermore, there are signs that Apple might have bitten off more than it can chew by entering the streaming video sector. Bloomberg’s report notes that the corporation initially budgeted $1 billion for its first year of content. Ultimately though, the firm revised that number considerably, ultimately allocating $6 billion for movie and TV production.
Somehow, Apple is reportedly spending $300 million to make the first two seasons of “The Morning Show,” a drama led by Reese Witherspoon, Steve Carell, and Jennifer Aniston. For comparison, HBO spent $90 million making the final season of “Game of Thrones.”
Services Over Products
The Bloomberg report also outlined why Apple is devoting so much money to its new SVOD. The publication notes that the iPhone maker intends to generate $50 billion in services revenue by 2020. In the quarter ending on June 29, the firm reported a services income of just $11.5 billion. While that segment grew by 11 percent year-on-year, the company has a while to go before hitting its goal.
Apple intends to quintuple its services revenue with a host of new offerings that include its SVOD, a newsstand for games and digital publications, and the Apple Card. The company’s leadership believes that a significant portion of the 1.3 billion people that own active Apple products will try its new offerings. Indeed, the company’s past success with the launch of iTunes and the App Store indicates that the strategy has merit.
The firm’s need to find new revenue streams comes partially because its core electronics business is softening. In Q3 2019, the corporation’s iPhone revenue dropped below 50 percent for the first time since 2012. Thanks to President Trump’s promise to impose a new 10 percent tariff on Chinese made electronics starting in December, Apple’s hardware revenue will likely continue to decline into 2020.
However, if Apple successfully revamps its business model to prioritize services over products, further declines won’t devastate it.