Does Apple see Apple TV+ as nothing more than a loss-leader?
Does Apple see Apple TV+ as nothing more than a loss-leader?
New data has some interesting insights on why Apple continues to keep its streamer going in the face of significant losses.
What’s Apple’s endgame with its streaming service Apple TV+? How does the company justify its existence after a recent report that it loses $1 billion every year? Those questions are at the top of analysts minds lately, but new data recently unveiled by CIRP may be shedding some light onto the answers.
Key Details:
- Apple TV+ users tend to own more Apple devices, according to CIRP.
- This raises an interesting chicken-or-egg dilemma regarding Apple TV+.
- The three-month Apple TV+ trial that Apple device purchasers get could be the key factor.
When it comes to generating revenue, there are few companies in the world that do as well as Apple. With a market capitalization of over $3 trillion, the tech giant is not hurting for money. However, despite a long string of hits, the company’s streaming service is still losing $1 billion per year according to recent reports. That has led many onlookers — including Netflix co-CEO Ted Sarandos — to wonder why Tim Cook and Apple continue to pump money into the platform.
Well, according to CIRP’s data, 50% of Apple TV+ subscribers own each of the three principal Apple devices: an iPhone, iPad, and a Mac. It also found that one third of customers who had purchased a new device from Apple in the past three months are already Apple TV+ viewers. The data brings up an interesting causational question: Are viewers watching Apple TV+ because they are already devoted to the Apple brand, or are they buying more Apple products because they love the programming on Apple TV+ and want to continue supporting the company?
It might be near impossible to thoroughly answer that question without more data if it were not for one key fact: Apple gives consumers who purchase one of its devices a three-month free trial to its streaming service for free. With the data that 33% of new Apple device buyers use Apple TV+, it would seem that the trial brings a substantial number of customers to the service.
The trouble is, they don’t seem to be staying subscribed at a rate that Apple would like. Apple TV+ has the second-highest churn rate of any premium streaming service as recently measured by Antenna, so it’s clear that many viewers decide the three-month trial is enough.
I think the problem there lies in Apple TV+’s programming philosophy. The streamer is exclusively interested in stocking its library with high-quality, original shows, and only introduces licensed programming for limited windows. Customers may find a show, or two, or three that they really like on Apple TV+, but when those shows are finished and there are six months to a year before a new season comes out, they don’t feel much incentive to pay $10 per month for the streamer.
Which brings the question back to whether or not Apple will try to do anything to improve the revenue stream from Apple TV+. The company may see value in having the streamer keep customers within its corporate ecosystem; a loss-leader service that keeps the Apple brand in the minds of consumers the next time they shop for electronics. The company still makes billions of dollars in profit every year, and it might see Apple TV+ as a key part of that equation even if it isn’t actually the thing bringing in money.
There are certainly means at Apple’s disposal to enhance the money Apple TV+ generates, such as price increases or the introduction of an ad tier. Until those things actually happen, however, analysts will continue to pontificate over why Apple thinks its streamer is a worthwhile venture, despite its continued losses.
Apple TV
Apple TV (formerly known as Apple TV+) is a subscription video streaming service for $14.99 per month, offering a growing slate of original series, films, documentaries, and specials. Unlike other platforms that combine licensed titles with originals, Apple TV is built entirely around exclusive programming, making it the home of critically acclaimed hits such as “Ted Lasso,” “Severance,” “The Morning Show,” and “Silo.” Its lineup continues to expand with award-winning dramas, comedies, family-friendly shows, and blockbuster original films like “CODA,” which won the Academy Award for Best Picture.