Apple TV+ sends weak signals

Apple TV+ sends weak signals

New York (Bloomberg): Apple Inc.’s streaming-video service has gained limited traction with consumers, and this could represent a cautious signal as the company moves away from hardware sales and toward services.

It is estimated that fewer than 10 million consumers opted for their free 12-month trial of Apple TV+. This equates to 10 per cent or fewer of eligible customers, a take rate that is “surprisingly low”. (Apple hasn’t disclosed subscriber numbers for the TV+ service.)

According to analyst Toni Sacconaghi at Bernstein, Apple TV+ may be “failing to resonate with customers, perhaps due to its limited content offerings”. Unlike other streaming services such as Netflix Inc. or Amazon Prime, which offer reruns to well-known content, Apple only offers original shows on its service.

Meanwhile, Walt Disney’s Disney+ service has benefited from the company’s pool of well-known intellectual property, like “Star Wars” and Marvel.

In December, an expert panel hosted by UBS said that Apple TV+ “needs a mega-hit original series to ultimately retain subscribers,” adding that the company “may likely have to ultimately also acquire an asset with a big backlog of catalogue content - most of which will be very expensive at this point.”

Yet to have Apple’s full backing

Bernstein suggested other reasons why Apple TV+ may not have caught on in terms of subscribers. It could be that Apple “hasn’t been able to effectively promote TV+,” Sacconaghi wrote, encouraging the company “to more directly leverage its 1.5 billion device installed base.”

He also reflected that the company may be conservatively estimating the take rate or “deliberately scaling its promotions of TV+ slowly to mitigate the negative accounting impact.”

In any case, he added, investors should “closely monitor the adoption of TV+ going forward,” as the take rate will “provide some indication of potential acceptance of the service, as well as Apple’s ability to successfully launch meaningful new revenue-generating services.”

Apple confronts some gravity
Shares of Apple are up nearly 80 per cent from a June low, although it has recently dropped on concerns over the coronavirus outbreak in China.