Apple (NASDAQ: AAPL) could finally be ready to unveil its news subscription and video streaming services, according to reports last week about an event scheduled for March 25th.
While both projects have long been rumored, Apple has not published any details on these projects. The tech giant has been under increased pressure to generate new revenue streams to counterbalance the decline in iPhone sales and the maturing smartphone market. During the last quarter, the company's revenues for the iPhone dropped by 15% over the previous year.
With 1.4 billion iPhone devices active worldwide to support new services, such as news and video subscriptions, this announcement is potentially fruitful.
1. The Apple video streaming hub
Apple said it wants to give consumers a way to access all their streaming services from an app. Indeed, as the distribution space grows to include businesses such as Disney (NYSE: DIS)Apple, HBO, Amazon (NASDAQ: AMZN)and still others, users must subscribe to two or more services and navigate to separate applications for each one.
The combined service should be offered as part of the Apple TV application. The idea is to make the original content available, as well as programs from other video subscription options such as Starz and Showtime. There is no fixed date for the launch. Speculation at the present time says to wait anywhere from April to the fall.
Sources say Netflix (NASDAQ: NFLX) has not signed up to be part of the app, but Apple is still negotiating with HBO about its membership, according to CNBC. Last year, Apple would have spent $ 1 billion to develop its own original series, similar to those of Netflix and its original content strategy of six years. Apple's spending level does not quite match Netflix's content budget, which would be $ 15 billion (versus $ 8 billion in 2018).
2. Apple news service hub
The news publishing industry is still adapting to the digital age and looking for the best way to monetize its content. Apple thinks that can help. The company plans to launch a bundled news service for customers, which will allow them to subscribe to several publishers with the help of a single application.
This seems like a good idea as more and more print newspapers have decided that the best way to make money is to subscribe, online and on paper. But editors continue to tighten their budgets, and Apple would ask publishers to reduce by 50% the revenue generated by his new product, according to the same source. The Wall Street Journal. It is possible that Apple is having trouble getting publishers to subscribe to the project and perhaps explains why the company was slow to launch it.
Why subscription services?
Apple is well known for lagging behind technology trends, but then tried – and often succeeded – to take over anyway. Apple was not the first technology company to create an MP3 player, but soon came out with the premium iPod that was an instant hit. It was also not launched with the first smartphone, but with the launch of the iPhone in 2008, he quickly became the main player. More recently, he also launched the HomePod a few years after the launch of Echo by Amazon, hoping to be also the best in this segment.
Apple is now trying to catch up on the video streaming and news subscription markets. The best way to become a dominant player with a significant source of income is to become the hub of choice for both services.
In a certain way, it is a shortcut. Apple does not have to do as much work, it just creates a market for publishers and video distributors to sell their own work. Apple has already had success with this before: simplifying products and making them accessible to a wide audience.
Apple will also contribute to the original content offerings of the service, which could attract interest and users and create a mutually beneficial relationship with potential partners. Distressed publishers and desperate Netflix competitors would need enough reason to deny easy access to their content on the 1.4 billion Apple devices currently in use. For them, even a 50/50 contract with Apple could be worth it.
John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Natalie Walters does not own any of the shares mentioned. Motley Fool owns stocks and recommends Amazon, Apple, Netflix and Walt Disney. The Motley Fool offers the following options: Long Calls from $ 150 to January 2020 for Apple and short calls from $ 155 to January 2020 on Apple. Motley Fool has a disclosure policy.