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Some believe that Apple's long-awaited video streaming service is a key part of replacing lost iPhone revenue with Services revenue, but at least one major analyst remains skeptical.
Tim O'Shea, an analyst at Jefferies, predicts that Apple will charge $ 15 per month for this service, and that the company faces two big challenges – and even the best forecasts do not help the company so much …
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In an investor note seen by Internal business, O'Shea says there are two success factors in streaming video. First, the original content – in which Netflix has excelled. Second, access to the content of major studios and networks. Apple, he says, is not well positioned to achieve these goals.
Apple spends a fraction of what Netflix spends on original series and movies, which means that at least in the beginning, it will probably be much more dependent than the giant of streaming third-party content. However, the company's plans to reduce its revenues by 30% may not appeal to many Hollywood studios and networks, he said.
"It's hard to see how these economies are soaring," O'Shea said.
Even before the launch of Apple's video service, Netflix was trying not to pay a commission similar to Apple's so that app store developers would subscribe to subscriptions via their iPhone apps. Instead, Netflix encourages customers to subscribe to its service through its website.
Apple may find it difficult to enroll customers in its own video service if too many production companies are reluctant to offer programs and movies through it. Netflix has already hesitated to be part of the Apple service and HBO has not yet agreed to engage, reported CNBC.
"There are only a few players that make the content important," O'Shea said. "If you lose one or two, it makes your service a lot less attractive."
O'Shea recognizes that Apple's huge customer base and ecosystem leave it well-positioned to attract subscribers, while the growing number of Apple Music subscribers is showing its full potential. But even if Apple's streaming video service becomes more important than Netflix, it still does not help much, he suggests.
O'Shea estimated that if Apple's video service had 250 million subscribers in 2023, it would still only account for about 5% of the company's revenue that year – and would not offset the decline in its sales of smartphones. By reference, after 12 years of offer in video streaming, Netflix has 139 million subscribers.
"It takes a lot of time for this type of service to really move the needle," O'Shea told Business Insider.
Apple should finally announce its video streaming service at an event on March 25th.
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