Apple TV+ Could Quickly Become World’s No. 2 Video Service Because Of This One Thing

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Apple this week finally put numbers around its long-delayed TV+ subscription-video service, including a price, $4.99 a month. It’s a bargain, but delivers only a handful of shows at launch.

The offerings will presumably fill out quickly; after all, the company did order $6 billion worth of shows, like The Morning Show with Reese Witherspoon, Jennifer Aniston and Steve Carrell. Even all of Cupertino’s production meddling won’t permanently delay the appearance of most of those shows soon.

A bargain price for high-profile shows from top talent will attract some customers, no doubt. But Apple’s real opportunity to quickly become the world’s second-biggest video-streaming service after Netflix is due to a little-noticed deal.

That deal: Buy a Mac laptop or desktop computer, an iPad, or an iPhone and you get TV+ free for a year. It could be a game-changer in the business of streaming, even if most observers seem to treat the deal as an afterthought.

But it’s no afterthought. Here’s why: Last year, worldwide, Apple sold 76 million iPhones, worth a little more than $100 billion. And for this year, they ordered components to build 75 million more. The three new iPhones didn’t get a rapturous response last week, but I’m betting they’ll sell many tens of millions of the $699 flagship iPhone11, and the $599 holdover from last year, the XR, for a lot of excellent reasons.

Last year, Apple also sold 48 million iPads. It now offers a wide array of iPads at various price points and form factors, including the nicely featured new $329, 10.2-inch model that should move a bunch of units.

And finally, Apple shipped 18 million Mac desktop and laptop computers last year, according to estimates provided by market analysts IDC. Shipping isn’t the same as sales, but it’s safe to say most of those machines were sold.

Altogether, that’s 132 million units of Apple hardware out the door, a number Apple will almost certainly match in the coming year too.

Figure that there’s significant overlap between people buying the various Apple hardware, in part because of the tight interactivity between the devices through the company’s software.

So let’s say Apple indeed sells hardware to about 75 million unique customers, each of whom will now get a free TV+ subscription. At that point, TV+ is at half the level of Netflix’s 152 million subscribers.

Add in some portion of the existing owners of 1.4 billion other Apple devices as paying subscribers. Maybe they don’t buy hardware this year, but want access to The Morning Show or Ron Moore’s next sci-fi blockbuster series. If, somehow, Apple persuaded even 1 percent of those device owners to subscribe, that would be another 14 million accounts.

That’s around 90 million subscribers, both paying and free.

For perspective, Morgan Stanley sent Disney stock up 4 percent when it projected that combined, all three of that company’s streaming services would hit 130 million… by 2024.

Amazon Prime has more than 100 million subscribers, but estimates are that only about half of those subscribers take advantage of its fine array of included video programming alongside their free shipping, music and other benefits.

CBS All Access and the streaming version of corporate sibling Showtime have a combined base of 5 million subs. HBO Max won’t launch until April, and will cost around three times as much as Apple TV+.

Comcast, whose still-unnamed service finally got a general manager last week, also won’t launch until next year. It reportedly may do the same throw-in deal with its programming for its 22 million pay-TV subscribers, or 25 million Internet customers, but that still leaves it orders of magnitude behind Apple’s potential reach.

And No. 2 cable provider Charter Spectrum is doing an increasing amount of free or ad-supported programming exclusively for its customers, from news channels to police procedural series.

These back-of-the-envelope calculations show that Apple could add many tens of millions of subscribers in its first year, in a way that its big-media competitors can’t duplicate. It could quickly outstrip just about all the competition, and grab a fast and substantial lead in subscribers, the major metric used to measure success.

And after they’ve had the service for a year, for free, with more and more shows coming online, what are the chances that many of those subscribers will object, or even notice, that $4.99 fee on their monthly bill?

It’s easy to dismiss TV+ after its stuttering start and short list of programs at launch. But by giving away an inexpensive premium service to all its hardware-buying fans, Apple again is upending an industry, in this case, the nascent SVOD business. How are we going to value the competition when they have a tenth of Apple’s subscribers, or less, a year from now?

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