Apple (NASDAQ: AAPL) may finally be ready to unveil its news and video-streaming subscription services, according to reports this past week about a planned March 25 event.
While both projects have long been rumored, Apple has released no real details about them. The tech giant has been under increased pressure to come up with additional revenue streams to counterbalance a dip in iPhone sales and a maturing smartphone market. For the past quarter, the company's iPhone revenue was down 15%, year over year.
Having 1.4 billion active iPhone devices worldwide that it can push new services on, such as news and video subscriptions, makes this a potentially fruitful announcement.
Tim Cook at the iPhone launch last October. Apple's next event might be coming soon, as it preps to two subscription services. Image source: Apple.
1. Apple's video streaming hub
Apple has said it wants to give consumers a way to access all of their streaming services from one app. That's because, as the streaming space expands to include companies like Disney (NYSE: DIS), Apple, HBO, Amazon (NASDAQ: AMZN), and others, users are having to subscribe to two or more services and navigating separate apps for each one.
The combined service is expected to be offered as part of Apple's TV app. The idea is to make available original content, as well as programs from other video subscription options such as Starz and Showtime. There is no set date for the launch. Speculation right now says to expect it anywhere from April to sometime in the fall.
Sources say Netflix (NASDAQ: NFLX) has not signed on to be part of the app, but that Apple is still in talks with HBO about joining, according to CNBC. Last year, Apple was said to have spent $1 billion developing its own original shows, similar to Netflix and its now-six-year-old original-content strategy. Apple's level of spending doesn't quite match up to Netflix's content budget, which is reportedly $15 billion (up from $8 billion in 2018).
2. Apple's news service hub
The news publishing industry is still adjusting to the digital age and figuring out how to best monetize its content. Apple thinks it can help. The company plans to launch a bundled news service to customers that will allow them to subscribe to multiple publishers using one app.
This seems like a decent idea considering more and more print newspapers have decided the best way to make money is through subscriptions -- both online and print. But newsrooms continue to tighten budgets, and Apple is reportedly asking publishers for a 50% cut of the revenue made through its new product, according to The Wall Street Journal. It's possible Apple will have a tough time getting publishers to sign on to the project and may explain why the company has been slow to launch it.
Why subscription services?
Apple is well known for being late to tech trends, but then trying -- and often succeeding -- in taking over anyway. Apple wasn't the first tech company to make an MP3 player, but soon came out with the superior iPod that was an instant hit. It also didn't come out with the first smartphone, but with the launch of the iPhone in 2008, it soon became the dominant player. More recently, it also came out with the HomePod a few years after Amazon launched the Echo, hoping to be the best in that segment as well.
Now, Apple is trying to catch up in both the video streaming and news subscription markets. It figures the best way it can jump in and become a dominant player with a significant revenue stream is by becoming the go-to hub for both services.
In a way, it's a shortcut. Apple doesn't have to put in as much work, it just creates a marketplace for publishers and video streamers to sell their own work. This is something Apple has had successs with before: Simplifying products and making them available to a wide audience.
Apple will also be contributing to the original content offerings on the service, which could help attract interest and users and create a mutually beneficial relationship with potential partners. Struggling publishers and desperate Netflix competitors would need a good reason to turn down the chance to have their content easily accessible on the 1.4 billion Apple devices currently in use. For them, even a 50/50 revenue deal with Apple may be worth it.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Netflix, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.