(Bloomberg) -- Apple Inc. launches its TV+ original video streaming service Friday, ending years of anticipation about the company’s next act in television. But it will lack what many consumers want: a giant library of their favorite movies and shows.
Over the past decade, the iPhone maker has explored building its own TV set, buying major content firms like Time Warner and partnering with cable companies on new TV set-top boxes. Instead, it landed on a combination of a video aggregation app, on-demand access to pay-TV channels like HBO and Starz and a $4.99 monthly subscription service of original movies and television shows.The subscription service will be available on millions of iPhones, iPads, Macs and Apple TV boxes in 100 countries beginning Friday, just days ahead of Disney+ and months before comparable services from Comcast Corp. and AT&T Inc. Apple TV+ is currently focused entirely on original content, but its lack of a library of older fan favorites puts the service behind its rivals.
Apple’s original slate of content includes fewer than 10 programs coming Friday and a total of 15 in the initial slate. Disney+ is scheduled to begin Nov. 12, and it, too, is advertising 15 titles from among its first round of originals. Similarly, Peacock from Comcast’s NBCUniversal, is coming in April 2020 with 16 titles, while AT&T’s HBO Max, launching at $14.99 a month in May 2020, has dozens in the works. Apple has said it plans to add new titles on a monthly basis to its service, meaning the $4.99 value will increase over time. Still, many people subscribe to the top video services like Netflix and Amazon Prime Video primarily for their giant back catalogs of content.
“The number of streaming households that go out of their way to subscribe to Apple TV+ will be fairly limited initially due to limited content,” according to Michael Olson, an analyst at Piper Jaffray who covers Apple and Netflix Inc. Olson said a survey of 1,500 Netflix subscribers found 23% would subscribe to Apple’s offering and that interest is “moderate, not overwhelmingly high,” in part due to limited content. Video-streaming services typically start with a back catalog to “create early interest” before “transitioning” to originals, he said.
Apple TV+ is part of the Cupertino, California-based company’s strategy to generate more revenue from services and provide new ways to keep its loyal customers tied to the iPhone. Services generated sales of $12.5 billion in the fiscal fourth quarter, an increase of 18% from the period a year earlier, Apple said Wednesday.
Apple is pushing its video service like it does its devices, airing commercials during prime cable TV hours, putting up billboards in major cities and showcasing coming shows on its website and social media. The company has clearly raised enough awareness to quickly gain subscribers. And Apple is doing something it has rarely done in the past: allowing the service to work on third-party devices like Samsung TVs and Amazon set-top-boxes, giving it a larger potential customer base.
The concern about the lack of a catalog of reruns and old movies isn’t trivial and will make it difficult for Apple to fully compete. Disney+ will come to the market with the “Simpsons” and hundreds of Disney movies. HBO Max will have hit movies to stream like “Jaws” and “Erin Brockovich” and famous TV shows like “Friends” and “Big Bang Theory.” Netflix has blockbusters like “Seinfeld” and, until it moves over to Peacock, which has “The Office,” and a catalog estimated at more than 2,700 movies and 1,500 shows. Amazon.com Inc., which rivals Apple in consumer gadgets as well, has hundreds of older movies to stream on its Prime Video service.
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Netflix and Amazon Prime have both been building up their original content libraries for years, but they, too, started out with slim pickings, including only a few original programs initially. Today, Netflix is estimated to stream more than 1,200 original titles. Disney, NBC, and HBO’s services also have the built in advantage of giant content arms within their own companies, something Apple lacks. While Apple has thousands of movies and TV shows available on iTunes for single download purchases or rentals, it hasn’t shown the willingness to turn those deals into a subscription component for TV+.
Proponents said Apple’s service wasn’t designed with a back catalog of shows in mind, but with pricing a few dollars below services such as Netflix with giant libraries, consumers may find the lack of old favorites a clear omission.
With its pricing strategy, Apple has shown it recognizes the limitations of the service. At $4.99, it costs much less than Apple Music, Apple News+ and the company’s top cloud-storage offering, and in a move unprecedented for Apple, is bundled free for a year with any new device purchase. By necessity, it’s also far cheaper than most of its rivals, though HBO Max will also be free to some AT&T subscribers. Apple Chief Executive Officer Tim Cook said Wednesday the service is priced at $4.99 a month to encourage as many subscribers to sign up as quickly as possible. And, in a rare statement, the company said the service and pricing strategy would be immaterial, at least initially, to its financial results.
So far, the reviews of Apple's first slate of original shows indicate why a backlog of content is so important. Variety called “The Morning Show” with Jennifer Aniston and Reese Witherspoon a "streaming misfire" and the Hollywood Reporter said “See,” starring Jason Momoa, “isn't close to a good show.”
Still, Apple is banking on its service being good enough for its loyal users to pay for it a year from now, and even if the company can get just a quarter of its new iPhone buyers to sign up after a year, Apple TV+ will be a multibillion-dollar addition to its growing services arsenal.
--With assistance from Christopher Palmeri.
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