'It's not surprising': Why Apple is raising subscription prices now

·3 min read

Apple (AAPL) is raising its prices, and one analyst says it shouldn't come as a surprise.

"It's not surprising," Dan Morgan, senior portfolio manager at Synovus Trust, told Yahoo Finance Live (video above). "It's a very competitive environment, and [Apple] is trying to offset some of the things that are happening with some of the competitors."

Morgan cited the current inflationary environment along with upcoming ad-supported tiers from Netflix (NFLX) and Disney (DIS) as reasons for Apple's decision. Both platforms have also hiked prices in the past year; Netflix boosted monthly prices in January while Disney announced price increases across its various streaming properties in August.

Apple CEO Tim Cook gestures at the Apple Fifth Avenue store for the release of the Apple iPhone 14 range in Manhattan, New York City, U.S., September 16, 2022.  REUTERS/Andrew Kelly
Apple CEO Tim Cook gestures at the Apple Fifth Avenue store for the release of the Apple iPhone 14 range in Manhattan, New York City, U.S., September 16, 2022. REUTERS/Andrew Kelly

Most recently, YouTube (GOOGL) raised the price of its YouTube Premium Family plan by 28%, with U.S. prices increasing from $17.99 to $22.99. The YouTube Premium individual plan and the student plan maintained their current prices of $11.99/month and $6.99/month, respectively.

"Streaming pricing is going to go up," Paramount (PARA) CEO Bob Bakish previously warned during Yahoo Finance's All Markets Summit (video above). He added that consumers will likely absorb the cost increases since "streaming represents an extraordinary value in general for the consumer."

Apple announced its price increases on Monday, which affect various services including Apple TV+, Apple Music, and the Apple One Bundle. This is the first time Apple has raised the subscription prices of those offerings in the U.S., and international markets will see similar price increases.

Best picture winner 'Coda' (Courtesy: Apple TV+)
Best picture winner 'Coda' (Courtesy: Apple TV+)

Apple Music will now cost $10.99 for an individual plan (an increase of $1), and the family plan will go up by $2 a month to $16.99. Pricing for competitor Spotify (SPOT) currently starts at $9.99 a month.

Apple TV+ will see a price increase of $2 to $6.99 a month, while the Apple One bundle, which includes subscriptions to Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+, and Apple Fitness+, will raise prices by $2 a month to $16.95.

Apple noted that the change to Apple Music is due to an increase in licensing costs. As a result, artists and songwriters will earn more for the streaming of their music.

The stock, which is down more than 15% year-to-date, traded higher on Monday following the news. Meanwhile, Warner Music Group (WMG) surged on the announcement, jumping by more than 13% at one point on Monday.

In regards to Apple TV+, the company wrote: "We introduced Apple TV+ at a very low price because we started with just a few shows and movies. Three years later, Apple TV+ is home to an extensive selection of award-winning and broadly acclaimed series, feature films, documentaries, and kids and family entertainment from the world’s most creative storytellers."

Morgan noted that although the Apple TV+ service isn't critical to the tech giant's bottom line yet, Apple wants to compete with other platforms by boasting highly-acclaimed hits, such as the Oscar-winning film "Coda" and Emmy award-winning series "Ted Lasso."

"It's not a big part of their business," Morgan said. "It's a component in its service side but it is something that they've been working to try and grow over a period of time."

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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