For years, investors and Apple AAPL have been beholden to the iPhone, which is hardly a negative since its flagship product is largely responsible for turning Apple into one of the world’s biggest companies. But Apple has slowly pushed into new growth areas, with streaming television its newest frontier.
So let’s take a look at what Apple has planned as it readies itself to compete against the likes of Netflix NFLX and Amazon AMZN in the battle for the new age of entertainment.
Apple’s second-quarter revenues jumped by 16% to reach $61.14 billion, with iPhone revenues up 14%. However, iPhone unit sales climbed only 3% and iPhone revenues accounted for over 62% of total Q2 sales.
Apple knows this is not a sustainable business model, because rare is the consumer product that can remain in vogue for decades. This is why Apple has made a big push into news, which includes its March purchase of digital magazine subscription service Texture. Meanwhile, Apple Music has quickly become one of the most popular premium music streaming services, with its 38 million subscribers—50 million including users on a free-trial—competing directly against Spotify SPOT.
Apple Music helped Apple’s Services revenues climb roughly 31% to hit $9.19 billion last quarter, making it the company’s second-biggest revenue generator, nearly outpacing iPad and Mac’s growth combined. Apple’s Services unit features revenue from digital content and services, such as iTunes and Apple Music, as well as AppleCare, Apple Pay, and other services.
Meanwhile, somewhat quietly, Apple is ready to join the streaming entertainment market, in a big way. The company hired the former co-presidents of Sony Pictures Television, Zack Van Amburg and Jamie Erlicht, last June to head up Apple’s original programming division. Since then, Apple has gone on a major spending spree to scoop up original TV content, featuring some of the biggest directors and actors in Hollywood, in a move that many speculate will eventually lead to the launch of an Apple streaming platform.
Multiple reports from both The Wall Street Journal and The New York Times have noted that the technology powerhouse plans to start to roll out its slate of original series as soon as March 2019—Diseny DIS is expected to debut its streaming platform in late 2019. It is unclear at this time if Apple will sell this service as a stand-alone product or if it will possibly bundle in Apple Music, its news offerings, iCloud storage, and more.
Yet, no matter when Apple’s streaming platform does launch or what it ends up looking like, investors should understand what it will offer right away. The list of new Apple television programing includes, a reboot of Steven Spielberg's original series Amazing Stories; an animated series from the from Emmy-winning creator of Bob's Burgers; a world-building drama from Peaky Blinders creator and Hunger Games director; an untitled show starring Jennifer Aniston and Reese Witherspoon; a drama series from La La Land director Damien Chazelle; a psychological thriller from M. Night Shyamalan; and many more.
Although the details of many of Apple’s shows and its streaming platform are still unclear, investors should be pleased to see that Apple is ready to venture down a new revenue stream. Cleary, it will be hard to compete against Hulu, Amazon Prime, HBO, and Netflix.
But Netflix itself proved that spending on the right content can turn your platform into an industry leader—remember, House of Cards, its first original series, didn’t even debut until February 2013. And Apple has already secured some of the biggest names in Hollywood both in front of and behind the camera.
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The Walt Disney Company (DIS) : Free Stock Analysis Report
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