IHS: Media & services increasingly important to Apple
March 27, 2019
IHS Markit has offered its insight following Apple’s unveiling of its new streaming TV and news service from Apple
Apple’s commitment to content across all media forms, as well as credit and payment options, indicates the company will continue to invest in its expanding service provision businesses, according to Maria Rua-Aguete, executive director, IHS Markit, and Max Signorelli, research analyst, IHS Markit. Like many of the modern technology giants, Apple’s core business is not in content or services. For Amazon, their core business is retail, for Google it is advertising, for Apple it is their devices business. As Apple’s hardware business begins to dwindle however, especially as the iPhone loses market share to Android phones, the role of services and media will be increasingly important to the company.
This updated role is further reinforced by the expansion of Apple’s device portfolio for its TV app, becoming available for the first time outside of the company’s core device base on major smart TV and digital media-adapter platforms. Apple’s move is indicative to the industry more and more, as content providers need to strive to be platform-agnostic in their expansions.
For Apple’s new content subscription services, only the pricing for its News+ service was announced, with more information on the app store Arcade subscription coming soon. The pricing for both the Arcade and TV+ subscriptions will be particularly important for their development, especially considering the content they are offering. Importantly, these Apple subscriptions, like the News+ subscription, are said to include family sharing options as part of the package cost, giving them the same broader availability as other services.
Apple’s entry into credit card services with Apple Card is a strong offering for Apple’s customers who are avid users of Apple Pay services. The built-in functionality of the service into Apple Pay, as well as the development of a physical credit card, allows Apple to have insight into the transactions of its customers across all platforms, whether or not they are directly connected to Apple Pay.
Apple Arcade is one of the first subscription services of its kind for mobile gaming, a sector that has gained significant traction in the last few years, with larger and more prominent developers backing the production of high quality content that can be played on the go. As with subscription services on traditional gaming platforms that have existed for some time, the pricing and content library (both exclusive and otherwise) of Apple Arcade will be paramount to its success.
While an Apple video service has been anticipated for a number of years, only recently have details appeared, including Apple’s reported spending of nearly $1 billion on original content commissions. The details of Apple TV+ are still unclear and Apple’s initial investment in the service’s content is strong. However, by itself, it is unlikely to be enough to draw significant usage away from Netflix, Amazon Prime Video and other dominant players, especially with the major US studios set to release their direct-to -consumer offerings over the next few years.
Despite the gains in its service provision sector, Apple has another motivator behind its current content strategy. Video is a well-established and ever more-significant tool for Apple, Amazon, Google and other companies with larger ecosystems, to retain customers and keep them invested in other products. Video can provide a more satisfactory and engaging user experience and can help to reduce churn from other more developed business sectors.
With devices still generating over 80 per cent of Apple’s revenue, such retention will be beneficial for its core hardware business. It will aso help sustain and push its services division, as it continues to grow, IHS Markit concludes.