Apple still reliant on devices
July 28, 2020
Apple’s latest results will shows its new services, including TV, have yet to generate meaningful revenue, leaving it reliant on the iPhone and App store.
Last year Apple had an enormous launch for four new services: TV+, Arcade, News+ and the Apple Card but the propositions haven’t moved the dial on Apple’s top line, reports Bloomberg.
When Apple reports results on July 30th, for the fiscal third quarter, analysts forecast $13.1 billion (€11.1bn) in revenue from services, up 15 per cent from a year earlier. But most of those gains will come from existing services, such as the App Store and licensing deals.
The Apple TV+ service, which launched last November, has had no blockbusters yet, though some shows and movies have been well-received. Apple offered a one-year free trial with the purchase of a new iPhone or other hardware. But some analysts estimate that fewer than 15 per cent of eligible customers have signed up.
Apple introduced its Arcade mobile game subscription last September with 100 titles and praise from reviewers. However, the company recently shifted strategy, cancelling contracts for some games in development while seeking other titles that it believes will better retain subscribers.
The Apple Card came out in the US last August partnered by Goldman Sachs. The bank accumulated about $2 billion in credit lines since launch, a fraction of other co-branded cards, according to a February update by the Nilson Report.
The Apple News+ subscription offering may be the least successful so far. When it launched in March 2019, the highest-profile US newspapers – the New York Times and the Washington Post – didn’t take part. Since then, several publishers have complained about lower-than-expected income from the app. The head of business for Apple News stepped down, Bloomberg reported earlier this year.
For now, the company is still relying a lot on its App Store and third-party developers to spur revenue growth beyond hardware. That’s been going well lately, leaving the company on track to exceed $50 billion in annual Services revenue soon. The App Store generated $32.8 billion in the first half of 2020 for developers, up more than 20 per cent from a year earlier, according to Sensor Tower estimates. Paid subscriptions topped 515 million in the fiscal second quarter.
Apple takes a cut of 30 per cent from all paid apps downloaded from the App Store as well as purchases made inside of apps. It also takes 30 per cent from in-app subscriptions, or 15 per cent after the first year.