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Apple TV service faces biggest test yet as free trials run out

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Apple CEO Tim Cook arrives for Apple’s “The Morning Show” World Premiere at Lincoln Center – David Geffen Hall on October 28, 2019 in New York City.

Angela Weiss | AFP | Getty Images

The training wheels are about to be released for Apple TV +, the company’s streaming video service.

Apple TV + costs $ 4.99 per month. It also comes bundled with other Apple services like Music and iCloud in plans called Apple One starting at $ 14.95 per month. But a lot of subscribers don’t pay.

Apple offered a large number of Apple TV + subscriptions to launch the service. From September 2019, anyone who has purchased an Apple product (iPhone, iPad, Mac, Apple TV, or Apple Watch) gets one year of Apple TV + for free. During the pandemic, Apple extended the offer twice for people whose trial periods were about to expire.

The majority of Apple TV + subscribers still benefit from the promotional offer, with 62% of current subscribers accessing Apple TV + through a promotional package, according to data from a Moffatt Nathanson survey released in January. Apple did not specify the number of subscribers for the service, but it has sold hundreds of millions of iPhones and other gadgets since late 2019.

Now Apple is starting to wean Apple TV + subscribers from the free plan.

On July 1, people who buy Apple products will only be entitled to 3 months of free Apple TV +, instead of one year, and people who have already paid for the trial will no longer be able to get it. Also in July, the first subscribers to activate the promotional offer will begin to be automatically billed for the service after having had access to its shows for almost 21 months for free.

This creates a huge test for Apple.

Will the millions of users currently on a free trial end up signing up for the $ 5-per-month service or an Apple plan because they can’t live without Apple’s shows? Or will they cancel?

Others may simply forget they were on trial and not immediately notice the new charges.

Apple reducing its reliance on free trials for Apple TV + is a “tipping point” for the service, said Steve Cason, an analyst with Parks Associates who tracks the streaming industry.

“For newer or smaller departments, partnerships and promotions are an invaluable customer acquisition tool,” said Cason. “A large percentage of people follow, they really like the service and keep it going. Or they forget that they gave the service their credit card.”

Fewer TV shows and movies than its rivals

Apple TV + has always had fewer hours of movies and TV compared to other streaming services, which may be a reason it debuted at a lower price, compared to $ 8 per month for Disney + or $ 8.99 for a standard Netflix plan.

When Apple TV + launched in November 2019, it featured nine original Apple-backed shows and movies. Today, it has around 87 original TV shows, films and documentaries. This is far from what other services offer.

Hulu, for example, has thousands of shows, according to data from Reelgood, many of which already have large fan bases because they have aired on television. Netflix and Amazon Prime Video both offer over 1,000 licensed, original shows to watch.

Apple has not licensed any non-exclusive shows for its service and instead offers only financially supported shows. It hasn’t spent on buying media companies to fill its catalog, unlike Amazon, which recently agreed to acquire MGM Studios.

Most of Apple’s shows feature big-name producers and actors, such as Oprah and Steven Spielberg. However, talent is not exclusively linked to the company. Oprah’s biggest interview in recent memory, with Prince Harry, aired on CBS. Steven Spielberg also recently signed a deal with Netflix.

The streaming ratings are notoriously secretive, and Apple has never disclosed the number of viewers to its shows.

When Apple executives are asked about the success of its content, they highlight the appointments. In a press release last week, Apple said its original shows received 112 awards and 389 nominations, including Critics’ Choice Awards, Golden Globes and Oscars.

“No matter which device you like it on, this is a pivotal time for Apple TV +, racking up many new nominations and victories, including its first Oscar nominations,” said Apple CEO Tim Cook , during a call with analysts in April.

Cook then praised one particular show, “Ted Lasso,” which looks like Apple TV + ‘s first big hit. The light-hearted comedy about an American football coach, based on an NBC commercial poking fun at Americans’ ignorance about football, has found a fan base with its low-stake jokes.

Season 2 of “Ted Lasso” premieres July 23, and Apple will release new episodes every week in an effort to get current subscribers to try and potentially find new subscribers.

A promotional email sent to subscribers this week highlights “Ted Lasso” in addition to a second season of “The Morning Show” with Jennifer Aniston premiering in September. The email also promoted shows that had not yet aired, such as a comedy starring Will Ferrell and Paul Rudd called “The Shrink Next Door” and the science fiction series “Foundation” based. on the books of Issac Asimov.

Still, “Ted Lasso” is a 30-minute comedy with just 10 episodes currently available, and overall, Apple’s library of content still lags far behind its rivals.

“Apple is not in a strong position here,” said Michael Nathanson of Moffett Nathanson. “While they have some great shows, they don’t have the scale of new releases, tentpole titles, and an extensive library to really build a big, profitable business at this point.”

Part of a whole

Apple’s The Morning Show “will return for a second season on Friday, September 17, 2021.

Apple

It’s hard to understand how Apple TV + compares to Disney or Netflix in terms of subscribers because Apple doesn’t release stats.

Netflix has 208 million subscribers worldwide. It would also be surprising if Apple could match the 100 million Disney + subscribers it has built since the launch of Apple TV +.

Analysts are reluctant to come up with estimates, but based on the number of smartphones Apple sells per year, tens of millions of people could have taken advantage of the promotional offer for Apple TV. Apple sold 206 million iPhones worldwide in 2020, according to an IDC estimate, and that doesn’t include other Apple products that come with a free trial.

According to data from the Parks Associates survey, eleven percent of American households with a high-speed Internet connection subscribe to Apple TV +. There are around 103 million households with broadband, according to census data.

The percentage of subscribers who might end up unsubscribing is also unclear. A Moffett Nathanson analysis of survey data suggests that 29% of Apple TV + subscribers are not considering renewing and 41% are not sure yet. Only 30% said they plan to continue subscribing to Apple TV +.

But Apple never said it plans to take on Netflix, Cason said, so the total number of subscribers may not be that important to the company. He believes Apple TV + is another of the many services designed to make users addicted to iPhones and Apple services, in line with Apple’s overall corporate strategy.

“Apple wants to get you into their ecosystem through purchasing a device, and once you get in there, they say, ‘We’ll give you Apple TV +. We also have Apple Music, podcasts, news, fitness, you can bundle them together or you buy them separately, ”Cason said.

In fact, this is how Apple views its subscriber count. It said in April that it has 660 million paid subscribers on its services, but that also includes anyone who subscribes to an app through App Store billing.

Apple TV + provides the business with ad-free content that it can use to promote new audio and visual standards it incorporates into its products. For example, when Apple TV + shows debuted, they supported a Dolby HDR standard that produced better picture quality when viewed through a supported Apple player. The following year, Apple announced that iPhones can shoot video using Dolby Vision HDR.

More recently, Apple released a feature called Spatial Audio that works like advanced surround sound when listening on certain Apple headphones. Apple TV + shows and movies support spatial audio, giving Apple customers the ability to watch a show without the company making sure the supported content is available from its competitors.


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