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What Does Apple TV+ Mean for Convergent TV?

What is Apple TV+?

The streaming media pie is bigger than ever, and Apple wants a bite. Apple TV+, Apple’s representative in the Streaming Wars, is both an entertainment platform and another way to keep device users inside the walled garden of the most valuable company in the world. It doesn’t cost much, doesn’t run ads, and doesn’t appear to be bringing Apple significant direct revenue.

Apple TV+ Snapshot

The service launched in November 2019 with no third party shows and a small stable of star-studded original series. Despite high production value and A-list celebrity casts, original programming on the service has so far earned middling reviews.

Subscriptions are $4.99/month, or free for a year when you buy a new Apple device. Apple hasn’t released numbers, but on a January earnings call, CFO Luca Maestri said the service “was immaterial to our results.” But while Apple TV+ currently lags behind its competitors in almost every metric, recent moves indicate Apple has real ambition for the streaming service’s future. Or at least, a plan to leverage it to grow other parts of its business. Apple has seen sales of its flagship product, the iPhone, slowing down in recent years. The company stopped reporting quarterly iPhone sales in 2018 after it missed Wall Street sales estimates one quarter. Meanwhile, the company has shifted focus to the fast-growing services side of its business. That’s where Apple TV+ comes in. 

What does Apple TV+’s launch mean for convergent TV advertising today?

Apple TV+ doesn’t plan to start running ads anytime soon. But the streaming service still matters for convergent TV advertising. 

As the first free trials start to expire at the end of 2020, Apple has announced several deals that could motivate users to adopt paid subscriptions when their trials run out. For example, Apple announced an ad-free bundle for access to Apple TV+, CBS All Access, and Showtime, which includes a steep discount compared to separate subscriptions. Something to watch is whether this bundle pulls viewers from the ad-supported version of CBS All Access. Apple has also been buying up older shows and continuing to invest in new content leading to potential for strong growth, with some estimates projecting Apple TV+ reaching 100 million subscribers by 2025

Beyond streaming its own content, Apple is squarely in the connected TV hardware space with its Apple TV offering.  Although it trails Roku and Amazon Fire Stick in user count, it’s worth noting that Apple TV does allow users to access HBO Max and NBC Peacock, giving it a leg up over its larger CTV rivals who are engaged in contract disputes. Apple is clearly bought into the future of streaming and is smartly approaching it from both the supply side and the distribution angle.

What does Apple TV+’s launch mean for convergent TV advertising in the future?

Apple is reportedly working on a bundle of its services, that is being referred to as Apple One. The bundle would comprise Apple Music and Apple TV+, with the option to add other services like Apple News+ and iCloud storage. The initiative could be a bid by Apple to achieve the same loyalty and reach that Amazon has won through its Prime program. 

Apple One would likely be a boon for advertisers and Apple alike. The bundle could increase the user base across included services and incorporate insights from viewing preferences and consumption habits into improved ad targeting. That means that even if Apple doesn’t start running ads on Apple TV+, the streaming service could make the bundle more competitive and ad inventory on other Apple platforms more attractive. Apple sells ads in both the App Store and Apple News, and although App Store ads may be primarily bought by developers, Apple News boasts advertisers from a more diverse group of industries.

Bottom line is that Tim Cook has been preaching the importance of the services business to Apple’s future for years, and Apple TV+ may turn into one of the critical levers in that journey. 

We’ll keep this page updated with new developments; check back for the latest on the Apple TV+.

Read the rest of our Convergent TV blog series here!

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