Can Apple TV+ Really Compete With Netflix And Disney+?

by Trefis Team
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Apple (NASDAQ:AAPL) is expected to launch its streaming service, Apple TV+, over the next few months, taking on the likes of Netflix and Disney’s upcoming Disney+ service. While the full list of studios/content that will be available on Apple TV+ is not available yet, the company has signed up big names from the entertainment industry including Oprah Winfrey and Steven Spielberg to create original programming. Bloomberg reported that Apple is considering a $9.99/month price point, after giving users a free trial. Below, we take a look at how the foray could pan out and whether the company can compete head-on with big names in the streaming space.

View our interactive dashboard analysis Can Apple TV+ Pose A Legitimate Challenge To Netflix And Disney+?

Monthly Pricing Post Free Trial Could Be Higher Than Disney+, But Lower Than Netflix’s Most Popular Plan

  • Apple TV plus could be priced at about $10 per month, compared to $7 for Disney Plus, $13 for Netflix’s most popular plan, and $13 for the planned Disney+, Hulu, ESPN+ bundle.

The Streaming Market Still Has Scope For Growth

Cord Cutting And Rising Broadband Penetration

  • The pace of cord-cutting is accelerating, with the number of pay-TV subscriptions declining in the U.S. while broadband penetration is picking up.
  • Top pay-TV players have seen their user base decline from 94.4 million in 2015 to about 89 million in 2018.
  • On the other hand, fixed broadband subscriptions have grown from 102 million in 2015 to 108 million in 2017.

While Netflix Dominates, There Is Scope For More Players Given Lower Prices For Streaming Vs. Pay TV

  • While competition is likely to be intense, with Netflix commanding the bulk of the market, we believe the streaming race will not be a zero-sum game.
  • Streaming subscriptions typically cost ~$10/ month versus pay-TV packages which average ~$100/month, meaning that cord-cutters could opt for multiple offerings.

Apple’s Scale, Background In Media Distribution Could Give It Some Advantages

Apple’s Installed Base Of Over 1.4 Billion Devices May Provide Early Traction

  • Apple has an installed base of over 1.4 billion devices and its users already spend a significant amount on its services.
  • This could make it easier for the company to get users to try out its streaming service.

Apple Has Seen Success In Streaming Media With Apple Music, Which Recently Overtook Spotify In Terms Of Paid U.S. Subscribers

  • Apple has a relatively strong track record with media distribution platforms.
  • For instance, Apple Music now leads Spotify in terms of paid U.S. users.
  • That said, the video market could be different, at it leans heavily on original content, unlike music platforms which all offer similar content.

Quality Of Content Will Ultimately Determine Uptake Of The Service

  • While the streaming market offers scope for growth, the quality of Apple’s content will ultimately decide the uptake of Apple TV+
  • Apple’s past examples of producing original TV content have been underwhelming. Its Carpool Karaoke and Planet of the Apps shows were both poorly received.
  • While Apple initially committed about ~$1 billion to produce original content, the Financial Times reports that it has increased its commitment to ~$6 billion (time frame was not specified).
  • However, Apple’s content spending is likely to be below other rivals in the streaming space, with Netflix projected to spend $14 billion in 2019 and Disney expected to spend over $16 billion (excluding Sports).
  • We believe it is possible that Apple could acquire established media companies to bolster its content and offerings.
  • As Apple has a cash holding of over $210 billion, it could easily acquire the likes of CBS Viacom (combined market cap ~$27 billion) or Lions Gate Entertainment (market cap ~$2 billion)

Apple Could Beef-Up Content Spending, But It’s Still Likely To Be Much Lower Than Rivals

Apple Could Do Well To Acquire Established Media Players



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