Apple’s $6 billion carrot

Last week, Apple reported Q4 earnings, surpassing analyst expectations, on the eve of its original content drop, TV+. The “service” is available via the Apple TV app on iPhone, iPad, Apple TV, iPod touch, and Mac, as well as select Samsung smart TVs, Roku, and Fire TV.

TV+ has received mixed reviews and several customers reported issues with activating their free promo , however to think of TV+ as service comparable to Netflix or Disney+ is to think incorrectly. Currently, there’s only 8 titles and 46 videos to watch and zero library content…well, sort of. Over the weekend, I was able to consume 5% of the library without really trying. But that’s not so bad, when you consider Apple’s endgame, which is to become your TV ecosystem, if not your mega entertainment bundle.

TV+ costs $4.99 or nothing for one year with the purchase of a new Apple device. Tim Cook is calling it “a gift to our users.” In addition to Apple Care and iCloud, the company operates four subscription-based products: Apple Music, Apple News+, Apple TV+, and Apple Arcade. It’s critical and also inevitable that Apple finds a way to bundle these subscription offerings.

The company has already been in talks with record labels on combing Apple Music with TV. And customers with an Apple Music student plan are already getting TV+ for free.

Apple understands TV+ is a limited offering with zero library content. But just like Roku doesn’t need original content to succeed, does Apple need library content to succeed? For example, if you need more than the 8 titles available on TV+, there’s an Apple Channel for that.

Apple wants you to buy HBO through the TV app. They also would really love for you to cancel Britbox on Amazon Prime and rebuy it through the TV App. The “channels” business is huge and its not uncommon that over 50% of a company’s OTT subscribers come directly through Amazon. Apple would love nothing more than to take that business away.

And though Disney+ won’t be offered as an Apple TV Channel when it launches next week, it will have a third-party app on Apple devices that will be integrated with iTunes billing. Put simply, Disney and Apple will split the revenue (in perpetuity)from any new Disney+ subscriptions activated via Apple TV or mobile devices. This is where the Disney+, Hulu, and ESPN+ bundle comes into play.

Apple’s not spending $6 billion on a standalone streaming service. They’re spending $6 billion on a carrot to lure you into their TV ecosystem. And while Mr. Cook’s gifting the service to users, Apple can focus on maximizing conversions and ARPU.

Everyone’s looking at TV+, but Apple’s real moves are happening within the Apple TV App.

It’s the ol’ Kansas City Shuffle.


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