Apple journalist Mark Gurman on Tuesday filed a Bloomberg story summarizing what investors perceive as Apple’s lackluster return on its TV+, Arcade, News+ and Apple Card services after their first few quarters on the market.
Apple is due to report results on July 30 for the fiscal third quarter, and analysts have forecast $13.1 billion in revenue from services, up 15 percent from a year earlier. However, most of those gains will be from existing services like the App Store and licensing deals, rather than the new offerings.
Apple’s TV+ video streaming service made a late entry into an already crowded market when it launched last November, and Gurman cites one analyst’s estimates earlier this year that fewer than 15 percent of eligible customers had signed up, despite Apple offering a one-year free trial with the purchase of an iPhone or other hardware.
It’s a similar story for Apple Arcade subscription service, which launched last September. Apple reportedly shifted its strategy recently and canceled contracts for some games in development as it sought other titles that it believes will retain subscribers.
Some developers have speculated that Apple’s strategy change indicates subscriber growth is weaker than expected, and Apple also recently began offering some people a second free trial month, which perhaps suggests that users aren’t remaining subscribers for a long enough period of time.
As for Apple Card, Goldman Sachs Group accumulated about $2 billion in credit lines since it launched last August, which is a fraction of other co-branded cards, according to a February update by the Nilson Report.
The poorest services performer however is believed to be Apple News+, which launched in March 2019. Apple News+ provides access to hundreds of magazines along with subscription news from The Wall Street Journal and The Los Angeles Times, but it has failed to catch on with consumers, perhaps due to the lack of access to publications like The New York Times and The Washington Post, which have refused to sign deals with Apple.
Apple has not provided information on how many Apple News+ subscribers it has, but a report in November suggested Apple was struggling to entice people to pay for the service. That report indicated Apple News+ got 200,000 sign ups within 48 hours, but that the numbers have not increased much since then.
In February, Apple’s head of business for Apple News+ also departed the company less than a year after the $9.99 per month service launched.
That leaves the App Store, where Apple’s real revenue growth for services lies. Apple takes a cut of 30 percent from all paid apps downloaded from the App Store as well as from in-app purchases. It also takes 30 percent from in-app subscriptions, dropping to 15 percent after the first year.
The App Store generated $32.8 billion in the first half of 2020 for developers, up more than 20 percent from a year earlier, according to Sensor Tower estimates cited by Gurman. Meanwhile, paid subscriptions topped 515 million in the fiscal second quarter.
However, as part of an ongoing antitrust inquiry into Apple’s App Store policies, U.S. antitrust regulators are looking into the 30 percent cut that Apple takes from in-app subscriptions. Government lawyers have been meeting with developers over the course of the last several months, and developers have been asked questions about Apple’s subscription rules.
Apple chief Tim Cook and other big tech CEOs and are all set to participate in an antitrust hearing on Wednesday held by the U.S. House Judiciary Antitrust Subcommittee as part of the investigation on competition in digital markets. Whether or not Apple’s App Store revenue stream will be dealt a blow as a result of the inquiry remains to be seen. Tag: bloomberg.com
This article, “Bloomberg: New Apple Services Show Slow Growth in First Few Quarters” first appeared on MacRumors.com
Discuss this article in our forums