A Bloomberg report based on a Bernstein analysis suggests that Apple’s newest services have yet to make any ‘meaningful revenue,’ and investors will expect to hear about the company’s plans to address this.
It says that although Apple’s overall Services business is going well, the bulk of this is generated by the App Store and the Google search deal – with Apple TV+, Arcade, News+, and the Apple Card not playing much of a role …
Another interesting snippet in the chart in Bloomberg’s report is that iTunes downloads are now estimated to generate even less revenue than Apple TV+.
Last year, the Cupertino, California-based company launched four new services: TV+, Arcade, News+ and the Apple Card. After a few quarters on the market, the offerings haven’t contributed much to Apple’s top line.
When Apple reports results on July 30, investors will be looking for updates on these offerings. Services growth has been a bright spot in recent years as iPhone sales have slowed. For the fiscal third quarter, analysts forecast $13.1 billion in revenue from services, up 15% from a year earlier. Most of those gains will come from existing services, such as the App Store and licensing deals, rather than the new offerings.
Here are the estimated revenues for the current financial year:
Bernstein analyst Toni Sacconaghi suggested that a rethink may be required for Apple TV+.
The TV+ video-streaming service, which launched last November, has had no blockbusters yet, though some shows and movies have been well-received. Apple offered a one-year free trial with the purchase of a new iPhone or other hardware […] Sacconaghi estimated earlier this year that fewer than 15% of eligible customers had signed up.
During a keynote presentation at last month’s WWDC conference, Apple said little about the streaming service, according to Sacconaghi. He said there’s “potential need for a strategic reevaluation of TV+” and suggested the company should consider spending more on original content.
Apple already appears to have rethought its Arcade service, canceling some games and focusing more on one particular category.
Apple is increasingly interested in titles that will keep users hooked, so subscribers stay beyond the free trial of the service,” the report says […] On the calls with developers in April, the Apple Arcade representative cited a specific example of the type of game the company wants: Grindstone, an engaging puzzle-action game by Capybara Games that has many levels.
Apple News+ shows every sign of being a flop. The head of the service stepped down in February, and Apple has failed to provide any update on paid subscriber numbers since a 200k figure last April. The New York Times pulled out of Apple News, and there’s been an increase in News+ free promotions suggestive of some degree of desperation.
It’s unclear how much the company earns from the Apple Card, but estimates of the amount borrowed are low.
The Apple Card came out in the U.S. last August. It has no annual fee, but the company likely takes a cut of the interest charged by partner Goldman Sachs Group Inc. The bank accumulated about $2 billion in credit lines since launch, a fraction of other co-branded cards, according to a February update by the Nilson Report.
Apple is due to report its fiscal Q3 earnings later this week, when we’ll find out just how much the coronavirus crisis impacted both supply and demand of hardware alongside a Services update.
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