Impact of Apple's upcoming video service 'likely small,' analyst argues
Roger FingasApple has looped in people like director/producer J.J. Abrams for original content.
Goldman Sachs doesn't seem impressed at the potential for an Apple subscription video or news service, with the firm not seeing a large material value in the offering for Apple, or for investors.
"While new Video and/or News products might help to increase iPhone stickiness they seem unlikely to make much of an impact on Apple's bottom line," Rod Hall wrote in a new memo to investors, seen by AppleInsider. Even if the video service gains 20 million subscribers by the end of 2020, and charges them $15 per month, that would only boost consensus earnings forecasts by 1 percent, he estimated. If the service costs $10 per month, that would only raise earnings 0.4 percent.
A better scenario for Apple would be popularizing an Amazon-style bundle of multiple services, Hall argued. That might mean video, iCloud Drive, Apple Music, and Apple News Magazines, which like the video platform should appear at a March 25 press event.
"The key question for us on this is what the anchor value in such a bundle would be from the point of view of a consumer," Hall said. "In the case of Amazon it is free shipping but in Apple's case the core driver is less clear to us."
Other analysts have worried that Apple won't be able to compete with video rivals like Netflix or Disney in terms of quantity or quality, and that it may be years behind without any special reason to subscribe beyond particular shows.
Reports have also claimed that Apple executives like CEO Tim Cook are exerting a heavy hand with original content, insisting on family-friendly material and positive depictions of technology. That could irritate both studios and viewers used to the relatively free reins of services like Netflix and HBO.
Goldman Sachs is more pessimistic than some investment firms, maintaining a "neutral" rating on Apple stock and a $140 price target — below its current $187 value.
AppleInsider will be live from the March 25 press event, which begins at 10 a.m. Pacific time, 1 p.m. Eastern.
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26 Comments
This analyst obviously does not understand Apple.
Unlike most companies, Apple does not start with the profit and back into the product that will generate that profit.
Instead, they create a great product that improves people's lives and derives its profit from that.
Interestingly, I’m finding less and less to watch on Amazon Prime Video (actually watching old shows from the 60s through the 80s now because of the dearth of new shows and movies). Perhaps both Apple and Disney’s new streaming services will do the trick.
It doesn't take much to be an analyst at Goldman Sachs, apparently.
Of course a video service, just starting out, and likely some shows free to begin with (for Apple device owners) isn't going to have much of a pure financial impact on its own. It likely won't in 3 years either, even if successful, given the overall Apple business.
I am not sure Apple will be successful with their video service either. But we have to see that play out. Apple has done well with music, and I hear Apple News so far.
Lots of indirect value to Apple with their own video service (if it is moderately successful):
- Seat at the content table, which could get more subscription services to use the TV App (which could have more stickiness value, and be key to Apple TV value).
- Part of other broader content bundle (video, music, news/magazines)
- Overall another reason to stick with Apple devices
- Cultural relevance
But sure - Goldman has run the numbers...