Apple Disputes Goldman Sachs Analyst Report Claiming Free Year of Apple TV+ Will Impact Earnings

Apple Card, now brought to you by JP Morgan.

That analyst is clueless. He has no idea how powerful, how entrapping and addicting the Apple Ecosystem is. Once Apple customers get sucked into the Apple Ecosystem, it's very difficult to bail out. And often it starts with a Free Trial. Remember all the clueless analysts that said Apple Music would fail? That it would never ever compete or catch up to Spotify etc? LOL

Apple Music also started with free trials.

I know that Goldman Sachs' credit card division is a very different part of the company than the investment banking analysts' division, but this sure is awkward.

This was a smart move by Apple. If their content is indeed great, people will have time to get used to it and eventually keep it in the long run.

I am hoping Apple at some point creates a master subscription plan that includes all their services and iCloud storage at a fair price for individuals and families. That might entice me jumping into other services that at this point I don't care about it.

Further proof that what's good for the shareholders isn't necessarily the same as what's good for the customers.

Buuuut when your executive teams' bonuses are tied to shares of stock (and their value), is it any wonder the kinds of decisions we see?

Is that analyst on crack or something? Giving people the chance to experience Apple TV+ for free for a year will return in greater profits.

This large financial entities should screen their analysts opinions before letting them out to the public.
These narrow minded and cheap analysts are out of control.

A free year of AppleTV+ Is the best advertising campaign Apple could have chosen.
Encourages people to buy Apple products just to get the freebie, and also gives them a chance to try it and become addicted to it.

It's not that often that my professional expertise is relevant on this forum but, let me offer some insight into what is going on here - Revenue Recognition, Bundles, and Multi-Element Arrangements.

To the customer, the service is being offered as free however from an accounting perspective Apple is combining two products into a single hardware + software revenue contract where one of the products is being discounted at 100%. Since this product has standalone value (something called SSP under ASC 606) Apple needs to apply an accounting policy that appropriately estimates how much recurring revenue uplift they will receive from people continuing to use AppleTV+ after the free trial..

What the analyst is concerned about is Apple taking the full $60 and moving it from hardware to services and overstating how much of their revenue growth is coming from selling new services (analysts prefer subscription services growth since it's recurring - so this number accelerating is beneficial to a company).

What is important to note here is that in Jan 2018 the way that every public company reports their revenue numbers changed under new regulation known as ASC 606. Companies, analysts, and auditors still have different opinions on how the principals of this new standard should be applied so disagreements like this have been really common over the past year and will continue to be for a few years. To put it another way.. the bugs are still being worked out with how companies recognize revenue.

Here are some good articles for people who would like more information:

https://www.accountingtoday.com/opinion/welcome-to-year-one-of-asc-606

https://www.investors.com/news/technology/top-line-turmoil-booking-revenue-faster-could-shake-up-earnings/

https://www.accountingtoday.com/news/asc-606-or-666-software-companies-could-face-trouble-from-fasbs-revenue-recognition-standard

For the next 12 months the service isn't worth $1.99 a month with the content.

Maybe next year they can be worth $4.99

Such a strange professional relationship Goldman and Apple have.

Goldman: We back the Apple Card. Get it.
ALSO Goldman: Cuts the Apple stock target price. Don't get it.

That analyst is clueless. He has no idea how powerful, how entrapping and addicting the Apple Ecosystem is. Once Apple customers get sucked into the Apple Ecosystem, it's very difficult to bail out. And often it starts with a Free Trial. Remember all the clueless analysts that said Apple Music would fail? That it would never ever compete or catch up to Spotify etc? LOL

Apple Music also started with free trials.

You definitely have no clue about any of it. The analyst simply stated how this development would affect the accounting (and EPS as a result). This has nothing to do with ecosystem or Spotify or whatever.