Bloomberg: New Apple Services Show Slow Growth in First Few Quarters

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.

appleservices
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.

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Top Rated Comments

JohnStrass Avatar
50 months ago
Amazon wraps all of the special service in one umbrella call Amazon prime. With Apple they have so many different services now I don’t know what the heck I should be buying. Each Apple subscription product alone is weaker than its alternative. Apple Music is weaker than what you can hear on YouTube. Apple news is weaker than what I can get from a good subscription to A national newspaper. Apple TV+video offerings are a joke compared with the other video streaming ones out there

Apple needs simply an Apple prime service for free music free video and hopefully more clarity with the definitions of Apple TV (the devicej, Apple TV (the app)and Apple TV+
Score: 16 Votes (Like | Disagree)
mazz0 Avatar
50 months ago
Not really surprising is it - those services are all pretty underwhelming (except Apple Card which I haven't tried, as it's not available in the UK).

I was particularly disappointed with Apple Arcade. I was hoping it would feature more traditional games, ie bigger and deeper than normal mobile games, but it doesn't - it's just normal mobile games without the obnoxious monetisation systems. This may just be a problem with my own expectations/hopes for the service, although perhaps the poor performance indicates that lots of people who are willing to pay for such a service want something different from their games (perhaps the people who are happy with the mobile game style are also happy with its current monetisation model). That's just speculation of course.

I don't actually know what problem News+ is meant to solve.

I assumed AppleTV+ was meant to grow into something bigger and more worth the money over the course of the first year or so, with Apple relying on people who have it for free (since it came with their phones) watching, enjoying and talking about it (I've personally put several people onto For All Mankind). Again though, I'm not really sure what problem AppleTV+ was meant to solve.

Personally my favourite Apple service recently is the Channels functionality in Apple TV. Subscribe to whatever providers I want, but have a single, integrated UI? Yes please. I wish they'd push this really hard, I'd love it to be my sole interface for TV.
Score: 6 Votes (Like | Disagree)
M3gatron Avatar
50 months ago
OK so if Apple for some reason won't be able collect 30% from new App Store purchases anymore their service revenue will fall off a cliff. Interesting.
Score: 4 Votes (Like | Disagree)
Rychiar Avatar
50 months ago
Why would anyone pay for news in 2020? Apple Arcade had one good game “oceanhorn2” which I beat in the winter and had a lackluster ending. Apple TV+ doesn’t have enough content or enough stand out content. All those services are weak and should prob just be extras included with Apple Music, the one good service they have ...
Score: 3 Votes (Like | Disagree)
TMRJIJ Avatar
50 months ago
I'm subscribed to Apple Music, TV+, Arcade, and iCloud. While I do love these services, TV+ and Apple Arcade had to grow on me. I just couldn't stay with Apple News+.
Score: 3 Votes (Like | Disagree)
smaffei Avatar
50 months ago
Apple News : Actually worked for a major newspaper when this was released. The paper didn't bite because of Apple's cut and the fact they believed it would cannibalize their pay website. No surprise it's failing.

Apple Arcade: The games are not a caliber that most people are willing to pay a subscription for. Get a cheap Xbox One and pay for Game Pass Ultimate if you are a gamer. Yes, it's $15 a month. But, for a gamer, the selection is awesome! Microsoft just hit 10 million subscribers in April. All this time and Apple still doesn't understand gamers. Anyone want to play some Pippin?

Apple TV+: Is anyone actually paying for it? Most people I know got it free when they bought a device. Get back to me when people start dropping those "paid" subscriptions in October-November.

Apple Card: Love it! Very interactive; helps me see my spending. Money back as Apple Cash. And, it's my lowest interest rate card at 10.99%. Definitely a win for me!
Score: 3 Votes (Like | Disagree)