Apple (NASDAQ:AAPL) is reportedly planning a big event for Mar. 25. This one isn’t going to feature new hardware. Instead, the next Apple event is expected to focus on the company’s new push into digital services. A revamped, subscription-based Apple News — described as a “Netflix for news” — was the first of these services to leak. Now, it appears that AAPL’s long-awaited TV service will also be announced.
Apple stock posted slight gains as the rumors of the March event first surfaced, but it has since leveled out. However, with the company expected to increasingly rely on Services revenue as iPhone sales soften, the Apple March event announcements will have a real impact on AAPL going forward.
Apple Event: Subscription-Based Apple News
On Tuesday, news hit that AAPL is planning an event for Mar. 25. Rumors had been flying that the company might release its second-generation AirPods wireless earbuds, the iPad Mini 5 or even its long overdue AirPower wireless charger. However, according to BuzzFeed, which first broke the news of the Mar. 25 date, this Apple event will be all about Apple News.
The company is reportedly going to offer a paid subscription option for its News app, offering all-you-can-read access for $10 per month.
It didn’t take long for details to surface, or for potential cracks to show in AAPL’s strategy. The Wall Street Journal reported that Apple is looking for a 50% revenue split from publishers, for its so-called “Netflix for news.” And according to that report, some publishers are balking at AAPL’s cut. The 50% rate is much higher than the 30% it receives from apps, and participating would also mean publishers would lose some subscribers from their own paywalled sites — along with client-specific data and credit card info. There are also questions about how AAPL will distribute the remaining 50% of subscription fees among the participating publishers.
Offsetting those concerns is the fact that Apple News is pre-installed on the 2 billion iOS devices Apple has shipped, and it is now available on its Mac computers as well.
Apple’s TV Streaming Service
Yesterday, the scope of the March Apple event expanded. Bloomberg reported that AAPL has begun sending invitations to Hollywood celebrities, as Mar. 25 will also mark the unveiling of the company’s subscription TV service.
Apple has been investing heavily in original content and it has been in discussion with networks and studios for years as it negotiates for additional programming.
According to Reuters, AAPL has now signed deals with CBS (NYSE:CBS) and several other networks. Apple’s streaming TV service will be taking on Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) Prime video and Disney’s (NYSE:DIS) forthcoming Disney+ streaming service.
Bloomberg’s sources say the new streaming service will be announced at the Mar. 25 Apple event, but Reuters says the company won’t make the announcement until April. Either way, we’ll know what Apple is up to before spring is out. Pricing details haven’t yet been uncovered, but the timeline for the launch of the service is expected to be this summer.
The Apple Advantage
Negotiations for content have been difficult and drawn out. Apple has reportedly been negotiating with networks for years, without inking a deal — despite the success of its Apple TV set-top streaming box.
However, with iPhone sales on the decline and a focus on Services revenue to fuel future Apple revenue and AAPL stock growth, the pressure is on. And Apple has additional leverage with the success of Apple Music. AAPL’s $9.99 streaming music service launched in 2015 and with the advantage of having the app pre-installed on every iOS device, Apple has grown the service to 50 million paying subscribers and second place globally. That growth for a paid service amid established competition is not just good news for AAPL shareholders, it’s real leverage to convince content providers to sign on.
If it can do the same with the subscription-based Apple News and Apple streaming video service, AAPL should be well on its way to a Services future. Watch for coverage of the Mar. 25 Apple event on InvestorPlace.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
