Apple's subscription streaming video service, Apple TV+, is likely to remain a minor business for the tech giant. But it could play a major role if Apple expands its service bundles, a Wall Street analyst says.
Bernstein analyst Toni Sacconaghi estimates that Apple TV+ has about 30 million subscribers, who each pay $4.99 a month. But with annual content spending of about $3 billion, it is losing more than $1 billion a year, he says. Apple launched the service in November 2019.
"Apple TV+ will likely never be material financially for Apple in and of itself," Sacconaghi said in a note to clients Monday. "But it is an additional subscription-based revenue stream that can help its Services business grow and is a powerful bundling vehicle."
The company already offers Apple TV+ in its Apple One service bundles. Those bundles also include Apple Music, Arcade and iCloud. The most expensive service tier adds Apple Fitness+ and News+.
Apple TV+ Could Be In Hardware-Services Bundle
However, Apple TV+ could be a "powerful part" of a bundled hardware-with-services offering, Sacconaghi said.
"Apple TV+ would likely be an integral part of any potential hardware-plus-services subscription bundle (possibly along with iCloud and AppleCare), which press reports have recently speculated on, and has long been discussed within the investment community," he said.
Apple is a niche player in the streaming video market. It focuses on original, prestige content mostly for adults. Its shows include "Ted Lasso," "The Morning Show," "Severance," "Slow Horses," "Shining Girls" and "Schmigadoon!"
"Apple TV+'s focus is clearly on quality over quantity, consistent with Apple's brand," Sacconaghi said. Notably, Apple's original programs have already won about 250 awards, including this year's Academy Award for Best Picture for "CODA."
Sacconaghi rates Apple stock as market perform. On the stock market today, Apple stock ended the regular session unchanged at 141.66.
"While we see some opportunity for Apple to outperform modestly over the next few months given its historical seasonal trading pattern, we believe risk/reward on the stock over the next 6 months to 2 years is neutral to modestly negative," Sacconaghi said.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
