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Apple TV App Leads Tech Giant’s Surging Services Business

(Image credit: Apple)

Bursting out of the gates with more than 54 million subscribers globally, Disney Plus has completely blocked out the sun for Apple’s own entry to the streaming wars, Apple TV Plus, at least early on. 

Apple TV Plus Watched by Only 7% of U.S. Streaming Homes: Report

But while Disney Plus stood out as a lone beckon amid Disney’s devastated first-quarter balance sheet, which saw an overall 91% decline in profits,  Apple TV Plus was, inversely, only a small functional piece of broader success story for Apple, which saw its services revenue increase to a record $13.3 billion for the January - March period.

With sales of iPhones, Macbook Pros and other hardware gadgets in decline, the success of services was the reason Apple was able to eek out narrow 1% revenue growth in its fiscal second quarter. 

Since Apple TV Plus launched November 1, most of the buzz has been about, well, the fact that there’s been so little buzz. Apple TV Plus has no library and not enough original shows to succeed, pundits have contended. A recent HarrisX poll found that only around 7% of streaming homes were watching the service, mostly on an aggressive Apple promotion that provides it free for a year.  And its star packed original shows, including The Morning Show, have fallen surprisingly flat with TV critics. (Although the recent debut of filmmaker Spike Jonze’s Beastie Boys Story has delivered the $4.99-a-month streaming service its first hit.)

Also read: Apple TV Plus Has Pandemic’s Biggest Audience Demand Spike Among SVOD Services, Research Group Says

Reporting earnings April 30, Apple really didn’t get into its new video streaming service that specifically. While the so-called “streaming wars” topic is big news in the media business, and Apple reportedly spent $6 billion on original shows to be part of it, star-studded Apple TV Plus really does seem to be a mere character actor in Apple’s broader app-based services business, which also includes other recently launched apps, Apple Arcade, Apple News Plus and Apple Card.

Apple is aiming for its services business to finish 2020 with twice as much revenue as it generated in 2016. And the Apple TV app, for which Apple TV Plus is merely a component, is a key driver to that effort.

Notably, Apple isn’t really fighting the streaming wars so much as controlling the chessboard. For example, both AT&T/WarnerMedia and Comcast/NBCUniversal have recently put out announcement suggesting their respective new streaming services, HBO Max and Peacock, will be available on iPhones, iPads and Apple TV devices when they debut. 

To get there, they have to pay the house—that is, the Apple TV app. Apple TV+ gets to live there rent-free. But every other streaming competitor has to pay the going rate of around 30% of revenue, give or take, to get distribution in this piece of technology real estate no streaming service can afford to live without. 

“Our third-party subscription business grew across multiple categories and increased over 30% year-over-year, reaching a new all-time high,” Apple CEO Tim Cook told investors