An Apple mega-bundle combining music and TV could come in 2020, report says
Rumors of an Apple services bundle have been swirling since the end of October, when CEO Tim Cook said on the fiscal fourth-quarter earnings call that he was open to the idea. "We're cognizant that there are lots of users out there that want a sort of a recurring payment like that," he said.
According to a Bloomberg article published last week, that services bundle – which would include Apple News+, Apple Music and Apple TV+ – might come as soon as 2020. The article, citing sources familiar with the company's plans, said Apple wrote the possibility of such a bundle into its contracts with news publishers.
Nothing has been officially announced, but offering the three services together for a discounted monthly price would be a big step forward from the deals Apple currently offers. It would give Apple TV+ for free to students who have a $4.99 monthly Apple Music subscription.
A deal that combined its core services for all users would give the company an excellent tool for increasing its monthly recurring subscription revenue – one of Apple's clear goals as it looks to its services segment to provide a larger part of its revenue as iPhone sales slow.
The services segment is one of the company's fastest-growing businesses: In fiscal Q4 (which ended Sept. 28.), sales increased to an all-time high of $12.5 billion. The services segment accounts for 18% of Apple's total revenue, up from 13% a year ago.
A new bundle could help Apple in its efforts to compete in the music and video streaming markets. Apple is in a constant battle in the music space with Spotify, which has 113 million subscribers worldwide. Apple has 60 million subscribers total, though it has more subscribers in the USA than Spotify.
Spotify is increasingly encroaching on Apple's territory in the podcast space – it launched its own podcast service and funds original podcasts. A few months after that service's debut, Spotify's podcasts have overtaken those listened to on Apple's app in a handful of countries.
In the increasingly crowded video streaming space, Apple TV+ is an underdog, hoping to carve out a niche for itself. Netflix remains the undisputed leader, and Disney's newly launched Disney+ video service has accumulated 10 million users since its launch this month (including presales over the past couple of months).
In those fierce competitive environments, bundling the audio and video services could give Apple an advantage. Disney+ and Netflix lack music offerings, while Spotify is absent from video. Apple has the ability to promote something unique with a bundle of video and music, plus the Apple News+ service.
If the company does offer a services bundle – and prices it right – it could be what the tech giant needs to give its services strategy a boost and launch Apple into its next stage of growth.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Netflix, Spotify Technology and Walt Disney and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2021 $60 calls on Walt Disney and short January 2020 $130 calls on Walt Disney. The Motley Fool has a disclosure policy.
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