Fans inside Apple’s Steve Jobs Theatre may have oohed and aahed at the talent gathered by the company for its elaborate video tease yesterday, but Wall Street’s reaction could be described as a collective “meh.”
Apple stock, which dipped 2% yesterday, drifted down another 1% today, closing at $186.79 after most observers critiqued the two-hour event for being too light on details. Although some substantive information was released about the company’s push into news, gaming and credit cards, Apple TV+ was introduced with almost no specifics. Its launch date and pricing were not confirmed during a long and star-filled stage presentation, which also included no clips or trailers for the original shows ticketed for the service. It had some of the grammar of an upfront pitch or TCA panel, only with no footage or Q&A.
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One unmistakable takeaway was that the company’s “installed base” offers Hollywood an appealing target. With far more than one billion devices in use, Apple can serve as a hard-to-match gateway. That’s what it intends to do in video, as it has in music streaming and other areas. Increasing revenue from services, in order to reduce dependence on device sales or hardware manufacturing, is the management team’s main focus.
Just as subscription streaming has taken off in recent years, the company sees a similar opportunity to draw millions to TV subscriptions. By hosting apps in its ecosystem and charging a 30% fee, the company can participate in the re-bundling of television without spending to the same level as Netflix or other rivals.
Even so, many analysts downplayed the threat to established streaming giants.
“Apple’s new video service is not going to be a Netflix killer, and not going to materially impact the investing outlook for the company,” wrote Colin Gillis, director of research at Chatham Road Partners, in a note to clients. “We view that Apple Music with its estimated 56 million subscribers is still only 10-15% of services revenue, about 1-2% of total revenue. Video streaming is not going to save shares of Apple if the iPhone market declines. Apple remains the iPhone company.”
Raymond James analyst Justin Patterson reaffirmed his “buy” rating on Netflix and called Apple’s entrant “more incremental than revolutionary.”
Morgan Stanley’s Ben Swinburne sounded a similar note of caution, wondering if Apple has “the appetite to spend its way to success,” as he put it in a research note. Meanwhile, “Netflix’s risk appetite, singular focus and ability to bring the best of Silicon Valley to the best of Hollywood is still perhaps underestimated by the market.”
Paolo Pescatore, an analyst with PP Foresight, said the Apple presentation should be put into a larger context. “This should not be perceived as a game changer, neither is it a pivotal moment for Apple’s future,” he wrote in an email to Deadline. “Unfortunately, there was a lot of hype leading up to the event and hence why there has been some negativity to what was announced. In essence, Apple is putting all the building blocks in place. It will take time to fully realize the overall vision. The road ahead is a long one.”
Apple will report its second-quarter financial results in the next few weeks, which will fill in some more of the picture as to momentum in the services segment and continued struggles in hardware. In the fiscal first quarter, which coincided with the holiday season, the company reported a decline in iPhone revenue, a once-unimaginable statistic.
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