UPDATED with closing price. Apple’s $4.99-a-month entry into the streaming derby “won’t drive profits” but “will eventually lead to an Amazon Prime-like bundle” and also help its product ecosystem, in the view of Wall Street firm Macquarie Research.
UBS said the price is “lower than most expectations, undercuts all other rivals, and should spur adoption.”
Investors have seemed to mirror analysts’ largely upbeat reaction to Apple’s major product event Tuesday, sending the tech giant’s shares up nearly 3% Wednesday to $222.33 per share on above-average trading volume.
CEO Tim Cook presided over the nearly two-hour unveiling of a range of hardware and other offerings, including a new line of iPhones. The devices have drawn mixed reviews among the Apple-rati and in the all-important market of China. But Wall Street has generally concluded that the pricing plan reflects a shrewd strategy to drive hardware sales in the way that Amazon has with its Fire and Alexa lines combined with streaming video and music.
“We think this is most interesting when looked at as an indicator that Apple has shifted its view to customer long-term value in its overall ecosystem,” Macquarie said in a note to clients, noting the one year of free service being offered to anyone who buys a new Apple device. Apple TV+ is also going to be available via a range of non-Apple devices like Roku and Samsung smart TVs.
“In our view, even if video is a wild success for Apple (attracting 50%-100% of Netflix subs), it wouldn’t move [long-term earnings per share] more than 0.5%. However, it should be good for the overall ecosystem,” the Macquarie note affirmed.
Macquarie’s Tim Nollen said Roku, Netflix and Disney are among the most affected by Apple TV+, but said “commercial impact is probably limited.” As Apple ramps up its spending, “over time it could become a bigger threat to Netflix and Disney.”
While no bundle was announced with Apple TV+ and other services like Apple Music or Apple News, as had been rumored, a research note by Bernstein called the bundling with hardware “extremely clever.” Bank of America called the pricing “the biggest surprise at the event.”
Tim Long, an analyst at Barclays, agreed. “This is reasonable pricing, given the small number of programs available during the first year, and should help Apple gain an initial audience base for its content,” Long wrote in a note to clients.
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