Apple TV+ Turns 2: Why the Tech Giant’s Streaming Play Remains a Mystery

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Analysts describe the service as “middling” but tech giant wants to be seen as the next HBO

Two years after Apple made its long-awaited Hollywood debut, has Apple TV+ lived to its lofty ambitions? It depends how you look at the tech giant’s fledgling streaming service.

On the one hand, Apple TV+ is coming off multiple Emmy wins for “Ted Lasso” and looks to have an Oscar contender with the Sundance film “CODA.” But at the same time, analysts remain lukewarm on the service’s positioning among its streaming rivals, pointing to a lack of transparency from executives as to just how many people are actually watching the programming.

“We see the service as middling on a paid subscriber basis,” MoffettNathanson analyst Michael Nathanson told TheWrap.

Apple TV+ debuted at the onset of the current streaming influx, launching just 11 days before Disney entered the streaming era with Disney+. The Silicon Valley behemoth used its considerable cash flow to bag an enviable list of A-list talent, including Jennifer Aniston, Reese Witherspoon, Kumail Nanjiani, Steven Spielberg, Chris Evans and Tom Hanks. That has allowed Apple to build a modest library from scratch — but it has yet to make any kind of major content licensing deal.

“They need some successful content to attract subscribers, and ‘Ted Lasso’ is their only water cooler hit,” Wedbush analyst Michael Pachter told TheWrap. “There is other good content there, but not a lot of buzz and not a lot of great content.”

Outside of a few brief remarks during an earnings call in early 2020, CEO Tim Cook and other top executives have been virtually mum about the streaming service when talking with investors and analysts (though Cook did take time from Thursday’s earnings call to tout the Emmy wins). Much like Amazon, which has operated Prime Video as part of its overall Prime subscription rewards program that bundles everything from free product delivery to film and TV content, Apple regards its streamer as just one piece of a larger puzzle.

Apple has so far not released any kind of subscriber metrics and declined to make executives available for this story. “They gave (subscriptions) away free to iPhone users, and my guess is that they have only 10 million or so subscribers, hence not particularly eager to be compared to others,” Pachter said.

During last week’s earnings call, Cook explained Apple’s thinking towards sharing subscriber metrics.

“We look at a number of things internally that we don’t share externally. And so, you can bet that we’re looking at subs and ARPUs [average revenue per user] and conversions and churn and all of the normal things you would look at with a subscription business. But we’re not going to get into sharing those on an individual service basis,” Cook said.

The International Alliance of Theatrical Stage Employees (IATSE) said last month that Apple executives told them the service has less than 20 million paying customers in the U.S. and Canada — to justify paying lower compensation rates to below-the-line Hollywood workers. However, those user numbers doesn’t include those who get the service via one of Apple’s many (and lengthy) free trials.

Apple spent a record $25 million to acquire the Sundance favorite “CODA”

Comparatively, Disney+ has more than 116 million subscribers around the world and WarnerMedia has nearly 70 million customers between HBO and HBO Max. Even NBCUniversal’s Peacock has more than 50 million people in the U.S. that use the service (though since it has free tiers it’s not known how many actually pay for it).

According MoffettNathanson research, Apple TV+ only has about an 8% penetration in the market, which would be below HBO Max and Peacock and more in line with Discovery+ and Paramount+, both of which launched earlier this year. Around 45% of Apple TV+ users are using it via the company’s promotional offer, which gives new iPhone and iMac customers the service for free for one year.

“Given the increased frequency of usage, many services are likely starting to feel more confident in their ability to grow subscribers and maybe start to reduce promotions. Nowhere is this more evident than at Apple TV+, which has historically been the only service that sources the majority of its subscribers from promotions. However, as Apple’s aggressive initial promotions roll-off and thanks to the success of ‘Ted Lasso,’ we have seen the share of promotional users fall further,” Nathanson said in a research note earlier last month. “This still is by far the highest promotional share among the other streaming services.”

Data from Antenna has found that since its 2019 launch, more than three-thirds (77%) of its sign ups have come via this one-year free trial. As those trials have expired, around 42% have kept the service, which is well below the 69% average trial conversation for streaming services. Even so, Apple TV+’s paid subscriber base has more than quadrupled since those free trials have begun to end, Antenna found.

Aside from one-off deals like one last year for the animated Charlie Brown specials that included rights to new “Peanuts” related shows, Apple has so far made no moves to significantly beef up its content offerings. Amazon earlier this year agreed to spend $8.45 billion on the legacy MGM studio (with its library of 4,000 films and 17,000 hours of TV programming), and there has long been speculation that Apple might look to purchase a studio of its own, with Lionsgate and Sony targeted as the likeliest targets.

Although Apple TV+ launched with high-profile series Jennifer Aniston and Reese Witherspoon’s “The Morning Show” and “For All Mankind” from “Battlestar Galactica” creator Ronald D. Moore, it wasn’t until “Ted Lasso” that the streaming service finally broke through with one of its shows.

The Jason Sudeikis comedy, which was based on a character he created for a series of NBC Sports commercials about a college football coach who ends up leading an English soccer club, was one of the more surprising success stories last year. It landed 11 Primetime Emmy wins in September, including for Outstanding Comedy and acting wins for Sudeikis, Brett Goldstein and Hannah Waddingham.

One way Apple is establishing itself is within the creative community as it tries to model itself after the “old,” pre-AT&T days of HBO, which likened itself to a bespoke shop at a time when the industry is in full “peak TV” mode of more and more content.

Ted Lasso
Apple TV+

The content team lead by ex-Sony executives Zack Van Amburg and Jamie Erlicht have been heralded as being creator-friendly, a big turnaround after a bumpy start for the tech giant, which had been criticized for killing any show that was deemed controversial. And if the HBO comparisons weren’t enough already: Richard Plepler, the longtime celebrated head of HBO for multiple decades, is now creating content for Apple under an overall deal.

“One of the great things about Apple TV+ in my experience is I really felt like I sold them on a basketball show, and throughout the evolution of the show, and the various things that happened in the world, it couldn’t just stay a basketball show,” Reggie Rock Bythewood, the showrunner of the new drama “Swagger,” which is loosely based on NBA star’s Kevin Durant teenage years. Bythewood altered the show following last year’s racial justice protests after the murder of George Floyd.

“It had to really be a show that reflected society,” Bythewood said. “They supported me on that a great deal. And so, it’s been great.”

Michael Showalter, who directed the upcoming Will Ferrell-Paul Rudd limited series “The Shrink Next Door,” described Apple as being “very filmmaker-friendly, very artist-friendly, passionate about the material.” But without more breakout hits like “Ted Lasso,” it’s hard to see how Apple TV+ can compete with more robustly programmed competitors in the streaming space.