Apple has said it wants to bulk up revenue from services — including Apple TV Plus, which is just over one year old. But new research suggests that the tech giant’s entry into the so-called “streaming wars” is at a distinct disadvantage compared with rivals.
In the fourth quarter, the majority of Apple TV Plus subscribers — a whopping 62% — said they were on the free promotional offer that Apple extended to buyers of its hardware devices, according to research firm MoffettNathan’s Q4 2020 SVOD Tracker report. What’s worrisome for Apple: 29% of those said they do not plan to resubscribe once the promo period expires; only 30% said they plan to renew at the regular $4.99/month price (and the rest were unsure).
By comparison, 16% of Disney Plus users said they access the service via the Mouse House’s promotional partnership with Verizon. About 23% of HBO Max subscribers said they access the service via AT&T’s promotions that provide free access to customers on the telco’s best wireless, video and internet plans (and for the priciest packages, HBO Max is bundled in as a permanent perk).
Almost half of Disney Plus subs on the Verizon promo (48%) said they planned to resubscribe after the free-access period rolls off; just 19% saying they do not plan to renew. The data suggests that roughly 18% of Apple TV Plus subscribers plan to churn off the service once their promotional offer ends, versus 3% of Disney Plus customers on free plans, the MoffettNathanson report said.
Apple hasn’t disclosed how many Apple TV Plus users it has. But it clearly doesn’t want to lose them: The company has extended the free-access period for Apple TV Plus customers who signed up through its one-year-free subscription offer through July 2021. The 12-months free of Apple TV Plus remains available to customers who buy a new iPhone, iPad, iPod Touch, Apple TV or Mac.
“We remain concerned about future subscriber churn if there is a slow device cycle and users choose not to renew on their own,” the MoffettNathanson team, led by senior analyst Michael Nathanson, wrote in the report. While Disney and WarnerMedia have been “clear about strengthening their respective content offerings, it seems Apple is still not all-in on making Apple TV Plus originals a focal point.”
A big issue for Apple TV Plus is its very limited content lineup, compared with the thousands of titles available on other SVOD services. Currently, Apple TV Plus offers a total of 55 originals (11 drama series, six comedy series, 13 nonfiction series, 11 films and 14 family series and specials). Those include breakouts like “The Morning Show” and “Ted Lasso,” but in terms of sheer tonnage, Apple TV Plus is far below the rest of the SVOD field.
Apple has a slate of originals in the pipeline, but that’s still not in the same league as Netflix, Disney Plus or HBO Max. Upcoming releases on Apple TV Plus include Season 2 of Ronald D. Moore’s “For All Mankind” (Feb. 19); and Anthony and Joe Russo’s film “Cherry” starring Tom Holland as an addict who resorts to bank heists to pay his debts (Feb. 26).
Meanwhile, the percentage of U.S. consumers who said they use Apple TV Plus declined from 10% in November 2020 to 8% in December, per the MoffettNathanson report. In December, 72% of respondents said they use Netflix, followed by Amazon Prime Video (52%), Hulu (39%), Disney Plus (31%) and HBO Max (13%).
All that said, for Apple, there’s another underlying strategy behind the SVOD play: to drive hardware sales, by providing an incentive for consumers to purchase its smartphones, tablets, computers or Apple TV set-top. If the Apple TV Plus free benefit has made even a small incremental difference in moving the needle there, it’s possible that the company can rationalize the cost of the investment in Apple TV Plus. Apple, in true Apple form, doesn’t offer a native Android smartphone app (but claims you can use Chrome or Firefox on Android devices to stream Apple TV Plus); Google says the Apple TV app is coming to the new Chromecast with Google TV in early 2021.
For the SVOD tracking study, MoffettNathanson enlisted market-research and consulting firm HarrisX to conduct surveys of 19,435 respondents between October-December 2020.
Other findings from the MoffettNathanson/HarrisX study:
Streaming services penetration of U.S. households was 77% at the end of 2020, up five percentage points year-over-year, attributed to the country re-entering some stage of self-quarantining this winter because of the COVID pandemic.
The average U.S. pay-TV household now subscribes to an average of 3.33 SVOD services while non-pay-TV homes on average subscribe to two. That “speaks perhaps to the impact of income on cord-cutting, with pay-TV homes being more willing/able to invest in more video products,” the MoffettNathanson analysts said.
When subscribers were asked to name what content they watched recently, 43% of Disney Plus customers cited original series, and 38% of Netflix and 34% of Amazon Prime Video customers said the same. Just 13% of Hulu subscribers reported their recent viewing was original TV shows and for HBO Max it was 12%. Meanwhile, 84% of both Hulu and HBO Max customers said that acquired programming was what they most recently watched, compared with 56% for Netflix, 51% for Prime Video, and 49% for Disney Plus.
Asked why they use streaming services as a replacement for pay TV, at least half of the subscribers with Hulu (50%), Amazon Prime Video (54%), Netflix (53%) and Disney Plus (52%) said it was due to the cost of traditional cable and satellite TV. The second most reported reason for cutting the cord in favor of streaming services was convenience (12%-17%) followed by content availability (13%-14%), the ability to binge-watch content (10%-12%), and avoidance of commercials (4%-8%).