Why is media queen Oprah Winfrey making documentary films for Apple Inc.’s new streaming television network? “Because they’re in a billion pockets, y’all,” Winfrey said Monday at Apple’s corporate headquarters. “A billion pockets.”
That’s not entirely good news. Sales of the company’s iconic iPhone are slumping because so many people already have one. But on Monday, Apple unveiled a host of new financial and entertainment services that could rake in billions of dollars from Apple loyalists, long after they’ve finished paying for their phones.
There will be Apple’s long-expected launch of a streaming TV service to compete against incumbent giants like Netflix. But there’s also a subscription video gaming service; a paid version of Apple News that offers access to contents from 300 magazines as well as the Los Angeles Times and Wall Street Journal. And in perhaps the day’s biggest surprise, there’s a new Apple-branded credit card offered in cooperation with the investment bank Goldman Sachs.
Larry Downes, project director at the Georgetown Center for Business and Public Policy, said that stagnating iPhone sales mean that Apple must sell an array of services to keep revenues climbing. “They definitely have to do this, or something like this,” Downes said.
Apple’s already built a surging services business, generating $10.9 billion in revenue last quarter. That’s more than the company makes from its iPad tablets or its Mac computers. With its new offerings, Apple is aiming for even faster growth.
Most of the pre-announcement buzz centered around Apple TV Plus, the company’s streaming TV service. Along with Oprah’s new shows, it will feature original programs from Steven Spielberg, Ron Howard, M. Night Shyamalan, Reese Witherspoon, and J.J. Abrams, among others.
It’s a massive deployment of star power. But is it enough to overcome Netflix’s headstart, not to mention streaming services that giant media companies Disney and AT&T plan to launch later this year?
“Apple needs something to pop with viewers, something that really captures attention,” said Brett Sappington, senior director of research at Parks Associates. “If it doesn’t have that ‘wow’ factor, that’s going to be a problem for Apple.”
The company didn’t reveal how much the new service will cost — that will come in the fall. With Netflix charging a top price of $15.99 a month, it’s unlikely Apple could charge much more. “They don’t have a lot of leverage on price,” said Downes.
Yet Apple will have to invest a lot in programming to keep up with Netflix, which is expected to spend about $15 billion on new shows this year alone. And the top talent hired by Apple doesn’t come cheap. “Obviously, if you want Steven Spielberg, you’re going to pay for Steven Spielberg,” Downes said. So Apple may have to splash out a lot of cash to become a credible player. Luckily, the company has about $245 billion in the bank.
Another challenge: Apple said it will launch the new service in more than 100 countries. But the company has said nothing about creating programs tailored to the tastes of non-Americans or non-English speakers. Netflix has become a global brand by producing dozens of TV series especially for foreign markets. It’s unclear whether Apple plans to do the same.
But people don’t just watch television. Apple is also reaching out to gamers with Apple Arcade, a service that will offer over 100 original games that can be played on any Apple device — phone, tablet, Mac computer, or Apple TV streaming box. Apple didn’t disclose the price of the new service which is set to launch sometime this fall.
Apple did say that it will charge $9.95 a month for its new News Plus app, with the first month available free. The service is available immediately.
Apple also said that it will launch its new Apple Card credit card this summer. The card will include a cash-back feature that pays off instantly in money added to the user’s account. All purchases will generate a 2 percent rebate, but items purchased from Apple get 3 percent. In addition, the card will charge no fees — not even for late payments. And it will include advanced features built into the iPhone’s Apple Pay app to help users manage their money better. For instance, it will display a map showing where a user has made purchases with the card. But all such information will be stored on a secure chip inside the user’s iPhone, and will not be shared with Apple or with Goldman Sachs.