Apple CEO Tim Cook arrives on October 28, 2019 for the world premiere of Apple’s “The Morning Show” at Lincoln Center’s David Geffen Hall in New York.

Angela Weiss | AFP | Getty Images

The training wheels are soon to be taken down for Apple TV +, the company’s streaming video service.

Apple TV + is $ 4.99 per month. It’s also bundled with other Apple services like Music and iCloud in packages called Apple One starting at $ 14.95 per month. But many subscribers don’t pay.

Apple gave away a large number of Apple TV + subscriptions to get the service off the ground. From September 2019, everyone who has bought an Apple product – an iPhone, iPad, Mac, Apple TV or Apple Watch – will receive Apple TV + for free for one year. During the pandemic, Apple extended the offer twice for people whose trial period was about to expire.

According to survey data by Moffatt Nathanson released in January, most Apple TV + subscribers are still using the promotional offer, with 62% of current subscribers accessing Apple TV + through a promotional package. Apple didn’t say how many subscribers the service has, but hundreds of millions of iPhones and other devices have been sold since late 2019.

Now Apple is starting to wean Apple TV + subscribers from the free plan.

On July 1, people who buy Apple products are entitled to 3 months of free Apple TV + instead of one year, and people who have already redeemed the trial will not be able to get it again. Also in July, the first subscribers who activate the special offer will be automatically billed for the service after having had free access to the shows for almost 21 months.

This represents a great test for Apple.

Will the millions of users who currently have a free trial end up signing up for the $ 5 per month service or an Apple bundle because they can’t do without watching Apple’s shows? Or will they cancel?

Others may simply forget they were on trial and not immediately notice the new charges.

Apple reducing its reliance on free trials for Apple TV + is a “critical point” for the service, said Parks Associates analyst Steve Cason, who follows the streaming industry.

“For newer or smaller services, partnerships and promotions are invaluable customer acquisition tools,” said Cason. “A large percentage of people go through it, they really love the service and keep running it. Or they forget they gave the service their credit card.”

Fewer TV shows and films than competitors

Apple TV + has always had fewer hours of movies and TV compared to other streaming services, which could be one reason it debuted at a lower price compared to $ 8 a month for Disney + or $ 8.99 Dollars for a standard Netflix plan.

When Apple TV + launched in November 2019, there were nine original Apple-sponsored shows and movies. Now it has around 87 original TV shows, films, and documentaries. This is nowhere near what other services offer.

Hulu, for example, has thousands of shows, according to Reelgood, many of which already have large fan bases because they were broadcast on television. Netflix and Amazon Prime Video both have 1,000+ licensed and original shows for customers to watch.

Apple has not licensed any non-exclusive shows for its service and instead only offers sponsored shows. It hasn’t spent to buy media companies to fill out its back catalog, unlike Amazon, which recently agreed to take over MGM Studios.

Most of Apple’s shows feature big-name producers and actors like Oprah and Steven Spielberg. However, talent is not exclusively tied to the company. Oprah’s biggest recent interview with Prince Harry aired on CBS. Steven Spielberg also recently signed a deal with Netflix.

Streaming ratings are notoriously secret, and Apple never revealed how many viewers any of its shows had.

When Apple executives are asked about the success of the content, they refer to nominations. In a press release last week, Apple said its original shows received 112 awards and 389 nominations, including Critics Choice Awards, Golden Globes, and Oscars.

“Whichever device you enjoy it on, it is a milestone for Apple TV + with many new award nominations and wins, including the first Oscar nominations,” said Tim Cook, Apple’s CEO, on a call with analysts in April.

Cook particularly praised a show, “Ted Lasso,” which looks like Apple TV + ‘s first big hit. The breezy comedy about an American soccer coach, based on an NBC ad that poked fun at Americans’ ignorance of soccer, found a fan base with its low-stakes banter.

“Ted Lasso” Season 2 premieres on July 23rd and Apple will publish new episodes weekly with the aim of getting current subscribers excited about the trial version and possibly finding new subscribers.

A promotional email sent to subscribers this week featured “Ted Lasso” in addition to a second season of “The Morning Show,” starring Jennifer Aniston, which premieres in September. The email also promoted shows that have not yet premiered, such as a Will Ferrell and Paul Rudd comedy called “The Shrink Next Door” and the science fiction series “Foundation” based on Issac Asimov’s books.

Still, “Ted Lasso” is a 30-minute comedy with just 10 episodes currently, and overall, Apple’s content library still lags far behind its rivals.

“Apple is not in a position of strength here,” said Michael Nathanson of Moffett Nathanson. “While they have some excellent shows, they lack the amount of new releases, tentpole titles, and an extensive library to really build a big, profitable business at this point.”

Part of a whole

Apple’s The Morning Show will return for a second season on Friday, September 17, 2021.

Apple

It’s hard to figure out how Apple TV + fares in terms of subscribers with Disney or Netflix because Apple doesn’t publish statistics.

Netflix has 208 million subscribers worldwide. It would also be surprising if Apple can keep up with the 100 million Disney + subscribers it has built since Apple TV + debuted.

Analysts are reluctant to give estimates, but based on the number of smartphones Apple sells each year, millions of people could have accepted the Apple TV promotional offer. According to an IDC estimate, Apple sold 206 million iPhones worldwide in 2020, and that doesn’t include the other Apple products that come with a free trial.

Parks Associates polls show that eleven percent of US households with a high-speed Internet connection subscribe to Apple TV +. According to census data, there are approximately 103 million households with broadband.

The percentage of subscribers who might end up churning is foggy too. Analysis of Moffett Nathanson’s survey data shows that 29% of Apple TV + subscribers are not planning to renew, and 41% are not yet sure. Only 30% said they would continue to subscribe to Apple TV +.

But Apple never said it planned to include Netflix, Cason said, so total subscribers may not be that important to the company. He believes Apple TV + is another of several services designed to get users excited about iPhones and Apple services, in line with Apple’s overall corporate strategy.

“Apple wants you to get into their ecosystem by purchasing a device and once you get there they say, ‘We’re giving you Apple TV +. We also have Apple Music, Podcasts, News, Fitness, you can bundle them up or buy them separately “said Cason.

In fact, that’s how Apple thinks about its subscriber numbers. In April, it said it had 660 million paying subscribers for its services – but that includes anyone who subscribed to an app through App Store billing.

Apple TV + provides the company with ad-free content that it can use to promote new audio and video standards that it is incorporating into its products. For example, when Apple TV + shows first debuted, they supported a Dolby HDR standard, which produced better picture quality when viewed through a supported Apple player. The next year, Apple announced that iPhones would be able to film videos using Dolby Vision HDR.

Recently Apple released a feature called Spatial Audio that works like enhanced surround sound when listening with certain Apple headphones. Apple TV + shows and movies support spatial audio so that Apple customers can watch a show in it without the company having to ensure that supported content is available from competitors.