Last year, Apple made a significant pivot towards services to replace revenue lost from lagging iPhone sales. However, a new Bloomberg report suggests the California-based company’s new services haven’t generated meaningful revenue yet.
Apple launched TV+, Arcade, News+ and, in the U.S., Apple Card, last year. The four services were either significant expansions on existing services designed to generate more revenue or entirely new services. For example, Arcade sought to take advantage of the large mobile gaming market by bundling several games together into one subscription. On the other hand, Apple Card made use of the company’s existing Wallet software and mobile payments system to provide a unique credit card experience.
Bloomberg says that investors will look for updates on these service offerings when Apple reports its earnings on July 30th. Analysts forecasted $13.1 billion USD (about $17.5 billion CAD) in revenue from services, a 15 percent jump from last year. However, Bloomberg says most of those gains will come from existing services. That includes the App Store and licensing deals such as Google Search.
Apple TV+ could need ‘reevaluation’ while News+ appears to be struggling most
Apple TV+ launched last November, and despite some well-received shows and movies, analysts told Bloomberg that they estimate fewer than 15 percent of eligible customers signed up. It’s worth noting Apple offered a one year free trial for people who bought a new iPhone, so it remains to be seen how many of those people will continue with the service once the trial ends.
Analysts told Bloomberg that Apple TV+ might need a “strategic reevaluation,” and the company should think about spending more on original content.
Apple unveiled Arcade in September with 100 titles and some high praise from reviewers. However, Bloomberg notes that Apple since shifted strategy and cancelled contracts for some in-development games. At the same time, Apple reportedly began looking for titles that would better retain subscribers. That change suggests Arcade has struggled to maintain subscriber numbers.
Bloomberg says that Apple News+ appears to be struggling most. It launched in March 2019 without some high-profile news organizations. Although some eventually joined, others left, and some publications complained of lower-than-expected incoming from the app. Further, the head of business for Apple News stepped down earlier this year.
As for Apple Card, it also appears not to be faring well. While launching it in other countries — such as Canada — may prove helpful, Bloomberg reports that Goldman Sachs Group — Apple’s partner for the credit card — accumulated about $2 billion USD in credit lines since launch. Bloomberg cites a February update from a Nilson report that says those numbers are a fraction of other co-branded cards.
Apple is under increased scrutiny for its App Store practices
All these services could see more growth in the future, but so far, it seems Apple will continue to rely on the App Store and third-party developers to spur revenue growth.
However, this comes as Apple sees increased scrutiny over its App Store practices, much centring on its 30 percent cut. The California-based company takes 30 percent of all paid apps downloaded from the App Store as well as from in-app subscriptions for the first year (and 15 percent after that).
Apple does have exemptions for this rule, but these too have come under scrutiny since Apple seems to offer better exemptions for some big developers while holding smaller developers to stricter standards.
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