Apple Likely To Unveil Video Streaming Service On Mar 25

Apple (NASDAQ:AAPL) is expected to launch its much-anticipated video streaming service in April or early May. Per Bloomberg, the company is planning to host a star-studded event on Mar 25 to unveil the video and a news subscription service.

The video service is likely to comprise a generous dose of free original programming (reportedly for Apple device holders) along with subscription-based streaming offerings like CBS Showtime, Lions Gate’s LGF.A Starz and Viacom.

However, Netflix (NASDAQ:NFLX) and Hulu will not be a part of the service. Also, HBO is yet to strike a deal, apparently due to revenue split issues. Per CNBC, Apple is pushing for a 30% cut on every customer who subscribes to the service instead of 15% that it currently charges on revenues from customers signing to HBO Now service through App Store.

Revenue sharing arrangement has also been a bone of contention between Apple and a host of major publishers, including the New York Times and Washington Post, for the upcoming paid news service. Reportedly, Apple has demanded a revenue cut of roughly 50%. The paid news service will be integrated into the Apple news app.

Video Streaming to Boost Services Momentum

As iPhone sales growth slows down, Apple’s Services business has emerged as the company’s new cash cow. In the last reported quarter, the segment accounted for 12.9% of sales, which increased 19.1% year over year to $10.88 billion.

Growth was driven by an expanding App Store, Apple Music and Apple Pay subscriber base. Apple currently has more than 360 million paid subscribers across its Services portfolio. More than 30,000 third-party subscription apps are available on the App Store.

Further, Apple Music has now more than 50 million paid subscribers. Apple News currently has more than 85 million monthly active users (MAUs) in the United States, the U.K. and Australia. Additionally, Apple Pay’s transaction volume was 1.8 billion, more than twice the volume in the year-ago quarter.

The upcoming video service is an important addition to this ensemble portfolio. Apple has spent roughly $2 billion on its content (either through producing or acquiring) and inked multi-year content deal with Oprah Winfrey.

Per Macworld, Apple has spent $1 billion on original TV programming through 2018. A number of Hollywood stars, including Jennifer Garner (My Glory Was I Had Such Friends), Reese Witherspoon, Jennifer Aniston, Steve Carell (untitled series on morning show drama), Captain America - Chris Evans (Defending Jacob), Jason Momoa (See), Octavia Spencer (Are You Sleeping) and many more.

The involvement of Hollywood stars as well as acclaimed directors and producers like Steven Spielberg and J.J. Abrams surely makes the shows attractive. This is expected to boost subscriber base that will eventually drive top-line growth.

Content Strength to Aid Competitive Position

Moreover, content strength will improve Apple’s competitive position in the streaming space, which is currently dominated by Netflix, Amazon (NASDAQ:AMZN) and Hulu. Further, with already 200 over-the-top (OTT) services available in the United States alone, competition in the space is reaching new heights.

Upcoming streaming services from traditional media companies like Comcast’s NBCUniversal, Sinclair Broadcasting and Disney will further intensify competition for incumbents like Netflix and tech companies like Apple. In such a scenario, innovative and diversified content will be the key differentiator.

Apple currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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