Apple said it wants to increase service revenue – including Apple TV Plus, which is just over a year old. But new research suggests that the tech giant’s entry into the so-called “streaming wars” is at a clear disadvantage compared to its rivals.
In the fourth quarter, the majority of Apple TV Plus subscribers – an impressive 62% – said it was in the free promotional offer that Apple extended to buyers of its hardware devices, according to research firm MoffettNathan’s report, Q4 2020 SVOD Tracker. What is worrying for Apple: 29% said they did not plan to renew their subscription after the promotional period expires; only 30% said they plan to renew at the regular price of $ 4.99 / month (and the rest are unsure).
In comparison, 16% of Disney Plus users said they access the service through Mouse House’s promotional partnership with Verizon. About 23% of HBO Max subscribers said they access the service through AT&T promotions that provide free access to customers on telco’s best wireless, video and internet plans (and for the most expensive packages, HBO Max is included as a permanent benefit).
Nearly half of Disney Plus subscribers in the Verizon promotion (48%) said they planned to sign up again after the free access period has ended; only 19% said they did not plan to renew. The data suggests that about 18% of Apple TV Plus subscribers plan to stop the service when their promotional offer ends, compared with 3% of Disney Plus customers with free plans, said the MoffettNathanson report.
Apple did not reveal how many Apple TV Plus users it has. But it clearly doesn’t want to miss them: the company extended the free access period for Apple TV Plus customers who signed up through its one-year free subscription offer until July 2021. The free 12 months of Apple TV Plus remain available to customers who buy a new iPhone, iPad, iPod Touch, Apple TV or Mac.
“We remain concerned about future subscriber turnover if there is a slow device cycle and users choose not to renew on their own,” wrote the MoffettNathanson team, led by senior analyst Michael Nathanson, in the report. While Disney and WarnerMedia have been “clear about strengthening their respective content offerings, it appears that Apple is not yet determined to make the original Apple TV Plus a focal point”.
A major problem for Apple TV Plus is its very limited content line, compared to 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 non-fiction series, 11 films and 14 family and special series). This includes breakouts like “The Morning Show” and “Ted Lasso”, but in terms of absolute tonnage, Apple TV Plus is far below the rest of the SVOD field.
Apple has a list of originals in preparation, but it is not yet in the same category as Netflix, Disney Plus or HBO Max. The next releases on Apple TV Plus include the 2nd season of “For All Mankind” by Ronald D. Moore (19 of February); and Anthony and Joe Russo’s film, “Cherry,” starring Tom Holland as an addict who resorts to bank robberies to pay off his debts (February 26).
Meanwhile, the percentage of American consumers who said they use Apple TV Plus fell from 10% in November 2020 to 8% in December, according to the MoffettNathanson report. In December, 72% of respondents said they used Netflix, followed by Amazon Prime Video (52%), Hulu (39%), Disney Plus (31%) and HBO Max (13%).
That said, for Apple, there is another underlying strategy behind the SVOD game: boosting hardware sales by providing an incentive for consumers to buy their Apple TV smartphones, tablets, computers or set-top boxes. If the free benefit of Apple TV Plus made a small incremental difference by moving the needle there, it is possible that the company could rationalize the cost of investing in Apple TV Plus. Apple, in true Apple form, does not offer a native app for Android smartphones (but claims that 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 screening study, MoffettNathanson recruited market research and consulting firm HarrisX to conduct surveys with 19,435 respondents between October-December 2020.
Other findings from the MoffettNathanson / HarrisX study:
- The penetration of streaming services in U.S. homes was 77% at the end of 2020, an increase of five percentage points year on year, attributed to the country reentering some self-quarantine stage this winter due to the COVID pandemic.
- The average pay TV family in the United States now subscribes on average 3.33 SVOD services, while homes without TV subscribe on average two. This “may refer to the impact of revenue on cable cutting, with pay TV houses being more willing / able to invest in more video products,” said MoffettNathanson analysts.
- When subscribers were asked to cite the content they watched recently, 43% of Disney Plus customers cited the original series and 38% of Netflix customers and 34% of Amazon Prime Video customers said the same. Only 13% of Hulu subscribers reported that they recently watched original TV shows and for HBO Max it was 12%. Meanwhile, 84% of Hulu and HBO Max customers said that the programming they acquired was what they watched most recently, compared to 56% on Netflix, 51% on Prime Video and 49% on Disney Plus.
- Asked why they use streaming services to replace pay TV, at least half of subscribers with Hulu (50%), Amazon Prime Video (54%), Netflix (53%) and Disney Plus (52%) said it was due at the cost of traditional cable and satellite TV. The second most reported reason for cutting the wire in favor of streaming services was convenience (12% -17%), followed by content availability (13% -14%), the ability to watch content compulsively (10% – 12%), and avoidance of commercials (4% -8%).