Apple has said it wants to increase revenue from services – 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 a clear disadvantage compared to opponents.
In the fourth quarter, the majority of Apple TV Plus subscribers – a whopping 62% – said they had the free promotional offer that Apple gave to buyers of its hardware devices, according to research firm MoffettNathan’s Q4 2020 SVOD Tracker report. Which is of concern to Apple: 29% of people said they did not plan to sign up again once the promotion period expired; only 30% said they plan to renew at the regular price of $ 4.99 per month (and the rest were not sure).
By comparison, 16% of Disney Plus users said they access the service through the Mouse House’s promotional partnership with Verizon. About 23% of HBO Max subscribers said they access the service through AT&T offers that provide free access to customers on the best wireless, video and internet plans from telco (and for the most expensive packages HBO Max combined as a permanent benefit).
Nearly half of Disney Plus’ participation in the Verizon promotion (48%) said they plan to sign up again after the free admission period expires; only 19% say they do not intend to renew. The data indicates that about 18% of Apple TV Plus subscribers plan to discontinue the service as soon as their promotional offer ends, compared to 3% of Disney Plus customers who have free plans, according to the MoffettNathanson report.
Apple did not disclose how many Apple TV Plus users it has. But they clearly do not want to lose: the company has extended the free access period for Apple TV Plus customers who have signed up for their annual subscription offer through July 2021. The twelve months free Apple TV Plus remains available for customers who buy a new iPhone, iPad, iPod Touch, Apple TV or Mac.
“We remain concerned about future subscribers if there is a slow device cycle and users prefer not to renew themselves,” the MoffettNathanson team, led by senior analyst Michael Nathanson, wrote in the report. Although Disney and WarnerMedia ‘were clear about strengthening their respective content offerings, it seems that Apple is still not doing everything it can to make Apple TV Plus original a focal point.’
A major problem for Apple TV Plus is the limited content setup 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 movies and 14 family series and shows). These include ‘breakouts’ like ‘The Morning Show’ and ‘Ted Lasso’, but in terms of volume, Apple TV Plus is far below the rest of the SVOD field.
Apple has a large number of originals in the pipeline, but it’s still not in the same league as Netflix, Disney Plus or HBO Max. Upcoming releases on Apple TV Plus include Season 2 of Ronald D. Moore’s “For All Mankind” (February 19); and Anthony and Joe Russo’s movie “Cherry” with Tom Holland as an addict who uses bank robberies to pay off his debts (February 26).
Meanwhile, the percentage of U.S. consumers who said they used Apple TV Plus dropped from 10% in November 2020 to 8% in December, according to the MoffettNathanson report. In December, 72% of respondents said they use Netflix, followed by Amazon Prime Video (52%), Hulu (39%), Disney Plus (31%) and HBO Max (13%).
That being said, for Apple, there is another underlying strategy behind the SVOD game: to stimulate hardware sales by giving consumers an incentive to buy smartphones, tablets, computers or Apple TV set-top. If the free benefit of Apple TV Plus made even a small incremental difference in 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 Android smartphone app (but claims that you can use Chrome or Firefox on Android devices to stream Apple TV Plus); Google says the Apple TV app will come to the new Chromecast with Google TV in early 2021.
For the SVOD detection study, MoffettNathanson appointed the market research and consulting firm HarrisX to conduct surveys of 19,435 respondents between October-December 2020.
Other findings from the MoffettNathanson / HarrisX study:
- At the end of 2020, the penetration of electricity services from American households was 77%, with five percentage points higher than a year-on-year, which is attributed to the country entering a stage of self-quarantine again this winter due to the COVID -pandemic.
- The average U.S. pay-TV household now enrolls an average of 3.33 SVOD services, while non-pay-TV homes enroll an average of two. That “perhaps speaks to the impact of revenue on the cut, and pay-TV homes are more willing to invest in more video products,” MoffettNathanson analysts said.
- When subscribers were asked to name what content they had recently watched, 43% of Disney Plus customers mentioned original series, and 38% of Netflix and 34% of Amazon Prime Video customers said the same. Only 13% of Hulu subscribers said they had watched original TV shows recently, and for HBO Max 12%. Meanwhile, 84% of both Hulu and HBO Max customers said that the acquisition of programming has been watching lately, compared to 56% for Netflix, 51% for Prime Video and 49% for Disney Plus.
- When asked why they use streaming services as a replacement for pay-TV, at least half of the subscribers at Hulu (50%), Amazon Prime Video (54%), Netflix (53%) and Disney Plus (52%) said the cost of traditional cable and satellite TV. The second most reported reason for cutting streaming services was ease (12% -17%) followed by content availability (13% -14%), ability to view content (10% -12%), and avoidance of ads (4% -8%).