You will be redirected back to your article in seconds

How Will Apple TV+ Shake Up Netflix? Analysts Are Split

Is Apple’s star-fueled streaming service a “Netflix killer” — or just another incremental challenger chasing the market leader? Wall Street analysts don’t agree on whether Apple TV+ will put a big dent in Netflix’s subscriber momentum with the debut of its premium subscription VOD service later this year.

At its splashy unveiling Monday, Apple trotted out a host of Hollywood boldface-name partners, including Oprah, Steven Spielberg, Jennifer Aniston, Reese Witherspoon, Steve Carell, J.J. Abrams and Sesame Street’s Big Bird, who talked about their projects for the forthcoming streaming service.

A big challenge in assessing the impact of Apple TV+ is that the company left key questions unanswered: namely, what it cost and what exactly is going to be in the package. At the event, it screened only a 90-second supercut of the original shows it’s ordered to date. The streaming service is slated to debut in the fall of 2019 in over 100 countries.

Some expect a seismic jolt. “Apple Poisons Netflix” was the title of the research note by Needham & Co. analyst Laura Martin, pointing to Apple’s estimated $2 billion content budget for original entertainment, its high-wattage creative partners and strong brand.

Netflix “has an inferior competitive position to [Apple] over time, as we see it, in both: a) customer acquisition costs; and b) content costs,” Martin argued in her analysis. Apple has “zero consumer acquisition costs,” assuming it will first target its captive 900 million global user base, she wrote. Meanwhile, Apple’s content costs will be offset by the revenue share of subscriptions it will sell through the Apple TV Channels storefront for HBO, Showtime, Starz and others.

Moreover, Apple has the ability to bundle together TV, games, news, and music subscriptions with new iPhone sales, Martin continued. Assuming the tech company prices its three new services (TV, games and news) at $10 per month each and it gets 10% of its installed base to subscribe to each one, that would add $32 billion in new revenue annually (nearly double Apple’s 2018 total services revenue). In turn, that would fund two to three times more content than Netflix — and Netflix, Martin noted, has been forced to borrow billions of dollars to fund its content spending.

With Apple Music, Apple Arcade (its new game-subscription service) and Apple TV+, the company “will be able to cross-sell and integrate best practices of all 3 into a new innovative service never done before,” Martin wrote.

But Apple’s plans to dive into the streaming space — and the talent it has been working with — were not exactly state secrets. The Cupertino “magic factory” has been plugging away for the last two years to assemble its programming slate under the direction of ex-Sony TV executives Jamie Erlicht and Zack Van Amburg.

Other analysts think Apple TV+, whatever it ends up looking like at launch, will have a minimal impact in slowing Netflix’s roll.

Raymond James analyst Justin Patterson doesn’t believe Apple’s streaming service will have a major negative effect on Netflix (nor, for that matter, will Disney+, the forthcoming subscription VOD service from the Mouse House). Netflix already competes with a slew of rivals, including HBO, Amazon Prime Video and Hulu.

“Similar offerings already exist, suggesting [the Apple TV+] service is more incremental than revolutionary,” Patterson wrote in a note. “We believe Apple’s and Disney’s launches will not adversely affect Netflix’s competitive position.” The analyst reiterated a “strong buy” rating on Netflix and a 12-month price target on the stock of $470.

Apple has a massive footprint of users, but a question about its SVOD ambitions is whether it will have the volume of content win Apple TV+ subscribers, according to Morgan Stanley’s Ben Swinburne.

“Does Apple have the appetite to spend its way to success?” Swinburne wondered in a research note Tuesday. He maintained that Netflix is well positioned for the battle: “Netflix’s risk appetite, singular focus and ability to bring the best of Silicon Valley to the best of Hollywood is still perhaps underestimated by the market.”

Apple is offering the SVOD service through its redesigned Apple TV app. In a departure from its past strategy of tying hardware, software and services into one (closed) vertical stack, Apple is planning to launch the new Apple TV app this spring Samsung smart TVs and on Roku, Amazon Fire TV, LG, Sony and Vizio platforms at some point in the future.

In any case, Apple’s subscription VOD service certainly stands to be a credible contender in the fight for the share of consumers’ entertainment dollars — which, of course, isn’t unlimited. In 2018, the average U.S. consumer subscribed to three video streaming services, according to research from Deloitte, and increasingly they’re frustrated by “subscription fatigue” in which they have to cobble together multiple services to get what they want to watch.

Apple is playing a long game with the so-called “Netflix Killer” and has the opportunity to capture 100 million consumers for Apple TV+ over the next three to five years, according to Wedbush Securities managing director of equity research Daniel Ives.

Apple TV+ “takes direct aim at [Reed] Hastings and Netflix over the coming years,” Ives wrote in a note. “We believe Apple’s goal here is to be a major distribution platform for content and with 1.4 billion active iOS devices worldwide, with the theme of family and safer viewing platform, Cupertino is trying to differentiate itself vs. competitors and flex its Apple brand muscles to get more consumers on this ‘trustworthy’ platform.” The analyst maintained his “outperform” rating on Apple’s stock.

Another question about Apple’s strategy is why it unveiled Apple TV+ some six months before it is scheduled to become available — a “sneak peek,” CEO Tim Cook called it, while others likened the parade of Hollywood celebs to a TV upfront presentation. It could be that Apple expected the SVOD service to be ready to go in the spring of 2019. Or perhaps the company simply wants to build buzz for its originals leading up to the launch.

For now, Netflix investors don’t seem overly spooked about Apple’s entrée on its turf.

Netflix’s stock closed up 1.4% on Monday, to $366.23 per share, after Apple’s announcement, while it was down around 1.1% in morning trading Tuesday. Apple shares closed down 1.2% Monday — as investors were likely looking for a bigger bang from the much-hyped event — but were up 1.7% in Tuesday trading.

More TV

  • Liz Heldens

    Liz Heldens Sets Drama Pilot 'Big Leap' at Fox

    “The Passage” creator Liz Heldens has scored a drama pilot order at Fox for the 2020-2021 season. The one-hour project is titled “The Big Leap.” Inspired by the UK docuseries “Big Ballet,” the show centers on a group of diverse underdogs from all different walks of life who compete to be part of a competition [...]

  • advertising placeholder NEW

    Procter & Gamble Gets Ready to Enter TV's Streaming Wars

    AT&T, Comcast and Walt Disney aren’t the only big companies eager to get into streaming-video. Procter & Gamble, one of the world’s most influential advertisers, is looking to do the same. P&G. the maker of Pampers, Crest and Bounty, among other popular supermarket staples, has struck a partnership with Stone Village Television, the production company [...]

  • The Luminaries

    Berlinale Series Market Unveils 2020 Selection

    The BBC and TVNZ’s adaptation of Man Booker Prize winning novel “The Luminaries,” starring Eva Green, is among the scripted TV projects that will feature in this year’s Berlinale Series Market and Conference program at the Berlin International Film Festival. Set during the 1860s gold rush in New Zealand, the Working Title and Southern Light [...]

  • The Photograph Issa Rae Stella Meghie

    How ‘Love & Basketball’ Allowed Issa Rae to Dream

    Issa Rae says she had every reason to think she could be a filmmaker when she was growing up. “The ’90s had lots of black television and film … a lot of the shows were helmed by black people,” she recalls. “That’s what inspired me to at least try it.” She may have only been [...]

  • A security guard wears a mask

    China’s Media Regulator Cuts 'Entertaining' TV Content During Coronavirus Crisis

    China’s media regulator has responded to the deadly coronavirus epidemic sweeping the country by cutting “entertaining” TV shows and boosting news programs, it said Tuesday, at a time when millions are stuck at home under quarantine. The announcement comes just days after it declared it was also doing the opposite: actively working to bring in [...]

  • Nic Pizzolatto, Matthew McConaughey28th Annual American

    Matthew McConaughey, 'True Detective' Creator Re-Team for FX Drama Series

    Matthew McConaughey and Nic Pizzolatto are coming together for a potential new TV series at FX. The “True Detective” collaborators have landed a script-to-series order for a drama series titled “Redeemer,” which Pizzolatto will write and in which McConaughey will star. Both will also executive produce the project. In addition, Pizzolatto has signed an overall [...]

  • 'Miracle Workers' Creator Talks Taking the

    'Miracle Workers: Dark Ages' Creator Talks Pivoting the Series Toward Medieval Times

    “Miracle Workers: Dark Ages” sees Steve Buscemi shift from playing God to a local excrement remover, and Daniel Radcliffe ditch his awkward angel for a soft-brained prince. Given the malleable nature of the TBS anthology series, creator Simon Rich was presented with a blank canvas for Season 2. Rich made the decision to leave behind [...]

More From Our Brands

Access exclusive content