Newer Apple Services Showing Slow Growth in First Year: Bloomberg
Apple is expected to report its fiscal third-quarter results on July 30th. Analysts have forecasted that the Cupertino-based company gained $13.1 billion in revenue from its services, up 15 percent from 2019. However, it appears as though the App Store and licencing deals played a larger role than Apple’s new services such as Apple Arcade, Apple TV+, Apple Card, and Apple News+.
Bloomberg‘s Mark Gurman reported that investors are expecting a shallow return on Apple’s newer offerings when it comes to services, which many are still in its first year of launch.
Apple Arcade, for instance, launched in September of last year to much adoration. However, the company recently revised its approach to the video game subscription service. It’s been said that Apple has cancelled contracts for certain games in development while searching for other titles that would assist in retaining subscribers. Some developers have stated that subscriber growth is weaker than expected.
Last November, Apple launched Apple TV+ in what was already a competitive space in regards to content streaming services. While offering well-received films and original content, Apple TV+ has yet to make its industry splash. Apple has also been offering one year free trials through purchases of iPhones and other devices. Though, Gurman states analysts estimate that less than 15% of eligible users signed up.
Apple Card has accumulated $2 billion in credit lines since its launch in August 2019. However, a February update from Nilson Report showed that the number pales in comparison to other co-branded cards. This is despite Apple Card offering no annuals fees but likely takes a cut of the interest partnering company Goldman Sachs Group Inc. charges.
Finally, Apple News+ appears to show the slowest growth. In March of 2019, Apple News+ launched without the support of heavyweight news outlets such as the New York times and the Washington Post. Apple has not released up to date subscribers numbers though a report in November hinted that Apple saw 200,000 subscribers sign up in the first 48 hours. Though, the number has likely not grown a substantial amount over time. Adding to that, Apple News+’s head of business left the company less than one year after the service launched.
With all that said, Apple’s new services certainly have room to grow and prosper over time. However, as for now, the App Store is doing the heavy lifting for Apple. The App Store has generated $32.8 billion in the first half of 2020 for developers. This figure is up 20 percent from a year earlier according to an estimate from Sensor Tower. Paid subscribers grew to 515 million in the second quarter.
Apple takes a 30 percent cut from all paid app downloads from its App Store. It also takes a 30 percent cut from in-app subscriptions or 15 percent after its first year. Though, this is a topic of contention as recent antitrust complaints will see Apple CEO Tim Cook participate in a hearing this week. It remains to be seen if the App Store’s revenue intake will be affected moving forward.