Streaming media is not just about Netflix, what is the potential of Apple's Apple TV+?

Barclays said that Apple's streaming TV service will lose billions of dollars in the coming years, which will have a significant impact on the company's profitability. However, Apple has not shown any signs of giving up its foray into streaming video.

Analysts say that the increase in content spending in Apple's $90 billion stock buyback plan announced last week actually reduces cash.

Shareholders would prefer the company to buy back more shares or increase dividend yields rather than invest heavily in content on Apple TV+.

Long maintains an "equal weight" rating on Apple, and Apple TV+ continues to show impressive growth in revenue and users, but it will take several years for this service to contribute to Apple's profits.

Growth potential of Apple TV+

Apple has not disclosed any data on TV+ users, revenue, or profitability. But Long made some informed guesses about TV+'s performance.

The analyst estimates that Apple TV+ accounts for only 2% of Apple's service revenue, and streaming services will generate $1.5 billion in revenue in 2022, growing to $2.2 billion in 2023.

Long also wrote that Apple TV+'s operating profit margin may be negative, with a projected loss of 30 cents per share in 2022. He predicts that based on content spending of $4.8 billion in 2022, $5.8 billion in 2023, and $6.6 billion next year, losses will "tend to stabilize" in 2025.

However, strong growth may occur in the future. Long expects Apple TV+'s annual compound growth rate to be around 30%, far higher than the industry's growth rate of around 15%. For 2023, he predicts that Apple TV+ revenue will grow by 52%, partly due to the price increase in October 2022.

In terms of users, he estimates that Apple will have about 29 million paying users in 2022, and the total is expected to reach 39 million by 2025. This will make Apple one of the smaller streaming service providers.

What are the advantages of the content?

As Long pointed out, Apple's content has generally received positive reviews from critics. In addition, Apple TV+ is priced at $6.99 per month, much lower than the prices of other ad-free services - Netflix is $19.99 per month, and HBO Max is $15.99 per month. Disney charges $10.99 per month.

Apple's content library is smaller, but most of it is fresh. Long pointed out that the service released more than 55% of its content from 2021 to 2023, while more than half of Netflix's content was released from 2016 to 2020. He also said that Apple TV+ has more content rated 8 or 9 by IMDb, accounting for 18%, while Netflix and Amazon Prime are 9% and 5.5%, respectively. Longbridge stated that the company is involved in sports content, including exclusive agreements with the Major League Soccer in the United States and broadcasting rights for Major League Baseball games on Friday nights, which "may pave the way for future advertising layers for TV+," potentially providing significant revenue growth for the service.