Apple Adds Streaming, News & Gaming to Services Portfolio

Apple AAPL unveiled a host of services on Mar 25. These include its new video streaming service Apple TV+, a news subscription service, Apple News+ and an ad-free gaming service, Apple Arcade.

The iPhone-maker also launched Apple Credit Cardin partnership with Goldman Sachs and Mastercard.

Let’s delve into the details further.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Apple TV+

The much-awaited streaming service exclusive to the new Apple TV app will be available to users this fall. The ad-free service will include original movies, shows and documentaries from popular Hollywood content providers like Oprah Winfrey, Octavia Spencer, Reese Witherspoon, Jennifer Aniston and Steven Spielberg to name a few.

Apart from original content, the Apple TV app will also include Apple TV channels, available May onward, and movies and TV shows currently available for purchase/rent on iTunes.

Notably, users can watch popular services like Showtime, HBO, CBS CBS All Access and more on Apple TV channels and can share content with up to six members, per management. Additionally, users can easily access channels using their Apple ID and individually subscribe to new channels they like.

Moreover, based on user preference, the app will suggest movies and shows from more than 150 streaming apps, including Amazon AMZN Prime, ESPN+ and Hulu to name a few and pay-TV providers like Charter Spectrum and DIRECTV NOW.

Notably, free update to the TV app will be available to iPhone, iPad and Apple TV users this May and to Mac users this fall in more than 100 countries. Additionally, the TV app can be accessed on Samsung smart TVs starting this fall and will later come to Amazon Fire TV, Sony, LG, Roku ROKU, and VIZIO.

Apple News+

The news subscription service, part of Apple News app, will feature content from popular publications like The Wall Street Journal, People, Los Angeles Times, Vogue, ELLE and National Geographic Magazine. The service also includes content from 300 magazines and other top newspapers and publications.

Subscribers will have access to the latest and old content from magazines including Vogue, ESPN The Magazine, Food & Wine, The Oprah Magazine, New York Magazine to name a few.

Apart from content, Apple also improved the features and the look of the service to facilitate easy transition among the apps and enhance user engagement. Additionally, the company stated that through Family Sharing the content can be accessed by all family members at the same price.

The service is available for $9.99 a month in the United States and $12.99 a month in Canada starting Mar 25. Notably, the service will soon be made available in the U.K. and Australia.

Apple Arcade

Apple’s new ad-free gaming subscription service will be available this fall in more than 150 countries. The service, which will have more than 100 new and existing games can be accessed across Apple devices - iPhone, iPad, Mac and Apple TV.

Notably, the new service will only be a part of App Store, which has approximately 300,000 free and paid games and has been used by more than 1 billion people for game downloads.

The company is closely working with renowned creators like Will Wright, Hironobu Sakaguchi and Ken Wong and other independent developers and major studios to develop the games. Additionally, Apple is sharing the development costs.

Moving away from the normal practice of developing games for younger audience, Apple is developing games suitable for users of various age groups. Additionally, users are not required to make any other payments apart from their subscription fees to gain full access to the game and its features.

Moreover, Apple noted that new games will be added on a frequent basis.

Apple Card

Apple Card, which will be available to U.S. customers this summer, will be integrated into the Apple Wallet app.

The card is designed to help individuals have a better understanding of the cost of services and the payment processes. Additionally, user purchases are differentiated per categories. Users are provided with weekly and monthly spending outlines.

Notably, customers can quickly register for the card through the Wallet and have access to customer support 24/7.

This apart, customers can access other features like daily cash, cashback on Apple Cash card as a percentage of every purchase made, lower interest and no fees card. Apple also stated that customers will not be charged a penalty if they miss a payment. Additionally, the card is very secure as transactions will be processed only after authorizing it with Face ID/ Touch ID and a one-time password.

Further, the company announced titanium Apple Card available for use at locations currently not accepted by Apple Pay.

Conclusion

Apple’s shift toward a high-margin business model by including more services in its portfolio is expected to drive its top line.

Notably, services gross margin expanded 450 basis points (bps) year over year in first-quarter fiscal 2019. Additionally, revenues from services increased 19.1% year over year to $10.88 billion and accounted for 12.9% of sales in the same period.

Apple current carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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