Mic Drop #13: Apple Extends Its Free Trial for TV+
In doing so, it betrays weaknesses for both TV+ *and* its Apple One Bundle
I connect the dots across the OTT streaming marketplace for your competitive edge at PARQOR.com. Here, I will be highlighting and celebrating “mic drops” on my predictions from past PARQOR Member mailings.
I published PARQOR's "Learnings from OTT streaming in 2020, Predictions for 2021" presentation just before the holidays. If you haven’t seen it yet, you can view the PDF here, or the SlideShare here.
One of my predictions for 2021 was for Apple TV+ under The Curse of the Mogul framework:
In February, Apple TV+ again will revisit its free trial offer. The service is not ready for monthly subscriptions, yet, and likely suffers from high churn and/or pause.
Apple hedges by adding a cheap Apple One tier with iCloud and Apple TV+, only, and extending the free trial for new device owners.
Last Friday, 9to5Mac reported:
Apple is again extending the free period for the Apple TV+ 1-year free trials given out with hardware. With the latest announcement, anybody with an Apple TV+ subscription that was set to expire from now until June will instead expire in July 2021.
This means customers who took advantage of the ‘year free’ deal back when the service first launched will now be getting an additional 9 months of free access to Apple original shows and movies.
The first TV+ extension was announced in October and pushed the first wave of free trial renewals out to February. The new extension means that anyone who didn’t already cancel their subscription will now be able to use it for free for six additional months.
Any current customers with free trials set to end in the February to June period will now see those subscription renewals pushed out to July. Similarly, customers with an annual subscription that expires between February and June will also get the same additional months of service at no additional charge.
Apple will notify all eligible customers of the extension via email in the next couple of weeks. Like last time, the company will be compensating existing subscribers with credit refunds as follows.
Two weeks before January Apple has revisited its offer, proving me generous in my skepticism so I am…
But what about a cheaper bundle tier?
The “cheap Apple One tier with iCloud and Apple TV+, only” prediction reflected two assumptions of mine:
The Apple One bundle is not scaling because it is not solving a need for customers; and,
TV+ does not have a library or value proposition for which Apple customers will pay an additional monthly fee.
9to5Mac confirmed #2:
“The second round of extensions gives Apple more time to expand the Apple TV+ content offering and increase the value proposition of the service, as the company releases new flagship series and movies as well as second seasons of its popular launch shows
As for assumption #1, there is not any direct evidence for it: Apple is not sharing any data or press releases. When Apple announces Services revenues in its quarterly earnings next Wednesday, it is unlikely to go into much detail because, first:
Services net sales include sales from the Company’s advertising, AppleCare, digital content and other services;
and, second:
Services net sales increased during 2020 compared to 2019 due primarily to higher net sales from the App Store, advertising and cloud services.
Both lines are from Apple’s 2020 10-K, and both reflect how there are bigger revenue drivers for Apple Services revenues than News, TV+, Fitness, Music, or Arcade.
Both quotes were also central to a piece I wrote for Members back in November, “Apple TV Plus ($AAPL) at One & the Apple One Bundle”, where I argued “Apple One seems to be a concession from Apple that it has not had success marketing Apple TV+ any other way.”
As I wrote in the piece:
…higher net sales from the App Store, advertising and cloud services make it immediately clear that Apple TV+ both is and is not considered by Apple to be an immediate driver of growth. It is a driver in the sense that the free trial is considered revenue as part of every new sale, and it is not in the sense that this free trial has been extended by Apple for another three months.
By extending the trial again, for another five months, Apple has made it clear that TV+ continues not to be an immediate driver of Services growth.
And, we can infer from the free trial extension that the Apple One bundle has not yet moved the needle for TV+ or other services yet, either. Because if it had, then Apple would be aggressively marketing and upselling the discounted bundle deals by now.
Might Apple offer a cheaper bundle tier?
They might, I can’t rule it out. Why not?
One obvious reason is that current Apple One bundles clearly are not moving the needle enough for TV+, both in their current form and at their current price points.
A cheaper, narrower bundle with iCloud - a service families with Apple devices need to host photos and videos - may do a better job of upselling TV+ than a package of nice-to-have services like Fitness or News+.
The other is this week’s news that Apple continues to seek alternate offerings for its bundle as The Information reported ($ - paywalled): Apple is having conversations with creative partners about introducing a subscription product to its podcasting business.:
By charging for individual podcasts, Apple could potentially offer podcast creators a chance to make more money, drawing them to its orbit and away from rivals.
The obvious objective here is to mirror strategies of Spotify and Amazon to paywall podcasts.
But, Apple has always played the role of “a benevolent distributor” as a podcast distributor, so a paywall would be trading its podcast value proposition for more services revenues.
Which suggests Apple is actively testing the value propositions of its services and services bundles. Audio is a growth opportunity, but Apple seems to be behind both Amazon and Spotify in monetization.
With TV+’s free trial being extended, it appears that Apple not delivered a value proposition that users need with neither TV+ nor an Apple One bundle. Also, Apple shifting its attention to paywalled podcasts implies that it is looking at additional growth engines for both its Services business, which is expected, but also its Apple One bundle, which is a bit unexpected three months after launch.
This all reads a bit ominous for both TV+ and the Apple One bundle.
