Why Apple TV+ ups the stakes in streaming wars with $4.99 price

By Wendy LeeStaff Writer

Sept. 10, 2019 10:47 AM PT

CUPERTINO, Calif. — Seeking to stand apart from rivals, Apple Inc. on Tuesday stunned some industry analysts by offering a lower-than-expected price for its much-anticipated streaming service.

The tech giant said Tuesday that Apple TV+ would launch Nov. 1 for $4.99 a month — nearly half what some industry analysts had predicted.

“The pricing of Apple’s streaming TV service at $4.99 per month is a showstopper and a major shot across the bow at the likes of Netflix and Disney, among others,” said Daniel Ives, managing director of equity research at Wedbush Securities.

The service will enter an already-crowded marketplace of streaming video services dominated by Netflix, Amazon Prime Video and Hulu. And more competition is coming, with Walt Disney Co. and WarnerMedia offering their services later this year or next.

But Apple’s streaming platform undercuts the price of its rivals. It’s less expensive than Disney’s upcoming streaming offering, Disney+, which will cost $6.99 monthly or $70 a year, and Netflix’s basic plan, which costs $8.99 a month.

“Life just got tougher for Netflix,” said Gene Munster, a managing partner with venture capital firm Loup Ventures. He said he initially expected Apple TV+ to charge $9.99 a month.

Apple said that the first shows on Apple TV+ will be available Nov. 1 in more than 100 countries and regions.

“All of these incredible shows for the price of a single movie rental,” Apple Chief Executive Tim Cook said at the media event, which was held in Steve Jobs Theater at Apple headquarters in Cupertino, Calif.

As an incentive, consumers will receive a year of Apple TV+ included when they buy Apple products, such as an iPhone or iPad, Cook said.

Apple said nine original programs will premiere with the Nov. 1 launch. Those include “See,” a drama starring Jason Momoa; “The Morning Show,” about a broadcast morning show starring Jennifer Aniston and Reese Witherspoon; a coming-of-age story called “Dickinson”; “For All Mankind,” a series about the global space race; the children’s series “Helpsters”; and an animated original “Snoopy in Space.”

The content on these platforms will play a key role in drawing subscribers.

Apple has signed up high-profile directors, actors and celebrities to help it launch its service. Some industry insiders, however, have questioned Apple’s content strategy.

Cook said there is strong demand for the upcoming shows, with trailers for “The Morning Show,”
“For All Mankind”and “Dickinson” garnering more than 100 million views.

One advantage that Apple has is that people around the world already use iPhones, and streaming video content through Apple’s own apps can be more convenient than having to download new ones.

As Oprah Winfrey, who is working on bringing documentaries to Apple TV+, noted at an Apple event in March, they’re “in a billion pockets, y’all. That represents a major opportunity to make a genuine impact.”

There are 900 million active iPhones worldwide, and Apple has the opportunity to gain 100 million consumers on the streaming front in the next three to four years, said Ives of Wedbush Securities.

Apple offers subscriptions to news with Apple News+ and the streaming music service Apple Music.

Apple has increased the number of services it is offering consumers, as the company looks for new ways to grow revenue. Sales of its flagship product, iPhones, declined 12% during the three months that ended June 29, compared with a year earlier.

Netflix CEO Reed Hastings said in a July earnings call with investors that there is a battle for who will pay for content around the world, but he doesn’t see it as a zero-sum competition. He believes people will subscribe to more than one service, noting that most Netflix employees are also HBO subscribers.

“We love the content they do, and that spurs us on to want to be even better,” Hastings said. “So it’s a great competition that helps grow the industry.”

With just nine original programs at launch, Apple TV+’s library will be much smaller than Netflix’s, a person familiar with Netflix said.

“It seems like apples to oranges, no pun intended,” the person said.

During Apple’s media event, the company also unveiled new hardware products. Apple’s new iPhones will resemble recent models but with better cameras and new colors. The most expensive models, the iPhone 11 Pro and iPhone 11 Pro Max, will now have three cameras on the back, including a new, wider-angle one to squeeze more of the landscape into the picture.

They start at $1,000, the same as before. The cheaper model, called the iPhone 11, will start at $700, down from $750 for the iPhone XR. It now gets two lenses instead of one. The lower price reverses a trend in which premium phones get more expensive as people upgrade them less often. The new phones come out Sept. 20.

Apple also announced Apple Watch Series 5, which will go on sale in stores Sept. 20. The new Watch, which starts at $399, will have features such as a built-in compass.

And the company said it would launch its gaming subscription service, Apple Arcade, on Sept. 19 for $4.99 a month, with a catalog of more than 100 exclusive games. Games include arcade baseball game “Ballastic Baseball” from Gameloft.

Information from the Associated Press was used in this report.