Apple’s Service Bundle: A Surprising First Step
For a few months, speculations have mounted over Apple bundling its services and offering packages at a slightly discounted price – I wrote about Apple One recently. But Apple’s first move to pull services together was a bit different than many had imagined.
Apple partners on streaming video
On August 17, Apple announced a joint venture-type arrangement with ViacomCBS. The Cupertino company will offer a CBS-Showtime bundle for $9.99 per month to subscribers of Apple TV+, available in the US only.
Those who choose to subscribe to the bundle would pay roughly $15 per month for all three streaming services, which can be used by up to six people in the household. If purchased separately through the Apple TV app, all three services would cost a combined $26 per month.
What Apple investors should know
Not a surprise, the terms of the deal were not (and likely will never be) disclosed. I would not be shocked to learn that a revenue share agreement of some sort has been worked out between Apple and ViacomCBS, although I suspect that Apple’s cut of the $15-per-month subscription price would be very close to the already low $4.99 that the company currently charges for Apple TV+ as a stand-alone offering.
In my view, the partnership is a typical win-win case of “one plus one equals three”. Here are a couple of points to think about:
- Subscription services are highly scalable. Additional revenues do not necessarily come at higher costs. Therefore, any arrangement to increase the user base meaningfully should be viewed as a positive for sales and margins.
- Bundling can serve as the nudge that users need to sign up for services that they otherwise would not have. As an example, fans of Apple’s Morning Show who also like Showtime’s Billions may choose to subscribe to one streaming platform to the detriment of the other. Now, they can do both at a lower price, which bodes well for demand.
The Apple Maven is bullish
I believe that the video streaming bundling arrangement is yet another positive for Apple and its stock – although share price did not change much beyond the market’s broad moves. As I noted a few months ago, Apple TV+ has yet to prove successful in the face of so much competition for streaming video. The ViacomCBS carrot-and-stick approach, which reminds me a bit of Disney’s Hamilton strategy, could move the needle and help support new Apple TV+ subscriptions.
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