Apple's TV+ launches today, marking the beginning of a newly competitive era in video streaming.

Apple's streaming service, which costs $4.99 per month or free for a year for those who purchase new Apple devices, has a far more limited content selection than competitors such as Netflix (NFLX - Get Report) , Amazon (AMZN - Get Report) Prime Video and the soon-to-launch Disney+ (DIS - Get Report) and AT&T's (T - Get Report) HBO Max. But Apple is seeking to leverage its large installed base to give itself a head start. Apple (AAPL - Get Report) shares were up 1.9% to just shy of a new all-time high of $253.51 on Friday afternoon, following Apple's favorable Oct. 30 earnings report, which included a record $12.5 billion in revenue in its growing services segment.

On a Wednesday call with investors, Apple CEO Tim Cook explained the reason for the one-year free trial of Apple TV+, describing it as "a gift" to customers.

"From a business point of view, we're really proud of the content; we'd like as many people as possible to view it. This allows us to focus on maximizing subscribers, so we feel great about doing that," Cook said.

How many subscribers could that turn into? In a recent note, Barclays' Tim Long estimated that roughly 50% of device buyers will opt in to the free trial, which would yield more than 100 million subscribers one year from now. That could drop off as free trials begin to expire, but "the rate of churn will depend meaningfully on how quickly Apple can ramp up its content library," he wrote.

Put another way, it is hard to know how well Apple TV+ will do until we know more about Apple's content plans and how the current slate will be received. Advance reviews of Apple's marquee originals, such as The Morning Show, See and For All Mankind, pointed to a mixed bag. And if viewers don't like the initial slate, the free trial gives Apple basically one year to convince them to stick with the $4.99 per month service, whether that be through newer and more compelling content or through bundling options. Days ago, for instance, Apple said it would offer a $4.99 bundle for students that includes Apple Music and Apple TV+.

"The challenge for Apple, and for everyone when it comes to the popularity of video content, is that it's highly subjective," said D.A. Davidson analyst Tom Forte. "While the companies employ what is theoretically a strategy of securing A-list talent -- Reese Witherspoon, Jennifer Aniston, Steven Spielberg -- that does not guarantee the shows will be popular."

Although it's new to the Hollywood game -- Forte likened the content efforts to "a serious hobby, not yet a job" -- Apple has several advantages over competitors. One is controlling its own ecosystem of devices, software and services, which allows it to deliver a frictionless viewing and payments experience to TV+ subscribers. Another is Apple's huge bank account.

"The good news for Apple is that even if it's unsuccessful out of the gate, it's got a big checkbook to fall back on," Forte added.

Apple is estimated to spend around $6 billion annually on TV+ content, and it could be a little while before the service itself generates at least as much. Revenue forecasts vary somewhat, but Barclays estimated it could be a $6 billion revenue business in fiscal 2020, while Wedbush's Dan Ives estimated it could generate between $7 billion and $10 billion within three to four years, placing it on par with other existing services. 

The year-long free trial also translates into another accounting quirk that investors should be aware of, Barclays' Long wrote recently. For users that buy a new device and opt in to the free trial, Apple will deduct $60 (equivalent to what would be one year of Apple TV+), and begin recognizing that amount as services revenue. That could mean a decline in hardware gross margins and iPhone average selling prices -- a metric that's been trending downward in recent quarters -- at least in the near term. But it could also mean that services revenue, regarded as Apple's next frontier of growth, will see a re-acceleration in the same period.

On Apple's Wednesday earnings call, CFO Luca Maestri didn't discuss with too much granularity how Apple is accounting for assumed take rates in the TV+ free trial, calling such details "competitively sensitive," but said that Apple takes a variety of factors into account, such as family sharing, multiple device purchases and the number of users for whom it has payment details on file.

TV+ is one of several new services that Apple has introduced in the past few months. Others include Apple Arcade, its $4.99 bundle for high-quality mobile games, news subscription service Apple News+, and Apple Card, a credit card jointly created with Goldman Sachs (GS - Get Report) .

Year to date, Apple shares are up 57.5%.

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