Apple (AAPL) has joined the streaming wars — and according to one expert, all it needs to dominate the market is to “win a few awards” with its content.
This week, the tech giant announced a series of new initiatives — which include streaming, news and a credit card — in a bid to improve its service offerings. Investors initially yawned at the event and sent Apple’s stock lower, but it has since recovered ground.
“Services undoubtedly are a big part of where Apple's going,” Gene Munster, Loup Ventures Managing Partner, told Yahoo Finance’s The Final Round in a recent interview.
“It made 48 announcements over the last five years — or the last 20 years, and this is the first time they had a service-focused event,” Munster said. “If you look at the opportunity around services, undoubtedly Apple is going to be really trying to grow these four segments [and] … video is the biggest opportunity.”
Most notably, Apple is aiming to challenge streaming behemoth Netflix on its home turf. The latter is arguably now more popular than ever after one of its movies, “Roma”, reaped 3 Oscar awards in February.
To truly stand out like Netflix has, “all Apple needs to do is win a few awards over the next couple of years,” Munster added. “And at that point, I think it's off to the races.”
Apple was ‘light on some of the details’
Apple brought along many celebrities — including Sesame Street’s Big Bird and Oprah Winfrey — to showcase potential content offerings during the Cupertino event. But many experts, which includes Munster, are unclear on what exactly what consumers will get.
Yet, “even though they were light on some of the details that you're talking about, which has frustrated some people, it doesn't change the big story here,” said Munster.
“Services are becoming more important for Apple. They just announced four legs to that,” he said. “And ultimately, those new aspects are different than other products out there.”
Aside from content offerings, competitive pricing will be key for Apple to entice Hulu and Netflix users to shift to Apple.
And despite Apple spending reportedly $1 billion on original content last year — Netflix (NFLX) spent $12 billion — other analysts are not enthused about its prospects.
“We see limited pricing power given the small content library at launch,” analysts at Jefferies wrote in a note.
“And if Apple is playing the long game here it could pressure financials for years. How much can they charge?” the firm asked.
“It would likely be substantially below Netflix ($12.99) and Disney+ (TBA), formidable competition with deep libraries,” Jefferies added.
‘Big enough pie’
Munster projected a $10 or $15 monthly subscription fee, and added that it wasn’t a zero-sum battle for consumer eyeballs.
“Really what consumers want to do is unbundle their $160 per month option that most people are subject to,” said Munster. “Consumers don't want 120 channels a month for that cost. What they really want is six channels, for example, at $15 per month … so think about spending maybe $80 in total, but get the six channels you really want. And that leaves some space for multiple players out there — Netflix, Hulu, YouTube … the YouTube Red product. “
And at the end of the day, “the pie is big enough for Netflix, and Disney streaming, and all of these emergent players to continue to grow and continue to pressure the traditional ecosystem of subscribers,” CFRA Research’s Tuna Amobi told Yahoo Finance last month.
“Remember, we’re not just talking about the U.S. but also the international markets, where you’ve got very, very low penetration,” Amobi added.
Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.