The streaming service of Apple Inc. (NASDAQ:AAPL), Apple TV+, is reportedly incurring annual losses exceeding $1 billion.
What Happened: Since its 2019 launch, Apple has been allocating over $5 billion annually to content for Apple TV+. However, this budget was cut by around $500 million last year. However, the losses are crossing $1 billion a year, the Information revealed on Thursday.
Despite its original shows like “Ted Lasso” and “The Morning Show”, Apple TV+ has found it challenging to rival industry leaders such as Netflix Inc. (NASDAQ:NFLX), Disney Inc.‘s (NYSE:DIS) Disney+ and Amazon.com‘s Prime Video (NASDAQ:AMZN) in subscriber numbers.
Recent data indicates that Netflix leads with 301.63 million subscribers, followed by Disney+ with 124.6 million, and Warner Bros Discovery with 116.9 million. A Visible Alpha poll estimates that Apple TV+ will have reached 40.4 million subscribers by the end of 2024.
Despite these losses, Apple TV+ productions have received over 2,500 nominations and 538 wins, as announced by CEO Tim Cook in a post-earnings call in January. Amid escalating competition in the streaming industry, Apple TV+ is included in a Comcast (NASDAQ:CMCSA) package that includes the service along with Peacock and Netflix for $15 per month.
Why It Matters: Apple’s streaming business falls under its Services segment, which also encompasses Apple Music, the App Store, and other ventures. For the fourth quarter, the Services segment generated $26.3 billion in revenue, reflecting a 14% year-over-year increase. Reportedly, Apple TV+ is the only segment of Apple’s services business that remains unprofitable. According to Arstechnica, limited viewership and small marketing efforts for Apple TV+ are some of the reasons behind these annual losses.
Notably, the Information reveals that the original concept of Apple TV+ was not focused on gaining the highest number of streaming subscribers but rather on strengthening users’ connection to the iPhone and the broader Apple ecosystem. Moreover, an Apple TV+ employee told the publication that the streaming service is projected to incur losses ranging from $15 billion to $20 billion within its first decade since launching in 2019.
That being said, Apple has been making strategic moves to boost its subscriber base and expand its ecosystem. In February, Apple expanded its Apple TV+ app to Android mobile devices, aiming to increase subscription growth.
Furthermore, Apple’s services chief Eddy Cue, during a panel at the SXSW festival in Austin, Texas, highlighted Apple TV+’s selective content strategy and wants to focus on it. He praised the global success of “Severance,” considering it one of the most culturally impactful shows of recent years.
Apple Stock lost 12.20% year-to-date stock as it grapples with broader market challenges.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
