As tech titan Apple Inc. (AAPL) shifts its reliance from hardware sales toward recurring revenue from its growing suite of software and service offerings, reports are growing that the smartphone maker is preparing to launch a news and magazine subscription service next year. The firm is reportedly considering bundling the offering in a single subscription with its original video content, as reported by The Information, as it ramps up investment in projects and partnerships such as a new multiyear deal with Oprah Winfrey. (See also: Apple Inks Multiyear Deal With Oprah.)
According to an earlier report from The Wall Street Journal citing people familiar with the plans, the Cupertino, California-based tech behemoth is expected to create a subscription offering that includes access to its new original programming, alongside iCloud storage and potentially other services like magazine subscriptions.
While smartphones still comprise roughly two thirds of Apple's total revenue, longer iPhone replacement cycles, weakening global demand and heightened competition from lower-cost rivals such as China's Huawei Technologies have driven the firm to lean on its services like its App Store and Apple Music for new growth. Apple is aiming for $50 billion in sales from its service segment by 2020, compared to $29 billion generated from the unit in fiscal year 2017.
Content Is King for Tech Titans
Content has proven to be key in the race to gain subscription revenues and capitalize on a broad shift to direct-to-consumer streaming, causing deep-pocketed tech titans to shell out billions on in-house content production and to poach top talent from Hollywood. In 2018, Apple reportedly plans to spend $1 billion on content acquisition and programming, compared to Netflix Inc.'s (NFLX) over $8 billion and Amazon's $5 billion.
As noted by The Verge, Apple is likely in the process of sorting out how to package, price and sell all of its services, whether together or apart. The ambitious offering would look similar to Amazon Prime, which offers video, music and news, yet will be less narrowly focused on a particular area of entertainment like many popular media services. By differentiating itself against competitors like Amazon and Netflix in this sense, the company could more than double its Apple Music subscriber count to over 100 million over three years, as estimated by analysts at RBC Capital.
As a first step toward the unified, single offering, Apple is expected to launch a digital news subscription service in 2019, which will combine Apple News with a digital magazine subscription service called Texture that it acquired in March. (See also: Apple Enters Content Fray With Texture Purchase.)