Could Bernstein’s Toni Sacconaghi be wrong about Apple TV+?

It wouldn’t be the first time. In October, Sacconaghi seconded Rod Hall’s concerns about the impact of the service’s deferred revenue. Both analysts had to eat their words.

From a note to clients Monday that landed on my desktop today:

Our analysis of Apple’s FY Q1 indicates that ~10% or less of eligible customers – likely under 10M – have opted to take up their 12-month free trials of Apple TV+ to date.

We see 3 plausible explanations for this surprisingly low take rate: (1) Apple hasn’t been able to effectively promote TV+ – to which we would encourage the company to more directly leverage its 1.5B device installed base; (2) Apple may be conservatively estimating its “take rate” or deliberately scaling its promotions of TV+ slowly to mitigate the negative accounting impact of its early ramp; and / or (3) Apple TV+ is failing to resonate with customers, perhaps due to its limited content offerings, in contrast to the mega-launch of Disney+ (which comparatively achieved 10M subscribers in 1 day, despite offering a two week free trial vs. Apple’s one year free trial).

We encourage investors to closely monitor the adoption of TV+ going forward. While Apple’s management has indicated it won’t disclose subscriber numbers this year, the implied take rate of TV+ in FY20 will nonetheless provide some indication of potential acceptance of the service, as well as Apple’s ability to successfully launch meaningful new revenue-generating services.

My take: I take whatever Sacconaghi and Hall say about Apple TV+ with a grain of salt. For what it’s worth, Ampere Analysis, which tracks these things, puts the number of Apple TV+ subscribers at 33.6 million, more than triple Sacconaghi’s estimate.

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12 Comments

  1. George Knott said:
    CNBC if you are listening, at one time, you were my “go to” for financial information news….Not anymore!!! The “experts” you feature are buffoons and I feel sorry for those viewers who take their “expert advice” and then make investment decisions.

    KUDOS to this site, definitely has saved me more than once from making a bad trade.

    9
    February 4, 2020
  2. Fred Stein said:
    We just finished the first series of The Morning Show. It was great. Apple TV+ has an excellent future as in well over a 100 M subs and increasing the monthly fee.

    Note: Toni analyzed data based on the end of last quarter. I bought my wife an 11 Pro in late December to get extra Apple Card discount and the free TV+ sub. We activated in January.

    3
    February 4, 2020
  3. Jerry Doyle said:
    I fear the reason for the low customer opt-in for the 12-month free trial subscriptions of Apple TV+ is correlated with Apple store representatives not offering the service to consumers of new iPhones. In summary, Apple store employees may be doing a very poor job of promoting the free trail subscription.

    I went to Dallas over the weekend to see a lady friend. While there, we visited the North Park Apple Store where we got her a new iPhone. While Apple store employees were transferring the data from my friend’s old phone to her new iPhone, I monitored all the going-ons in the store while keeping an eye on the Apple techs as they worked with my friend. They finished and sent her on her way. As we were walking out-the-store I mentioned that she now had a free one year trial subscription to AppleTV+. She was shocked! I asked if the Apple store representatives explained that trial service to her. She said, “no!” She knew nothing about the free trial subscription. So we returned to the store, found another Apple representative and asked if my lady friend was entitled to the free Apple TV+ trial subscription. The Apple store representative said, “yes!” He then explained it to her, and showed her all the movies, TV programs, etc. and how to access them.

    Later that night my friend started watching the “The Morning Show” and just got hooked on that program! She thanked me profusely for letting her know about the free 12 month trial subscription.

    It was disconcerting to me that I had to be the one to inform my friend of the free trial subscription, as it was not my responsibility to have told her; and, it left me wondering how often other Apple representatives may not be promoting the Apple+ 12 month free trial subscriptions to purchases of qualified Apple devices.

    If Apple Staff Development reads these comments, then they may want to do some in-service training on staff to ensure that all staffs promote these free trial subscriptions, as appropriate.

    2
    February 4, 2020
    • Jerry Doyle said:
      Another caveat… This same failure-to-communicate happened last Thanksgiving in San Antonio at an Apple store when I purchased a new iPhone 11 for my daughter. Store representatives failed to informed her of the one year free trial subscription to Apple TV+. It was I who asked the store representative at the end of the purchase if my daughter qualified with the iPhone 11, which I knew that she did. The store representative then elaborated on the free trial subscription showing my daughter all the offerings.

      1
      February 4, 2020
      • David Emery said:
        Yeah, no mention of that when wife bought her new phone. And I forgot to follow-up on that, so I think we missed the free enrollment window. 🙁

        2
        February 4, 2020
        • Aaron Belich said:
          Call Apple Support, they are typically awesome at correcting such minor inconveniences—unless you already signed up for it on your account. Then call Apple Support to see if there’s anything they can do to rectify the situation.

          1
          February 4, 2020
        • Dan Scropos said:
          I have to believe that this is an intentional omission by Apple, as to not turn the retail experience into a perceived sales pitch. That said, a notification for eligible devices seems like a good idea. Something to politely bring awareness to the free trial is definitely needed.

          2
          February 4, 2020
  4. Fred Stein said:
    Oh, haha. The jokes on us.

    Ampere’s 33M was based on a survey of intent to subscribe that was taken before the availability of Apple TV+.

    We’re at the bottom of an s-curve of adoption that matures in about 10 years. Netflixx did $21B last year and is still growing.

    2
    February 4, 2020
  5. Thomas Larkin said:
    AAPL at 318, thinking the latest news on production took the wind out of this little ginned up story. Thinking maybe Tony S, CNBC, Bloomberg, et al threw away this shot.

    0
    February 4, 2020
  6. Gregg Thurman said:
    My take: I take whatever Sacconaghi and Hall say about Apple TV+ with a grain of salt.

    Sage advice.

    As to Sickonaghi’s analysis of Apple TV+ subscription levels, as with all of his Apple analysis he is missing an important factor: One subscription – 5 users, in other words a family plan. Those “family” members do not show up as PAID subscribers, only the primary does.

    In a years time that family plan will cost $20/month, and an individual plan will cost $9.90/month.

    Per WS’s past practice it will count subscribers (aka “units”) and ignore revenue, gross margin, operating revenue, net income, EPS, cash flow and share reduction.

    And the beat goes on.

    2
    February 4, 2020
  7. Steven Philips said:
    I didn’t get information at the time of purchase but did get a few emails later advising of the offer. I never signed up as I didn’t want to watch on my MacBook Pro (or iPhone or iPad.)
    When I finally got around to buying an actual TV the offer was no longer available to me. (Over 3 months since purchase.)
    I think I may take Aaron’s suggestion.
    Thanks, if it works.

    1
    February 4, 2020

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