Tech

Apple's first new subscription service is unlikely to move the needle toward the company's lofty goals for services

Key Points
  • Apple's news subscription service, Apple News+, had 200,000 sign-ups for a free trial in the first 48 hours it was available.
  • It's an important data point to gauge consumer interest in Apple's new subscription services.
  • But the revenue generated from a service like this won't be significant for Apple at this scale. Apple has 900 million iPhones in use and had $265 billion in revenue in 2018.
Tim Cook, chief executive officer of Apple Inc., speaks during an event at the Steve Jobs Theater in Cupertino, California, on Monday, March 25, 2019.
Source: Apple

Apple's new subscription service for news and magazines, Apple News+, had more than 200,000 people subscribe to a free one-month trial in the first 48 hours it was available, according to The New York Times.

It's a critical data point to gauge consumer interest in Apple's new subscription services. Apple News+ is the first of three monthly subscriptions that Apple hopes will transform its business from a hardware maker to a company that makes a substantial amount of money selling services to iPhone users.

The revenue generated at this scale is basically chump change for Apple, which makes most of its money on the iPhone. Plus, given the size of the iPhone user base, the initial wave of sign-ups is still pretty small. On the other hand, the Times says that 200,000 users is more than Texture, the now-defunct app Apple News+ is based on, had during its entire existence.

Apple News+ costs $9.99 per month, or about $120 per year. Assuming that everyone who signed up for the free trial ends up subscribing for an entire year, those 200,000 subs would generate $24 million in sales for the service per year. But Apple would have to pay as much as 50 percent of that revenue back to the publishers that provide content to Apple News, according to the Times.

In addition, there are a certain number of people who have or will cancel before the trial month ends. And Apple certainly has continued to add new trials after the first 48 hours it was available.

Apple Music, a $9.99-per-month streaming music subscription, grew to more than 50 million subscribers in 3½ years, according to a note distributed Tuesday from UBS analyst Timothy Arcuri.

In context

In 2018, Apple services totaled more than $41 billion in revenue, Apple CEO Tim Cook said in January. The company's services division includes fees from the App Store, subscriptions like Apple Music, and fees to make Google the default search engine on the iPhone.

Cook has implied that he wants the company's services business to generate $50 billion in revenue by 2020.

Apple had about $265 billion in total revenue in its fiscal 2018, of which about 60% came from iPhone sales.

Apple has about 900 million iPhones in use, the company revealed in January. However, it's unclear how many of those are from the United States and Canada, the only two regions where Apple News+ is available.

Revenue from subscription services will be bolstered by the other subscription apps that Apple announced last week, including a streaming video service, and a video game bundle. However, both services won't be released until later this year. Apple hasn't announced pricing for either of those services.

UBS estimates that the realistic number of iPhones that Apple could sell services to is 500 million to 600 million devices, based on geography. Apple says it has 330 million paid subscriptions, which includes subscriptions to apps distributed through the App Store.

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