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Sometimes it’s too easy to underestimate exactly how big the existing base of Apple device users is. Apple sold its billionth iPhone back in 2016, and although that naturally included upgraders, Apple was still able to boast at the time that it had over one billion active iOS devices, since that also included the iPad and iPod touch. By earlier this year that number had grown to 1.4 billion Apple devices around the world.
While there’s some overlap in this list — many users own both an iPhone and an iPad, for example, not to mention that it also includes the number of iPads being used in schools and businesses — it still speaks to an overwhelming number of actual people who are using an Apple device of some kind. So it’s no surprise that analysts realize that this is a huge untapped market for Apple to sell its services to.
In fact, Barclays analysts published a report earlier this week suggesting that Apple TV+ will easily grow to 100 million subscribers in its first year, based solely on the fact that Apple is expected to sell 220 million iPhones, all of which will come with a free one-year trial.
In our opinion, Barclays’ numbers are in fact somewhat conservative, since they assume only 50 percent of new iPhone owners will give Apple TV+ a look even for free, and their estimates also don’t include purchases of other Apple devices like iPads, Macs, and Apple TVs which will also come with free one-year trials, nor do they factor in the number of users who might be ready and wiling to pay for a subscription right out of the gate.
In addition to the one-year free trial that will get new Apple device owners hooked on the Apple TV+ service and hopefully opening their wallets to come back for more next year, Apple has another massive home field advantage — the Apple TV app comes pre-installed on every iOS 13 and macOS Catalina device, and since Apple already has your billing information, courtesy of iTunes and the App Store, you’ll be able to sign up at the press of a button, making it possibly the easiest streaming service on the planet to subscribe to.
Apple TV+ Will ‘Grow Like Crazy’
Now analysts at Morgan Stanley are weighing in, with CNBC reporting that they expect Apple’s new television service to “grow like crazy,” and easily become a $9 billion business by 2025 — and like Barclays, they’re actually being very conservative with these estimates.
In a research note sent out on Tuesday, Morgan Stanley analyst Katy Huberty predicted that growth in Apple’s services business overall is going to hit 20 percent next year, and that will be fuelled primarily by Apple TV+.
Huberty notes that even if “only a small fraction” of the users who take advantage of the free trial end up paying to subscribe, Apple TV+ stands poised to be Apple’s biggest services business going forward, even if only 1 out of every 10 Apple users actually pays for the service.
With an attractive price point at $4.99/month, and wide initial distribution to the Apple installed base via the bundled free year offer, we estimate Apple TV+ can become a $9B revenue business with 136M paid subscribers by FY25, assuming just 1 in every 10 Apple user pays for the Service by FY25.Katy Huberty, Morgan Stanley analyst
In fact, by 2025 Apple TV+ could give even start to give Netflix a serious run for its money, Huberty notes, since she conservatively estimates that her 1 in 10 estimate would give Apple 136 million paid subscribers. While Netflix already has 158 million by comparison, its growth has dramatically slowed, especially in the U.S. market, while Apple’s growth could easily be higher than analysts are estimating.
Huberty also predicts more sunny news for Apple’s iPhone business, with the expectation that iPhone sales will return to growth next year, since replacement cycles will be peaking just in time for Apple to debut its first 5G iPhone.