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Following Disney’s latest financial earnings report this week, CEO Bob Iger revealed that the entertainment giant’s new streaming service now has accumulated over 28 million subscribers since it launched in November, and while that’s a large number in such a short time, it’s probably not all that surprising considering the staggering amount of popular content that Disney is making available on the service — everything from Disney’s own traditional animated and live-action features to Star Wars, Marvel, and National Geographic.
What’s perhaps more interesting is that Disney’s actual numbers seem to have beaten analysts’ best estimates by about 8 million, suggesting that the real numbers are much higher than the industry watchers seem to think — something that becomes even more relevant when we look at Apple’s new streaming service.
Apple hasn’t released any actual numbers for how many people are watching Apple TV+, other than to say that they’re happy with the uptake. This has left analysts scouring through the company’s financials and reading tea leaves to try and put a number on it, and so far the estimates have been all over the place.
Last month, in an article that was primarily about Amazon Prime, the Wall Street Journal snuck in an estate that put the U.S. subscriber count for Apple TV+ at around 33.6 million — a number that would make some sense considering that the vast majority of Apple’s subscribers probably aren’t yet actually paying for it, thanks to Apple’s offer of a free year of the service for anybody purchasing a new iPhone, iPad, iPod touch, Mac, or Apple TV since last fall.Start a Disney+ Free Trial
The Journal cited the stats as coming from Ampere Analysis, which actually placed Apple TV+ in the third position, behind Netflix at 61.3 million U.S. subscribers, and Amazon Prime at 42.2 million. Hulu and Disney+ both trailed behind, at 31.8 million and 23.2 million, respectively.
What’s interesting here is that the Disney+ numbers seem reasonably close to what the company actually announced this week. Disney’s announcement includes total worldwide subscribers while Ampere’s analysis only includes the U.S. market, and since the only other countries in which Disney+ is currently available are Canada, the Netherlands, Australia, and New Zealand, it’s not hard to believe that the vast majority of its subscribers would be based in the U.S.
A ‘Surprisingly Low Uptake’
Not all analysts agree with the numbers for Apple TV+, however, and a new report by Bernstein analyst Toni Sacconaghi suggests that Apple has actually seen a “surprisingly low take rate” even for the free Apple TV+ offering.
As reported in Investor’s Business Daily, Sacconaghi claims that under 10 million Apple customers have even accepted the free trial offer, which represents less than 10% of those customers who would be eligible.
This is a shockingly low number considering how easily Apple is giving the service away, however, Sacconaghi cites Apple’s most recent fiscal first-quarter results as a basis for his estimates, which would presumably be based on how Apple reports its revenue for the one-year free trials, since the company is required to deduct it from its product revenue to ensure that it goes on the books properly.
In other words, for every user who purchased an iPhone 11 and then decided to redeem the one-year free trial, Apple needs to balance the books by taking the $60 value of a paid one-year subscription to Apple TV+, deducting it from its iPhone sales figures, and adding it to its Apple TV+ service. This means that for every 10 million new iPhone owners who take advantage of the free Apple TV+ offer, Apple has to deduct $600 million in revenue from its iPhone sales.
Of course, since Apple doesn’t provide unit sales in its financial reports, Sacconaghi and other analysts are left to try and read between the lines to figure out how the numbers all fit together, and with non-iPhone hardware such as the iPad, Mac, Apple TV, and even the iPod touch also qualifying for the one year of free Apple TV+ service, it’s difficult to imagine any analyst coming up with an accurate number when presented solely with the raw dollar figures.
Sacconaghi does concede that Apple may be playing some accounting games here as well by “deliberately scaling its promotions of Apple TV+ slowly to mitigate the negative accounting impact of its early ramp,” which could skew his analysis.
For example, if Apple is tracking the revenue for Apple TV+ free one-year subscribers as if they were monthly subscriptions, rather annual ones, this would change the numbers significantly, since Apple would have only had to deduct $12 from its iPhone revenue per free trial for the first two months of the service, rather than deducting $60 for the whole year.
At the end of the day, however, even if Sacconaghi’s numbers are correct, they also don’t include paid subscribers to Apple TV+, and although it seems unusual that Apple would have gained a substantially larger number of paying customers so quickly, especially when you compare it with the numbers Disney+ has gained with its considerably more attractive library of content, there’s definitely more going on here, and as usual, the real number is probably somewhere in the middle, or as John Gruber points out, “everyone is wrong.”
As easy as Apple makes it to get a free trial of Apple TV+, it’s also fair to say that many users who qualify either aren’t fully aware of the details of the free trial, may not have the necessary equipment to watch it on anything more than an iPhone, or may just not be all that into streaming services in general. Even Netflix only has 167 million paying subscribers worldwide, which is small when you consider the 1.5 billion iOS devices out there, and Netflix, of course, isn’t limited to users of Apple devices, so it’s fair to say that there are a lot of iPhone owners who still don’t actively subscribe to any streaming services.