The streaming industry has entered its adolescence, and while Netflix (NFLX) and Amazon Prime Video have established themselves as global frontrunners, a host of other services, including Disney+, Hulu and Apple (AAPL) TV+, are competing fiercely for market share. I’m a huge fan of Apple TV+’s premium content and ambitious storytelling, and I’m not the only one. Apple TV+ ranks an impressive third among the eight major streaming services in U.S. audience demand share for streaming originals (8.4 percent), according to Parrot Analytics, where I work as Senior Entertainment Industry Strategist.
However, that’s just one slice of the pie. Despite its critical acclaim, Apple TV+ accounted for just 0.3 percent of U.S. TV screen viewing in June, according to Nielsen. Industry analyst Entertainment Strategy Guy estimates the service has less than 20 million paying subscribers in the U.S. This suggests Apple TV+ is incredibly good at delivering top-tier original programming (it is!) but is struggling to broaden its offering for wider commercial appeal.
Part of that is a volume issue, which is solvable. For example, Peacock’s U.S. library is nearly 12 times larger than Apple TV+’s, per Parrot Analytics’ Content Panorama. That makes sense, given NBCU’s decades of content-creating experience. Yet frequent usage drives retention, and there simply isn’t enough volume on Apple TV+ yet despite the high quality. But Apple is looking to license more external content, which is a more sensible approach for the tech giant than the major studio acquisition some (including myself) have speculated about in recent years.
The other half of this equation is the type of content Apple TV+ delivers. The streamer is understandably committed to upholding Apple’s premium branding, but that may be limiting its mass-market reach. Exclusively lean-forward appointment TV—the Mad Men and Breaking Bad of the world that demand your full attention—is fantastic for fanatics such as myself but difficult to sustain for the average consumer who isn’t quite as beholden to their living room couches. Even HBO was always more of a premium niche network prior to Game of Thrones.
Looking at a range of streaming performance metrics in the U.S., Apple TV+’s most popular TV and film titles include (deep breath): Ted Lasso, The Morning Show, Hijack, Monarch: Legacy of Monsters, Silo, Severance, Presumed Innocent, Shrinking, For All Mankind, Masters of the Air, Killers of the Flower Moon, The Family Plan, Ghosted, Spirited and CODA.
Naturally, this list includes some high-concept, elevated genre storytelling. We’ve seen this lane produce anchor series that drive subscription growth for other platforms: The Handmaid’s Tale (Hulu), Stranger Things (Netflix), The Boys (Amazon Prime Video), The Mandalorian (Disney+). But then we have more traditional fare such as sitcoms (Ted Lasso), splashy soap operas (The Morning Show), big budget franchise entries (Monarch), a holiday musical (Spirited), an action comedy with a known star (The Family Plan) and an excellent feel-good family drama (CODA). These successful titles often possess an undercurrent of more middlebrow broad appeal that has long been popular on linear TV or in traditional cinema.
More accessible programming like this is needed for mass market penetration, especially if the goal is for a streaming service to be profitable. It doesn’t mean creatives can’t attempt to elevate these genres and adhere to Apple’s premium approach. But it does mean tapping into more recyclable formats. And that’s okay! It’s exactly what Netflix is doing with its “gourmet cheeseburgers.”
The real battle is beyond the so-called “streaming wars”
The goal is for Apple TV+ to become a central piece of Apple’s growing services ecosystem, which also includes Apple Music, Apple Arcade, Apple Fitness+, Apple News+, Apple Podcasts, Apple Books and more. In that sense, it can ideally be a valuable additional element to entice consumers and build out the Apple One bundle. But is it worth the $20 billion Apple has reportedly sunk into Apple TV+ content thus far?
iPhone sales comprise roughly half of Apple’s revenue but were down 10 percent year-over-year as of the most recent quarter. Normally, this would lead to a sky-is-falling reaction from Wall Street for nearly every other company. But Apple’s stock is holding steady. Why? “Apple’s gross margin expanded to 46.6 percent, continuing an upward trajectory that reflects the company’s growing services business, which brings with it stout profits,” CNBC’s Kif Leswing wrote in May.
Apple TV+, paired with Apple’s other service offerings, ideally creates a compelling package for consumers (that also potentially helps to drive product sales). The overall Apple ecosystem, including the App Store and iCloud, fosters customer loyalty and satisfaction. Together, this can create a significant edge over competitors. Google and Amazon also boast powerful platforms, but only Apple has cultivated an elite consumer brand image, providing pricing power and a seamless end-to-end user experience that rivals often struggle to match.
However, it’s difficult to quantify Apple TV+’s specific contribution to this strategy. Apple reports its services revenue as a collective division rather than breaking out revenue for each individual service. We don’t know how much Apple TV+ is generating on its own, though we do know that Apple’s reported annual services revenue nearly doubled from $46.3 billion in 2019 to $85.2 billion in 2023 (+84 percent overall and an average of +16.5 percent annually). Something is certainly working, but the primary drivers remain nebulous.
It’s important to note that Apple’s hefty investment on original media content is not just about trying to win the streaming wars. In fact, the “streaming wars” is a bit of a misnomer. The real battles are between the operating systems and the aggregators that control the entire media experience. By that measure, Apple is well-positioned to lead the game. Apple charges businesses 30 percent to sell apps within the App Store and has a robust purchase and rental video-on-demand (VOD) business, a market that some project to be worth more than $270 billion by 2028. In addition, Apple TV’s market share is growing fast. As of Q1 2024, Apple TV held an 8 percent share of the global connected TV (CTV) device market, up 54 percent year-over-year. It currently ranks fourth behind Roku (48 percent), Samsung Smart TV (11 percent) and Amazon Fire TV (10 percent). Apple should prioritize this battle, which is rooted in tech and iteration, something it does better than virtually everyone. Controlling the media experience allows for greater collection and control of user data, advertising and subscription revenue shares, as well as promotional power on valuable homepage real estate.
Apple can leverage its position to create a universal interface for streaming services via Apple TV, simplifying the user experience at a time when the flood of cross-company bundles (Disney+-Hulu-Max, Netflix-Peacock-Apple TV+, etc.) is still far from seamless. This could give Apple a significant advantage in the evolving media landscape. A consolidated entertainment ecosystem—similar to the pay-TV bundle, only retrofitted to digital—would take a page from the past in order to take a much-needed step into the future.
Such an undertaking is obviously easier said than done. Whichever company inevitably creates a more streamlined version of direct-to-consumer entertainment will have the power to dictate terms for the next era of streaming. The upside is massive. Most other streamers seem to mistake cost-cutting and price increases for a long-term strategy. But Apple can expand along any axis it wants and isn’t fettered by traditional streaming restrictions. That doesn’t mean it can spend endlessly without any return. But the company has far more options available than many of its rivals, making it easier to alter the status quo.
