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The Apple TV+ Price Hike Isn’t a Money Grab — It’s Something Else Entirely

What's $2 more per month when you sell $1,000 phones? An opening, perhaps.

Ted Lasso Season 2 finale Jason Sudeikis

Jason Sudeikis in “Ted Lasso”

Colin Hutton / Apple TV+

With a market cap of $2.4 trillion, Apple is the most valuable company on Earth. SVOD service Apple TV+ is a tiny cog in a giant machine — the kind that churns out iPhones.

On Monday, the Apple TV+ subscription price rose from $4.99 per month to $6.99, the service’s first price hike since launching November 1, 2019. Prices also increased for Apple Music (“due to an increase in licensing costs,” Apple said in a statement, “and in turn, artists and songwriters will earn more for the streaming of their music”) and Apple One, which is the bundle of Music, TV+, Apple Arcade, iCloud+, Apple News+, and Apple Fitness+.

Though Apple TV+ is probably best known as the home to Jason Sudeikis comedy series “Ted Lasso,” its prioritization of quality over quantity has also brought us the delightful “Acapulco,” the highly satisfying whodunnit comedy “The Afterparty,” and the star-studded “The Morning Show,” to name a few standouts. And just this year, Apple TV+ launched arguably TV’s best new drama series, “Severance,” and became the first streaming service to win the Best Picture Oscar with “CODA.”

So yes, a lot has changed since 2019.

“We introduced Apple TV+ at a very low price because we started with just a few shows and movies,” Apple said in a statement shared with IndieWire on Monday. “Three years later, Apple TV+ is home to an extensive selection of award-winning and broadly acclaimed series, feature films, documentaries, and kids and family entertainment from the world’s most creative storytellers.”

That expansion costs money, and Tim Cook doesn’t want to eat it all with iPhone sales. Plus, price hikes are all the rage in streaming these days, a combination of macroeconomic factors, like inflation, increasing content costs (especially for sports: Apple TV+ has “Friday Night Baseball” and a 10-year pact with Major League Soccer), and the giant scare Netflix put into the industry during the first half of 2022. Netflix’s shocking subscriber declines were a clear indication that good times can’t go on (as-is) forever.

Despite its fresh 40 percent increase in monthly cost, Apple TV+ is still relatively cheap among its streaming competition. Netflix’s soon-to-be-launched new “Basic with Ads” platform will cost the same price; the coming Disney+ ad-supported platform will cost $7.99 per month.

Severance Apple TV+ Adam Scott Patricia Arquette

“Severance”

Atsushi Nishijima / Apple TV+

Of course, Apple TV+ doesn’t have nearly the library of those two giants. But it also doesn’t have commercials: Apple TV+ is the last SVOD service standing without an ad-supported tier. Add in those pricey sports rights (but not the ads) as Apple has, and more monetization becomes a necessary evil — even for loss-leaders.

So Apple TV+ is somewhere between a loss leader and a write-off for Tim Cook’s mega-company. This summer, Apple posted a (fiscal) Q3 record with $83 billion in revenue; a little less than $20 billion of that total came from the company’s “Services” line item, which in addition to Apple TV+ also includes advertising, Apple Music, Apple One, AppleCare, cloud services, and payment services. Apple’s iPhone sales alone accounted for nearly $41 billion in revenue — almost half the overall revenue and more than twice the total from services — and then there are the iPads, Macs, Apple Watches, AirPods, and Beats.

We don’t actually know how many subs Apple TV+ is working with. About a year ago, the company told the International Alliance of Theatrical Stage Employees that Apple TV+ had fewer than 20 million subscribers in the U.S. and Canada as of July 2021, according to the union. Under the IATSE contract, with fewer than 20 million subscribers in the area, Apple is able to pay discounted rates to production crew members vs. the rates paid by larger streamers like Netflix. (Last week Netflix revealed it had 73 million subscribers in the United States and Canada.)

Even at 20 million subs, the extra $2 apiece would account for *only* another $120 million in quarterly revenue, or like one-seventh of 1 percent of the company’s revenue. So this isn’t corporate greed — it’s probably a strategic maneuver to create price separation among the company’s Apple One services, or between Apple TV+ and the upcoming standalone MLS service.

Or maybe, just maybe, we are getting an Apple TV+ ad-supported tier soon after all, something the company has recently denied. A logical Step 1, however, could be the setting up of financials that pave the way for consumer choice. That, or “Ghostwriter” is about to seriously upgrade its effects budget.

Apple will report its (fiscal) fourth-quarter (and thus, full-year) financial results on Thursday afternoon.

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