In a note to clients — as reported by AppleInsider — Morgan Stanley analysts think Apple’s upcoming video business will rival Netflix by 2025. They’ve upped their target price on the company’s stock to $245 from $232.
Upcoming original programming titles from Apple include “Amazing Stores,” “Are You Sleeping,” “Home,” “Little America,” “See,” “Swagger,” an untitled Damien Chazelle drama, an untitled Reese Witherspoon/Jennifer Anniston dreamed, “Dickinson” (a half-hour comedy starring Hailee Stenifeld), an untitled Ronald D. Moore drama, an untitled M. Night Shyamalan thriller series, a TV series adaption of “Foundation,” the Isaac Asimov science fiction novel trilogy, and the half-hour dramedy “Little Voices” from producers J.J. Abrams and Sara Bareilles, “Little America” from the screenwriters (Emily V. Gordon and Kumail Nanjiani) of “The Big Sick” and producer/writer Lee Eisenberg, a drama series about pre-teen investigative reporter Hilde Lysiak, a TV series based on the “Time Bandits” movie, an English-language adaptation of the French short-form series Canal+, “See,” a world-building drama set in the future, a series based on the bestselling 2017 novel “Pachinko,” a half-hour scripted comedy from Rob McElhenney and Charlie Day, and a series produced by Anonymous Content and based on the New York Times article, “Losing Earth: The Decade We Almost Stopped Climate Change.”
Morgan Stanley believes that Apple could offer its content on a standalone streaming service at a lower price point than competitors such as Netflix, and make a bundle of money. The analysts had this to say:
“We forecast that an Apple Video streaming service with high quality but limited breadth could be priced at the low end vs. competitors, or $7.99/month, and reach over 50M paid subscribers by 2025, compared to 124M at Netflix (current paid streaming subs) and Apple’s >650M unit iPhone installed base. This would imply that stand-alone Apple Video can grow from a ~$500M business in CY19 to a $4.4B business in just six years.”
“Combined with Apple’s stand-alone streaming music business, which we project grows into an $18B revenue generator over the same time period (from roughly $4B at the end of CY18), streaming video and music would become a $22B business by 2025, roughly equal to the size of Netflix and Spotify combined today but just 8% of Apple’s CY18 projected revenue.”
Another option would be for Apple to combine its video offerings with subscriptions to Apple Music and/or Apple News for a single subscription price.
Again, per the Morgan Stanley analysts: ”We believe a bundling of Apple’s video content with Apple Music and the Texture news and magazine subscription service into a $12.99/month unlimited Apple Media’ service (in-line with the current cost of a Hulu and Spotify bundle) would make the most sense for 5 primary reasons,” Morgan Stanley writes. “1) it would allow for differentiation vs. established peers, 2) it would reduce dependency on big video hits early on, 3) it could be perceived as a “higher value” service by consumers, 4) users would only need to navigate one integrated payments platform for all of their video, music, and news services, and 5) it could drive greater user engagement, subsequently improving overall customer stickiness.”
