Like many of its streaming rivals, Apple (AAPL 0.63%) does not disclose the exact number of people who watch its TV shows and movies. In fact, Apple goes further than competitors such as Netflix and Walt Disney’s Disney+ in that it also withholds Apple TV+ subscriber figures. Instead, the company combines its video-streaming numbers with the rest of its services business, which includes Apple Music, Apple Arcade, Apple TV+, and more.
To some investors, it may seem like Apple is hiding something. Here’s why you shouldn’t worry.
Hollywood would like to see the numbers
Apple’s tight-lipped approach to viewership numbers is in the spotlight after Ben Stiller spoke with Decider about his Apple TV+ show, Severance. The actor and director said he doesn’t know how many people have watched the show because Apple has only provided him partial data. However, Stiller noted even that information is far from transparent: “[Y]ou get these graphs and charts … but you don’t know what the baseline is.”
Stiller’s comments highlight a common disconnect between how streamers operate and the metrics Hollywood has long relied upon to determine whether a show or movie is a hit. Studios, producers, and agents have traditionally used Nielsen TV viewership ratings and box office receipts to gauge what audiences are responding to. These data points are the cornerstone of decisions about what gets made, what gets axed, whom to hire, how much they should get paid, etc. But as Stiller notes, “[It’s] a big mystery of who’s watching what on streaming.”
Apple is playing to a different audience
While Apple TV+ viewer numbers surely matter to Apple, this is not the only audience the company is thinking about. With devices like the Mac, Apple Watch, and of course, the iPhone, Apple has several revenue streams, with many overlapping customers. Leveraging its installed device user base, Apple has expanded into a diverse mix of ancillary services such as video-editing tools, payments, and music streaming as a way of bolstering its hardware operations and developing other revenue streams.
CFO Luca Maestri touched on how Apple’s hardware base directly ties into its services business during the company’s fiscal 2022 third-quarter earnings call. Maestri noted devices are the “engine” of Apple, and that services “tend to help [the company] over the long term.” Viewed through this lens, Apple TV+ is just another add-on feature that helps to keep customers tethered to Apple products, which drives growth.
Services as a growing business
The iPhone has been Apple’s big money maker for years. As the company revealed in its Q3 earnings, iPhone sales were up almost 3% year over year at $40.7 billion, accounting for almost half of all its revenue for the quarter. However, at $19.6 billion, services is now Apple’s fastest growing sector, representing a 12% increase year over year.
The growth of Apple’s services division is a positive for stakeholders as other parts of the company’s operation are struggling amid economic headwinds: iPad revenue for Q3 was $7.2 billion, down 2% year over year, while Apple’s wearables, home, and accessories unit managed $8.1 billion, a drop of 8% year over year.
The strength of the ecosystem
Apple certainly cares about the quality of the content it’s producing for Apple TV+ (the company cited its Emmy Award nominations during the Q3 earnings call), but by placing the streamer in the same category as Apple Pay and iCloud, it’s signaling that it’s just a piece of a much bigger puzzle. And while that might irk some in Hollywood, for investors, it’s an indication Apple knows its overall strength comes from its ecosystem rather than its constituent parts.
While it seems unlikely Apple will start reporting numbers for the individual parts of its services business any time soon, that could change if any individual offering gains dominance in its field. If Apple TV+ subscriber numbers started to look like they could challenge those of Netflix or Walt Disney, then Apple may opt to provide greater insight. But as things currently stand, market watchers should focus more on how the services unit is doing as a whole, as it’s clearly becoming one of the most significant parts of Apple’s business.
Tom Wilton has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Netflix, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
