Apple Services Set Records,. TV+ ‘Moving In Right Direction’

Apple had plenty to celebrate in reporting record Q3 profits and revenues overall and in its booming services unit, which hauled in $17.5 billion for Q3 revenues, up one-third from a year ago.

But while CEO Tim Cook spent a minute praising the 35 Emmy nominations – including a record 20 for hit freshman comedy Ted Lasso – he lingered little more than that in discussing one of Apple’s more expensive and high-profile new ventures, the streaming video service TV+.

The plenitude of nominations, though well behind the many dozens doled out by the TV Academy to competitors Netflix

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and HBO/HBO Max last week, “speaks to the quality of our programming and enthusiastic reception from critics and audiences alike,” Cook said during opening remarks.

Cook gave shoutouts for Ted Lasso, the Jason Sudeikis sports comedy whose second season debuted just as its first season scooped up all those nominations. But he also briefly highlighted Mythic Quest: Raven’s Banquet, a workplace satire set at a dysfunctional game studio that stars Rob McElhenney, who also produced with fellow It’s Always Sunny in Philadelphia alums Charlie Day and Megan Ganz.

Cook also looked forward to the August release of feature film CODA, which won an audience prize at this year’s Sundance Film Festival before Apple bought it for a record $25 million. The feature focuses on a teen girl who is the only hearing member of a deaf family of fishers in Gloucester, Mass., as she pursues her own dream to be a singer.

But after that, as has happened repeatedly during public events and earnings call since TV+ launched in November, 2019, Apple executives quickly moved on to other areas, like a monstrously successful overall quarter that saw double-digit growth in revenue and profit in every region of the globe, as well as for the general category of “Services.”

Apple’s Services division is a bit of a hodge lodge, containing such disparate subscription offerings as Apple Care warranties and the Apple Pay ecosystem, iCloud online storage, the App Store, search advertising, and content subscriptions for news, music, games, video and fitness workouts. But there was some slight granularity to this quarter’s report on the division.

“TV+, Arcade, Fitness+ subscriptions continue to scale up and are contributing to growth,” CFO Luca Maestri said. “The key indicators all continue to move in the right direction.”

Overall, Maestri said paid subscriptions of all types topped 700 million across all services in the quarter, up 150 million from a year ago, and nearly quadruple the number of just four years ago.

The huge growth in services might not be replicated in next year’s Q3, Maestri said, in part because of pandemic-caused distortions in the comparisons between Q3 this year and last, which was in the heart of the initial lockdown and economic downturn in the United States and elsewhere.

But perhaps by then, the company will have some notable revenue to report for TV+, which has largely been given away to millions of buyers of Apple hardware, or bundled into its large Apple One subscription that launched earlier this year.

Original subscribers haven’t haven’t been billed for the service until this month, 20 months after TV+ launched with a well-regarded but painfully thin collection of originals.

Ted Lasso proved to be an upbeat antidote to the dark days of pandemic resurgence and political uncertainty last fall. New data from Parrot Analytics suggests the service will make an even bigger splash in year two, now that it’s already won over a wide array of fans and critics, who also have given good reviews to the new Season 2.

Parrot –which uses a metric called “demand share” that tracks audience conversation across social media, online conversations, responses to advertising and much else –said Ted Lasso ranked only behind Disney+ hit Loki among recent debuts of original series on major streaming services.

Through last weekend, Parrot ranked Ted Lasso eighth among among all shows with U.S. audiences, with 41.2 times more audience demand than the average. Loki drew 42.8 times the average show’s level of audience demand.

Internationally, Ted Lasso also proved to have legs, perhaps less surprising given its fish-out-of-water story line of an American football coach hired to run an English soccer team. The show ranked 18th among all shows globally, and seventh among original series.

Most promising for Apple, Ted Lasso has helped boost the entire TV+ service, and promises to have an even bigger impact in season 2 as it unspools over the coming weeks.

The first episode of season two debuted at 20 times the level of U.S. audience interest of the season one launch episode, at 38.7 times average,

If season two follows the growth pattern in audience demand that characterized season one’s slow burn, it could be massively popular for Apple. Season two’s debut episode was 29 percent higher than the season one peak, which hit the day before the final episode debuted. The international demand figures are even better for the show, according to Parrot.

Overall, TV+ is fifth among streamers in demand share, just behind Hulu and ahead of HBO Max, according to Parrot. The demand share approach helps even the playing field for a service such as Apple, which has built a good-sized library of original shows, but has no deep library of older programming to keep audiences around, unlike just about all its competitors.