Apple Debuts Subscription Bundles, Its Twist on Amazon Prime
(Bloomberg) -- Apple Inc. unveiled a series of subscription bundles, a long-awaited move that Wall Street hopes will spur more growth in services revenue.
At an online event on Tuesday, the company said it will launch Apple One subscriptions that combine several services -- including Apple Music, Apple TV+ and iCloud storage -- at a lower price than users would pay if they bought each service individually.
The bundles start at $14.95 a month for a tier including Apple Music, Apple Arcade, Apple TV+, and 50 GB of iCloud storage. That lower tier will also have a $19.95 version for families. A Premier tier costs $29.95, adding Apple News+, Apple Fitness+ and 2TB of iCloud storage.
The offerings are geared toward families, meaning they will work with Apple’s Family Sharing system that provides access to as many as six people for each service.
The Apple One Individual plan offers savings of more than $6 a month, while the Family plan saves over $8 per month, the company said in a statement. The Premier plan saves over $25 a month, based on standard monthly pricing, Apple added.
The announcement was part of Apple’s annual Fall product blitz. This year included new Apple Watches and an upgraded iPad Air. Later this year, the company is expected to unveil several new 5G iPhones.
“While the focus for the Street remains the iPhone 12 5G supercycle set to kick off in early October, the launch of the next generation Apple Watch, iPad Air, and services bundle are key ingredients in Cupertino’s recipe for success heading into FY21 and beyond,” Dan Ives, an analyst at Wedbush Securities, wrote in a note to investors.
“For the services bundle, we view that as a smart strategic move to further monetize its golden installed base,” he added, while estimating this could lift services revenue 5% to 7% annually.
The bundle initiative is a major bid by Apple to achieve the same loyalty that Amazon.com Inc. has won with its Prime program, which combines free shipping with video streaming and many other services for an annual or monthly fee. This bundle is the bedrock of Amazon’s success and has been mimicked by other companies before with mixed results.
Apple has no large e-commerce delivery and warehouse network like Amazon’s, however it has hundreds of millions of ardent hardware customers who have already embraced some of its digital subscriptions. Unlike Prime, Apple is offering several variations at different prices. The bundle offerings will also include access to the Apple Arcade gaming service and Apple News+.
Spotify Technology SA, which offers a streaming service that competes with Apple Music, said the tech giant was unfairly “favoring its own services.” That echoed complaints Spotify has filed with European antitrust regulators.
Apple Music integrates smoothly with the Apple Watch, offering some features that aren’t available when using Spotify with the device. The new bundles may give Apple Music another advantage.
“We call on competition authorities to act urgently to restrict Apple’s anti-competitive behavior, which if left unchecked, will cause irreparable harm to the developer community and threaten our collective freedoms to listen, learn, create, and connect,” a Spotify spokesperson wrote in a statement.
Apple also announced a new online workout service called Apple Fitness+, which offers users video classes for workouts. This will integrate with the Fitness app on the iPhone and Apple TV, and requires an Apple Watch. The service will compete with offerings from Peloton Interactive Inc., which sells subscriptions to its fitness service that run in apps and on its workout equipment.
For years, analysts and investors have called for Apple to mimic Amazon’s Prime approach. Some of Apple’s newer services, including News+ and TV+, have started slowly. By bundling them at a discount with more popular services, usage and subscriptions could increase.
Apple’s services segment is one of the company’s fastest growth areas and has become a $50 billion-a-year business. While services like those for advertising and AppleCare were down in recent quarters due to the impact of Covid-19, digital offerings like the App Store, iCloud and video products set records.
(Updates with Spotify comment in 11th paragraph.)
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