With Streaming Music Soaring & Next-Gen Media Services around the corner, Apple's CEO is Deadly Focused on Services
Apple's CEO is banking on "Services" revenue to make up for any losses in smartphone share going forward. Apple's CEO stated in their last financial press release on November first, that services revenue grew from $7.9 billion in the fourth quarter of fiscal 2017 to $10 billion in the fourth quarter of fiscal 2018, an increase of 27 percent.
One of Apple's winning services is Apple Music which is growing rapidly. According to Nielsen's 2018 Year-End Music Report, Americans streamed a record of more than 900 billion songs during the past 12 months.
The number of on-demand audio streams hit 611 billion which represents growth of 49 percent in 2018, as subscription-based services such as Spotify and Apple Music grew increasingly popular among American music lovers.
As the chart below from Statista illustrates, the number of songs streamed over the internet has increased more than eightfold between 2013 and 2018 and has long replaced CDs and downloads as the number one waay of music consumption.
Interestingly, the chart above also illustrates a shift in music streaming as more people rely on (in many cases) paid audio streaming services instead of free video streaming services such as YouTube to listen to their favorite tunes. Video platforms used to account for the majority of on-demand music streams until 2015. Last year, audio streams accounted for more than two thirds of all on-demand music streams.
Beyond streaming music, the next big service on track to hit the market is in fact Apple's media content services expansion. With the news of Apple Worldwide Video gaining new content quarterly and Apple now dealing with Samsung, the leading TV brand in the world is significant.
Samsung announced it will integrate iTunes into the media bar on new Samsung TVs in 2019. That's a major deal. Additionally, LG and Vizio will allow iDevice users to use AirPlay 2 to easily watch movies and TV series on their high-end TVs will both assist current Apple customers and hopefully win over new customers that don't own Apple devices.
When Apple's late CEO said that "Hell Froze Over" when putting iTunes on Windows, it was the turning point for iTunes to reach a much larger worldwide market. Getting iTunes content like movies and TV series on another major platform like major TV brands will be seen in hindsight as a brilliant marketing move if their new service can differentiate itself enough from Netflix and others.
Apple's CEO spent a lot of time talking up services with CNBC's Jim Cramer yesterday. We better get used to hearing this because it's going to be the top marketing message Cook will repeat like a broken record throughout the year and far beyond in the hopes of changing the Apple story with consumers, Wall Street and investors.
Of course Apple isn't alone seeing services as part of new business model. It was only announced today that AMD is working with Google's project called "Project Stream." It's a new live streaming gaming service.
Today during AMD's keynote at CES, AMD announced it was working with Google on this project. You could review the keynote video in our earlier report at the 1:35:31 mark to learn more about this development.
AMD demonstrated playing Ubisoft's Assassin's Creed Odyssey online at full 1080p at 60 frames per second that could reportedly be played on as low a system as a Chromebook using the Chrome Browser. Google's Project Stream beta ends next week and it's only available in the U.S.
Can you see Apple delivering a streaming gaming service in the future as an extension for iTunes for Samsung TVs? I can. Again, Apple has a massive base of customers and adding a game streaming service in the future could be another major revenue stream on the way.
Would this differentiate their service from Netflix? You bet it would especially if they could introduce reasonable game rental pricing. In fact, that would be a killer app to be sure.
For now it's just one of many new services that Apple could be planning to bring to market in the future and coincidentally, Apple was granted a patent for multiplayer gaming this week.
In the big picture however, Services will no doubt play an important factor going forward, but it's a long-game. Apple stats presented in Statista's chart below show us that Services only accounts for 14% of Apple's total revenue.