An easy way to make people happy is to make stuff cheaper. People are naturally excited about these rumours of a forthcoming Apple services bundle to simplify the the growing list of things Apple gets us to pay for on a monthly basis, and save money at the same time.
However, that is the idealised end consumer. From Apple’s perspective, the core reason for doing a bundle is to make people spend more, in the aggregate. If you asked an average Apple customer what they would want from a bundle deal, they’d probably say a combination of Apple Music and iCloud storage. After all, these are Apple’s most popular subscriptions. ‘Everyone’ has them … which is exactly why Apple will not offer it. All that would do is make the people who are already paying, pay less.
Realistically, what Apple is looking for is ways to boost adoption of its newer content services that are still in their infancy. That is News+, TV+ and Arcade. A bundle would let Apple attach these new divisions onto what people are already subscribing to, with a discount incentive to complete the sale. Thematically, bundling iCloud doesn’t make much sense with television or news. This is a hunch, but I think Apple is going to keep pedalling iCloud as a separate entity. I think they are looking at a content bundle, whilst iCloud remains standalone.
So, let’s consider a quartet of Music, News+, TV+ and Arcade. Today, subscribing to each of these individually will cost you $30 per month. $10 for Music, $10 for News+, $5 for TV+ and $5 for Arcade. However, Music is single-user license but the others support Family Sharing. To make it symmetric, you need to get the Apple Music Family Plan which brings the total to a monthly bill of $35 for all of Apple’s content services.
Now, the question is what level of discount can Apple feasibly deliver. They basically have free rein to charge whatever they want for TV+ and Arcade. Obviously, the production of TV shows and games has to be ultimately paid for, but Apple is retaining the rights over distribution and pricing. Short term, they can charge $2, $5, $10, whatever they want. Apple Music and News+ are more complicated. The music industry has rigid contracts with all the streaming services, which lock down pricing. This is why Spotify and Apple Music basically offer identical plans for the same library of streaming music. The labels do not want their content to be devalued any more than it already has been. Apple’s margins on a music subscription are also relatively slim.
Apple’s position with News+ is slightly less restrictive, but still constrained by the fact that at the end of the day, publishers get paid by making half of the total News+ revenue. There have been a few reports that Apple has negotiated new terms which would allow Apple to reduce the amount it pays out when News+ was bundled, but it can’t be that much of a reduction — the magazines have long been complaining that monetisation from News+ is poor.
Theoretically, Apple could charge nothing for TV+ and Arcade and just accept the content productions costs as losses. As discussed before on this blog, TV+ is currently a loss-leader when priced at $5 per month. (Apple needs to hit about 50 million subscribers to start making profits from the TV+ service.) But charging nothing at all for it feels like an unsustainable step that Apple wouldn’t cross. I think we can reasonably estimate/guess that, as a bundle, Apple could shave $2 off the News+ pricing, halve the cost of TV+ and Arcade, and leave Music as is. With a bit of optimistic rounding applied, that sums to a saving of $10.
So, that’s $25 per month rather than $35. 30% off! Not bad. I mean, it is nice but it’s still expensive. People love to draw contrasts between Apple’s bundle and what Amazon does with Prime, but the price points are very far apart to the point where it’s not really comparable. Remember, this total figure is still excluding your monthly iCloud payment.
Take a prospective customer who was only ever interested in Music, TV+ and Arcade. They aren’t going to be better off in the post-bundle era financially, they’ll be paying the same. Admittedly, the draw of getting an additional service for free might draw some people in. My point is that the bundle is good, but not a silver bullet. It needs to come hand-in-hand with improvements to the services themselves, to make them more compelling.
People will groan but I fully expect to see a Services segment at the upcoming WWDC keynote. It’s more than a year since the March event, so Apple is due to have things coming out of the pipeline. Apple News+ audio articles is essentially fully implemented in the iOS 13.5.5 beta, Apple just has to flip a switch to make it appear for everyone. It does suggest that Apple isn’t waiting until iOS 14 in the fall to ship this. And given the code evidence, maybe the bundle is imminent too.