Apple One bundle, long rumored, will please Wall Street

Apple CEO Tim Cook gives the keynote address during the Apple Worldwide Developers Conference (WWDC) at the Steve Jobs Theater in Cupertino, 2020, California.

Brooks Craft / Apple Inc. / Handout via Reuters

For Apple investors, the most exciting product the company may release this fall is not the new version of the iPhone or Apple Watch: it’s a bundle that ties together some of the company’s subscription services and allows users to get more Allows to subscribe more at the same time.

Apple has not confirmed the suggested name for the bundle “Apple One”, but technology blog 9to5Google found code in the Apple Music Android app earlier this week that the iPhone maker would tie its music service to other subscriptions like Apple . TV +, Apple Arcade, and iCloud Storage.

If Apple One launched this fall, Wall Street investors and analysts would be happy. An Apple bundle has been on the investor’s wish list for years.

“We have long argued that bundled services are a unique tool that Apple has,” Goldman Sachs analyst Katie Huberty wrote in an August note.

The theory is that an Apple bundle would anchor Apple’s grumbling services business, increase the number of customers, and cater to Apple’s perspective shift from Apple as a hardware manufacturer, a technology and software company Will be accompanied by multiple lines of recurring revenue. A self-reinforcement ecosystem, potentially driving up the stock price without dramatically increasing product sales or prices.

Huberty wrote that an Apple bundle could differentiate Apple’s services, promote customers to Apple’s less popular services, integrate with Apple Pay and Apple Card, and close customers to the Apple ecosystem Can do. Apple has set a target for 600 million customers by the end of 2020 (including customers for the App Store app), Huberty writes, and a bundle will help it hit and surpass that goal.

Started in 2015

To some extent, Apple has already started changing its story with investors. They currently give the company a much richer valuation than it did in 2015, when activist investor Carl Icann wrote an open letter to Apple CEO Tim Cook, noting that Apple’s ecosystem was undervalued. .

According to FactSat, in Thursday’s closure, Apple’s P / E ratio is closer to 34.5, compared to 10.9 when Icahn wrote his letter. This is largely driven by Apple’s online services, which accounted for 22% of the company’s revenue in the quarter ending in June.

Icon, which sold its Apple stake in 2016, suggested that Apple could increase its P / E ratio by aggressively expanding the TV market, and a core part of that strategy was a “thin bundle of pay-TV shows and movies.” ” Will happen. From media companies with a streaming music service.

The “Skinny Bundle” never came, nor did the Apple-produced physical TV that Ikan predicted. But in recent years, Apple has taken some steps towards that vision. Last November, Apple released Apple TV +, a $ 4.99 per month subscription that gives users access to Apple-funded TV shows, movies, and documentaries. And inside the Apple TV app, users can save up to $ 11 per month by purchasing both services separately, for CBS All Access and Showtime, two streaming channels, for $ 9.99 per month.

But the Apple bundle idea and significant recurring revenue caught hold among those who felt at the time that Apple was undervalued. Goldman Sachs analyst Simona Jankowski said in 2016 that if Apple had its own content, it could bundle Apple music and hardware such as Apple TV set-top boxes and iPhones for $ 50 per month. Bernstein analysts said around the same time that it was a case of Apple making a bundle to buy Netflix to counter Amazon Prime.

The concept of “Apple Prime” was born among Apple watchers and fans.

No hardware

It is unclear exactly what price Apple will bundle. It sells several subscriptions that give it a good start:

  • Apple TV +, streaming video for $ 4.99 per month
  • Apple Music, streaming music for $ 9.99 per month
  • Apple Arcade, a selection of games for $ 4.99 per month
  • Apple News +, an online bundle of magazines and newspapers at $ 9.99 per month
  • iCloud Storage, which enables users to sync data between devices starting at $ 0.99 per month

Apple has not released subscriber numbers for Apple TV +, Apple Arcade or Apple News + since they launched last year. Apple Music has over 60 million subscribers. Apple said it had 550 million subscribers earlier this year, but it counted those who subscribed to the app on the App Store.

According to a Bloomberg report, the original bundle could start with Apple Music and Apple TV +. Additional levels will add Arcade, News + and iCloud storage for an additional fee – but still cost the services separately.

One thing that is unlikely to be included in the bundle: hardware.

Analyst Tony Sekonaghi asked Cook directly about a hardware bundle on a conference call. He did not shoot the idea, but suggested that something like this was already in effect.

In terms of hardware as a service or as a bundle, if you will, today there are customers who essentially view hardware as they are on upgrade plans and beyond, “Cook said during an earnings call said.” The degree that exists today. ”

But Cook also said that he hopes hardware will become a service or bundle in the future.

Apple has an iPhone upgrade program introduced in 2015, which charges users on a monthly basis and gives them the option to trade once a year for new models in their old iPhones. And last fall, Apple began offering interest-free financing for Apple products through an Apple Apple credit card partnership with Goldman Sachs.

Ultimately, Apple does not view its business the way Wall Street does. It sees Apple as building the entire ecosystem in itself. If a user has an iPhone, they will have a better experience if they also heavily use Apple software and services, and are probably more likely to buy AirPods or Apple Watch – or Apple One bundles. The entire ecosystem is bundled.

If Apple releases the Apple One bundle this fall, it won’t talk about the P / E ratio or whether the company is more valuable as a software-plus-services company. This will more likely emphasize how great its services are and why customers benefit more to be part of the Apple ecosystem.


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