Apple to launch subscription bundle – we called it!
In MIDiA’s 2020 Predictions report published in December 2019 we predicted that tech majors would start creating subscription bundles, with Apple leading the fray. Lo and behold, news has just come out that Apple is working on ‘Apple One’ – a multi-genre subscription bundle that will include Apple Music, Apple TV+, Apple Arcade and Apple News+.
This is what we said back in December:
“Expect Apple to experiment with paid bundles. Adding TV+ to its student Apple Music package is another test case and may soon see Arcade folded in also. With a global recession looming, Apple and Amazon will be well placed to grow market share.
We called it!
So why is Apple doing this, and why now?
With smartphone sales slowing, Apple needs another growth driver to maintain revenue growth. It is making this move now because, one, it needs the transition to start soon, and two, it is looking to profit from the recession. Standalone digital subscriptions are contract-free and so are vulnerable to cancellation. Additionally, they skew towards Millennials – the segment most likely to be hit hardest by any workforce reductions. Consumers who find themselves having to tighten their belts will not want to simply ditch their digital entertainment, however – it has become too important to them. So, a multi-subscription, value-for-money bundle will become particularly appealing during a recession. Apple is thus hoping to pick up price-sensitive subscribers during the economic downturn.
Apple also has an ace up its sleeve: device bundles. As we wrote in December:
“Currently, Apple’s mix of premium, standalone subscriptions are educating its user base that they have a clear monetary value. Apple will start to bundle these together with devices in order to maintain revenue growth in its otherwise slowing device sales segments. The initial bundling of Apple TV+ for free for one year may help acquire market share but it also lays the ground for a more comprehensive and structured bundling strategy. By tying subscriptions into long-term, need-to-have relationships – i.e. phones and shipping – […] tech majors could gain at the expense of standalone subscriptions.
Bundling used to be the sole domain of Telco’s but the tech majors are looking to get in on the act. Apple can use Apple One to increase device prices, e.g. pay $200 more to get an iPhone with a lifetime of unlimited music, video, games and extra cloud storage. By doing so it both increases device revenue (and after all, Apple is still a device company and is measured that way by investors) and taps into an entirely different purchase decision cycle. Devices are need-to-have and if you are in the market for a high-end device, adding on 15% for unlimited content is a much easier sell than trying to sell the subscription standalone.
In doing all of this, Apple is of course taking a leaf out of Amazon’s book. Amazon has built the core of its streaming businesses around the Prime bundle. In doing so, it has the additional benefit of creating a recession-proof bundle (everyone still needs to buy stuff) – one which is proving its worth already, if it’s incredibly successful Q2 is anything to go by. As we enter the recession, standalone subscriptions like Spotify and Netflix are vulnerable to increased churn. Apple and Amazon will be waiting to pick up the pieces.