Amid declining iPhone sales, Apple is expanding further into media and payments to accelerate services revenue. Earlier today, the tech giant finally announced several major new premium content services at its event in Cupertino. Despite information leaks and a broad push to grow its Services segment, Apple's new offerings — Apple News+, Apple TV Channels, Apple TV+, and Apple Arcade — had previously been shrouded in a veil of secrecy.

Overall, each of these services could provide a massive boost to Apple’s growing Services unit, which last year generated nearly $11 billion, up 19% year-over-year. Historically, Apple's chief power has been reinvigorating stagnant businesses, a fact noted by Cheddar's Alex Heath, by improving the user experience through aggregation, clean design, and effective pricing. That core DNA is playing out most prominently on Apple News+ and Apple TV Channels, which we see as having the greatest capacity to deliver meaningful, incremental, and recurring revenue to Apple overall. 

Apple News+

The facts: Launching the US and Canada today, Apple News Plus aggregates 300+ magazines — including The New Yorker, The Atlantic, and National Geographic — and select content from The Wall Street Journal, ad-free, for $10 a month. Notable legacy brands like The New York Times and The Washington Post have opted out to prevent cannibalizing their robust subscription businesses and eroding direct relationships with consumers. 

Our take:

  • The publishers who have joined are likely enticed by Apple's massive reach. Apple News comes pre-installed on iPhones, and there are nearly one billion active iPhones in the world.
  • Even without The Times or The Post, we believe Apple News+ is likely to be one of the top revenue drivers for Apple's Services segment — primarily because it reduces friction for consumers. News consumers are likely to grow more frustrated with fragmentation and increasingly restricted content as publishers shift to subscription models and erect full or partial paywalls.
  • Moreover, we view this as a play to rev waning iPhone sales, and possibly even convert Android users. The Apple News app comes pre-installed on iOS devices, but isn't available on Android — so heavy news consumers could be enticed to convert. 

Apple TV Channels

The facts: Apple TV Channels will enable users to customize content bundles from any source, with everything being delivered through [...]