The new streaming service — which will feature free original content for device owners, and a subscription platform for existing digital services — launches on Nov. 1. It is set to cost users $4.99 per month, but for those who buy a new Apple gadget, the first year is free.
Barclays Analyst Tim Long explained that his firm came up with its estimate based on a model of 222 million Apple devices being sold over the next 12 months.
“We assume that about 50 percent of those buying a device in the first year will accept the service, yielding well over 100 million subscribers a year from now,” he wrote, according to CNBC. “We exclude sales to China, and our estimate of second and third devices at families.”
He continued, “We assume that the trial period will last for one year, at which point we expect subscribers to decline as users opt out, and are partially offset by new additions. Of course, the rate of churn will depend meaningfully on how quickly Apple can ramp up its content library.”
Long believes that the new service will drive the company's stock over the next year, and its free trial will most likely cause Apple to move sales from the hardware line items on the balance sheet to services revenue.
“From an accounting perspective, for each user [who] is assumed to take the service, Apple will record a $60 contra revenue item to the hardware, and commence recognizing $4.99 per month in Service revenue,” the note stated.
However, after analysts at Goldman Sachs made a similar prediction last month, Apple countered that it does “not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results.”