With Apple iPhone X sales fading, Apple could be about to make a big bet on content
Apple shares hit an all-time high of $183.50 on March 12th and currently stand a bit over $20 a share lower. You know the game on Wall Street. Top the numbers forecast by analysts and your stock soars. Fail to meet those figures and it's look out below. Amazon is a good example. Last week, the company reported much higher than anticipated earnings numbers for its first quarter, and the stock soared as much as 8% higher the next day before fading a bit. With Apple, the metric often used instead of actual earnings is the number of iPhone units sold in a quarter. After all, the smartphone is Apple's largest contributor to revenue. The late Steve Jobs saw this coming and took the "Computer" off of his company's name on the very same day that the iPhone was first introduced.
The problem for Apple is that its future seems entwined with the future of the iPhone, and smartphone sales overall have been struggling. So the company is hoping that services can take over the growth from hardware. And that means Apple is going to need original content, and plenty of it. One rumor suggests that Apple is going to buy magazine publisher Condé Nast, a company that is losing $100 million a year. The publisher still has some famous titles like Vogue, Vanity Fair, Wired, The New Yorker and GQ. Apple can use these to help sell subscriptions to its digital magazine venture that includes the Texture app that it purchased earlier this year. Texture is known as the "Netflix of magazines" as it allows subscribers to read up to 200 magazines for $9.99 a month. Offering some very popular titles could allow Apple to charge subscribers more for monthly access.
Former Piper Jaffrey analyst Gene Munster, who still follows Apple for his job at Loup Ventures, doubts that the magazine publisher is in Apple's sights. He says that Apple is more interested in music and video than publishing. Overall, he forecasts that in 2018, Apple will double the $500 million it spent on original music, video and publishing content last year. By 2022, he sees that figure reaching $4.2 billion. Even at that pace Apple will trail Amazon. Munster sees the latter hiking its spending on original content from $4.5 billion to $8.3 billion.
Apple will release its fiscal Q2 earnings report approximately 60 minutes after the 4pm market close on Tuesday. Estimates on the number of iPhone units sold in the three month period have been all over the place, but the average forecast calls for 43 million handsets to have been rung up during the quarter.