On Monday, we'll finally find out where Apple's billion dollars have gone.
That's the amount the company earmarked for a video streaming service that it hasn't yet confirmed is coming. For years, rumors of Apple diving into a market dominated by YouTube, Netflix and other streaming companies floated around. It's even talked up the shows and celebrities it's cast. Still, Apple hasn't actually said what all of those partnerships are for.
We'll find out on Monday when Apple hosts an event at the Steve Jobs Theater on its campus in Cupertino, California, to unveil its long-awaited video offering. The event kicks off at 10 a.m. PT/1 p.m. ET.
For Apple, the launch marks the first time it's making its services business the centerpiece of a major event. It's spent the first three days of this week in an unprecedented flood of hardware announcements made via press release, fromto a and . In the past decade of Apple's flashy launches, none -- not even its annual Worldwide Developers Conference -- has focused primarily on services.
The company needs to highlight those offerings now. Last year, Apple became the first trillion-dollar American company but slipped below that mark three months later. Its iPhone business seemed to be on an almost never-ending rise -- until it suddenly wasn't. Apple makes about two-thirds of its revenue from the iPhone, but people are holding onto their devices longer, and in places like China, they're increasingly opting for phones from Apple's rivals like Huawei and Oppo.
Apple knows it has to grow its operations beyond the iPhone, especially its services business. The area, which includes the App Store and Apple Music, has been soaring thanks to all of us who own the 1.4 billion active Apple devices out there. In the December quarter, Apple's services business revenue jumped 19 percent to a record $10.9 billion. Apple Music now has over 50 million paid subscribers, and across all of its services, Apple has 360 million subscribers, up 120 million from the previous year.
Getting into TV streaming is the next logical move for the company.
"They've been saying on the last almost four years worth of [earnings] calls how much services is going to be important to them," Technalysis Research analyst Bob O'Donnell. "They've been building up to this."
That doesn't mean it's going to be easy. Apple's joining a crowded field, and many of us already shell out money every month to several streaming providers. Is there room for another?
Apple declined to comment ahead of its event.
From hobby to center stage
Apple has dabbled in entertainment for more than a decade. The company introduced its first Apple TV in 2007, the same year it launched the iPhone. In the early days of Apple TV, Apple positioned its streaming media box as a "hobby."
Apple finally updated Apple TV in late 2015, releasing it with its new TVOS software that lets developers make apps, and a new remote that worked with Siri. It was that new software that turned Apple TV into a more than just a dumb streaming box.
The update came at a time consumers were starting to ditch their traditional cable subscriptions in favor of smaller streaming bundles. On-demand TV services like Netflix, Amazon Prime and Hulu offered thousands of videos to stream on demand, while services like Sling TV, DirecTV Now and YouTube let people watch live TV over the internet. Increasingly, it was Apple TVs, Roku boxes and Chromecasts being used to view that content.
Now Apple doesn't just want to make the hardware for viewing entertainment. It also wants to make the content people are accessing.
Key to Apple's success in streaming is just what's offered on its service. No one will pay for content they don't want to watch.
It stepped into the market in 2017 with a couple original shows for its Apple Music service. That included Planet of the Apps, which was widely panned, and Carpool Karaoke, which began life as a viral segment on CBS' The Late Late Show with James Corden. (Editors' Note: CNET is owned by CBS, which is also producing the series.). Both flopped.
Apple was long rumored to be working on a virtual cable service that let subscribers pick and choose their channels. But that never materialized, and it isn't likely to be what Apple introduces Monday.
Instead, it's expected to release a more Netflix-like service that includes its own content and video from partners. Apple has reportedly been seeking deals with networks like HBO, Showtime and Starz to license a library of already-released content. (Note: Showtime is owned by CBS, CNET's parent company.) It could also bundle other streaming services and take a cut of their revenue.
Netflix, for one, reportedly won't be participating. "We want to have people watch our content on our service," Netflix CEO Reed Hastings said Monday. "We've chosen not to integrate into their service."
As for its own content, Apple has at least 30 projects in the works, with five reportedly ready to go. Its initial $1 billion investment in content could balloon to $4.2 billion by 2022, according to a 2017 estimate by longtime Apple analyst Gene Munster, who is now at Loup Ventures.
Apple's announced partners include a multiyear deal with Oprah, Reese Witherspoon, M. Night Shyamalan and Steven Spielberg. The company has hired two top executives from Sony Pictures Television to lead the effort.
Show me the money
To show it's really serious about services, Apple has to make its new TV streaming offering work on non-Apple devices. And it can't be so expensive that no one will subscribe. Already, Americans who watch video online subscribe to an average of three streaming services, according to a Deloitte study.
Some analysts believe Apple's service could be free for Apple device users, but it's more likely the company offers a free trial period. For Apple Music, Apple offers an extended free trial, and it's standard for most streaming video services to give new users a free introductory period.
One way Apple could get more subscribers is by bundling its TV service with Apple Music or with an iCloud account. Currently, Apple Music costs $9.99 a month, while iCloud storage costs 99 cents a month for 50GB (an amount that's lower than the current lowest capacity -- 64GB -- on Apple's new iPhones), $2.99 for 200GB or $9.99 for 2TB.
There's also Apple's rumored news subscription service, which is also expected Monday, that could be paired with its music and TV offerings. The service is expected to be based on Apple acquisition Texture, dubbed a "Netflix for magazines," which offered unlimited access to magazines and news outlets for one fee.
"Is this going to be the straw that broke the camel's back that gets me to think about what I'm already paying for?" Creative Strategies analyst Carolina Milanesi said. "If you bundle it, the value becomes more fluid."
Amazon bundles its music and video services into its Amazon Prime two-day shipping membership that costs $12.99 for a monthly subscription or $119 for the annual pass. Some people are paying the amount just for the shipping, but others want it for the video service, music or other benefits.
Ultimately, to get us all to subscribe, Apple's got to offer something we can't get anywhere else. We find out Monday if that's what it's built.