Apple is struggling to turn a profit on its streaming service, Apple TV+, despite investing billions of dollars into original content.
The company has been losing over $1 billion annually on the platform, even after scaling back its content budget by $500 million in 2023 according to Reuters.
While Apple TV+ has seen steady subscriber growth, it remains the only unprofitable Apple subscription service, raising concerns about its future in the competitive streaming industry.
Since its launch in 2019, Apple has spent more than $5 billion per year on content, banking on original films and series to attract subscribers. However, Apple TV+ still accounts for less than 1% of total U.S. streaming service viewership, far behind Netflix and Amazon, which commanded 8.2% and 3.5% of the market, respectively, as of February.
Apple’s CEO, Tim Cook, has reportedly begun questioning the platform’s financial viability, particularly scrutinizing big-budget productions that failed to drive significant subscriber growth. One such project, the spy action-comedy Argylle, which cost $200 million, did not generate the expected traction.
While losses are common in the streaming industry, Apple’s traditional fiscal discipline makes this an unusual departure. The company had initially planned for losses of $15 billion to $20 billion over a decade, but executives like Eddy Cue initially shielded Apple TV+ from financial scrutiny. That changed in 2022, when Cook pushed for tighter oversight, even cracking down on lavish private jet travel for Hollywood stars.
What to know
Despite the financial struggles of Apple TV+, Apple’s services division remains highly profitable. The segment, which includes Apple Music, Arcade, News+, and Fitness+, saw 13% revenue growth, hitting $96 billion in the last fiscal year. However, many of these services are also facing stagnation.
- Apple Music’s growth has reportedly stalled, with marginal profitability due to the high payouts to artists and labels, which exceed 70% of its revenue. Apple News+ and Fitness+ struggle with low engagement, while Apple Arcade had just two million users in its first year, with many on free trials.
- The departure of longtime Apple services executive Peter Stern in 2023 further signaled challenges within the division. Stern, who oversaw Apple TV+, reportedly left due to internal pressures to increase subscriber numbers. Apple has since restructured its services unit, separating Apple TV+, Apple Music, and international content from News+, Fitness+, and iCloud+.
- Much of Apple’s service revenue is now driven by Apple One, its bundled subscription offering, which inflates the perceived success of individual services. Many subscribers reportedly sign up primarily for iCloud+, rather than Apple’s other offerings. Without Apple One, both Apple Arcade and Fitness+ would not be profitable.
Despite its deep pockets, Apple’s continued losses on Apple TV+ raise questions about its long-term streaming strategy. With increasing competition and rising costs, the company must decide whether to double down or rethink its approach to the streaming market.
