Apple enters crowded streaming market

Morningstar analysts do not see any reason for either Netflix or the traditional media firms to be worried about Apple TV+ at this point

Morningstar 26 March, 2019 | 5:00PM
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At its Show Time event on March 25,  Apple (AAPL) unveiled its long-awaited video streaming service, Apple TV+, which will feature its original content. The service will launch this autumn as an ad-free service in over 100 countries for a price to be disclosed later. While Apple has secured projects from several high-profile creators and actors, including Oprah Winfrey and Steven Spielberg, the amount of content available at launch appears paltry when compared with  Netflix (NFLX) and Disney+. By waiting to launch until this autumn, Apple will be competing against not only established services like Netflix and Hulu but also against other new services from media firms with much deeper content libraries like Disney and WarnerMedia. We maintain our wide moat rating and $130 fair value estimate for Disney along with our narrow moat ratings and fair value estimates of $200, $135, and $37 for Apple, Netflix, and AT&T, respectively.

After an overly long video about creativity, Apple essentially held a network upfront presentation with creators and actors coming onstage to discuss their respective shows. However, the presentations did not feature any clips from the shows, and Apple overall showed one brief montage video for the entire TV+ presentation. While the star power of the celebrities on stage was impressive, we found the lack of show clips disappointing.

Between the lack of clips and price point, we did not see any reason for either Netflix or the traditional media firms to be worried about Apple at this point. While Apple’s entrance into the space will drive up the ever-increasing cost of producing content, we note that the estimated $3 billion in content spending by Apple prior to launch is equivalent to the combined annual spending by Discovery and Scripps as separate firms. While the two media firms focus on lower-cost unscripted content, we think the relatively low total spending by Apple highlights the lack of content that will be ready for the service's launch in the fall.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Apple Inc149.10 USD-0.11Rating
Netflix Inc645.28 USD3.22Rating

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