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Apple’s Price Hike Economics

Despite its fortress balance sheet, isn’t idly investing in film and TV because Tim Cook likes attending the Oscars or Emmys.
Despite its fortress balance sheet, isn’t idly investing in film and TV because Tim Cook likes attending the Oscars or Emmys. Photo: Emma McIntyre/WireImage
Julia Alexander
October 31, 2023

During its rocket ship ascent to become the world’s largest company, with a market cap of some $2.7 trillion, Apple has segued from hardware to services provider to, most recently, an owner of services—namely Apple Music, Apple News+, Apple Fitness+, Apple Arcade, and, of course, Apple TV+. It’s a natural progression, befitting the business realities. Apple’s gross margin for its hardware division is just over 34 percent, according to third party analysis. The margin for its services business sits at 70.5 percent. 

I was thinking about those margins when the company announced the most recent price hike for Apple TV+, raising the video service from $7 to $10 a month. Currently, Apple TV+ has between 15 and 20 million subscribers domestically, according to my team’s analysis at Parrot Analytics, where I work as director of strategy. Its global demand share—a measure of viewing consumption, social media chatter, and consumer research—sits at 7.6 percent in Q3, up from 7.2 percent in Q2, according to Parrot. It stands in fourth place for originals demand share when compared to Netflix (33.3 percent), Prime Video (11.6 percent), and Disney+ (8.6 percent). Apple TV+ also has the second lowest corporate demand share (demand for titles based on their ownership), meaning Apple TV+ licenses a lot of its content, and the lowest catalog demand share, which isn’t all that surprising for a new service.