Less than 10% of Apple (AAPL) customers eligible for 12-month free trials of the company's Apple TV+ streaming video service have taken the offer, a Wall Street analyst said Monday.
XBernstein analyst Toni Sacconaghi estimates that under 10 million Apple customers have accepted the free trial offer. He calls that a "surprisingly low take rate."
Apple customers are eligible for one year of free service to Apple TV+ if they bought a new iPhone, iPad, Mac computer, iPod Touch or Apple TV set-top box after Sept. 10. Other customers pay $4.99 a month for the service.
Apple did not respond to a request for comment on the Bernstein report.
Three Possible Explanations For Low Apple TV+ Take Rate
Sacconaghi based his estimate on an analysis of Apple's fiscal first-quarter results, released last week. Apple did not give specifics on the Apple TV+ service, which launched on Nov. 1. Apple Chief Executive Tim Cook said Apple TV+ "is off to a rousing start."
Sacconaghi sees three possible explanations for a low initial take rate for Apple TV+ free trials. First, Apple hasn't effectively promoted the video service to its large user base. Second, Apple might be deliberately scaling its promotions of Apple TV+ slowly to mitigate the negative accounting impact of its early ramp. Third, Apple TV+ is failing to resonate with consumers.
Consumers might not be interested in Apple TV+ because of its limited content offerings, especially compared with Walt Disney's (DIS) Disney+ service, Sacconaghi said. Disney+ debuted on Nov. 12.
Big Start Expected For Disney+ Service
Disney will report its fiscal first-quarter results late Tuesday. The media and entertainment giant said it will update its Disney+ subscriber numbers in the report.
Rosenblatt Securities analyst Bernie McTernan estimates Disney ended December with 25 million Disney+ subscribers. In a report Sunday, he predicted that Disney+ will have 39 million subscribers by the end of its fiscal year in September.
Sacconaghi noted that Apple management has indicated that it won't disclose subscriber numbers for Apple TV+ this year. Apple TV+ and Disney+ compete with Netflix (NFLX), Amazon (AMZN) Prime Video and others in the subscription video-on-demand business.
He rates Apple stock as market perform with a price target of 300. Apple stock dipped 0.3% to 308.66 on the stock market today.
For now, Apple stock is shaking off concerns about the coronavirus outbreak in China hurting its production and sales there. On Saturday, Apple announced that it was temporarily closing all of its stores and offices in China.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.
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