Apple unveils mostly ad-free content services for entertainment, gaming

Brief:

Apple yesterday unveiled new services for entertainment, news and video games, leaving little opportunity for marketers to participate in its content platforms other than through magazine ads. The iPhone maker also introduced Apple Card, a mostly digital credit card created with Goldman Sachs that is built into the Apple Wallet app.
The most significant addition to Apple's growing roster of services will be Apple TV Plus, an ad-free video-subscription service that carries original programming for a flat monthly fee. Apple will announce pricing ahead of a fall launch. In May, Apple will release an updated Apple TV app that works as a viewing hub for TV channels and video-on-demand services. The app will work on its connected devices and those of competitors including smart TV devices from Samsung, LG Electronics, Vizio, Roku, Sony and Amazon.
Apple News Plus is a digital newsstand available now that charges a flat fee of $9.99 a month for access to more than 300 magazines and newspapers such as The Wall Street Journal and the Los Angeles Times. Apple didn't provide pricing information for Apple Arcade, a game-subscription service with more than 100 exclusive video games that are without ads, ad tracking or additional purchases.

Insight:

Apple's latest batch of services again shows the company's ambivalence toward advertising, as CEO Tim Cook highlighted the difference between his company and its tech rivals during an event yesterday to introduce the news services. Apple TV Plus and Apple News Plus don't track consumers or collect their data for ad targeting.

"This is a different approach than others have taken," Cook said during the event yesterday, according to a report from Ad Age. While the executive didn't reference Facebook and Google by name, his comments sounded like they were directed at the two biggest digital platforms, each of which is facing challenges related to data privacy. To that same end, Apple recently released a TV ad touting its privacy protections with a tagline "If privacy matters in your life, it should matter to the phone your life is on," per Adweek.

During the event, Cook also focused on the reading experience of the 300 magazines in Apple News Plus, but not the advertising. The digitized magazines will show the same text and photos that are in the printed editions, including ads. "Every ad from the print edition will be in the digital edition," Doug Olson, president of Meredith's magazines, told Ad Age.

The magazines will be able to include Apple News Plus readers on audience reports to advertisers because the app is certified by the Alliance for Audited Media. In this case, marketers will have greater protections against ad fraud and better assurances of brand safety than platforms with user-generated content can provide. Magazines like National Geographic show moving images on their digital covers in Apple News Plus, indicating that publishers do have the ability to create more dynamic editorial content than still imagery. That may mean that magazines will eventually be able to offer marketers ad placements that resemble TV spots with more engaging product displays and emotional content.

For Apple, the expansion of its services comes as the tech giant contends with declining sales for the iPhone. IPhone sales dropped 15% to $51.98 billion during the holiday quarter, making the flagship device the only product to see a revenue decline among its Mac computers, iPad tablets and wearable devices like the Apple Watch. Apple's high-margin services business, which includes the App Store, Apple Pay, Apple Music, iTunes and iCloud storage, showed healthy growth of 19% to $10.88 billion, putting the company on track to reach its of annual goal of $50 billion by 2020.

A greater menu of services makes Apple hardware more valuable and useful to consumers, but also pits the company against a wider group of competitors. Tech companies like Apple increasingly are branching out from their core businesses to compete with each other for the limited attention span of viewers. Apple TV Plus' original programming will be ad-free, aligning Apple against Netflix and Amazon Prime in the increasingly crowded field for over-the-top video. Facebook, Google's YouTube and Snapchat also have original video programming to keep users engaged with their platforms. While Apple will broaden the distribution of its content to non-Apple hardware and spend $1 billion on original shows, that is a fraction of what Netflix, HBO and Amazon spend.

Apple touted the privacy and simplicity of its Arcade platform, which promises games without ads, ad tracking or additional purchase. Those privacy protections will extend to the new Apple Card, which will be integrated into the Apple Wallet app on iPhone. The security and privacy architecture for the card means that Apple doesn't know where a customer shopped, what they bought or how much they paid, the company said. By integrating the Apple Pay card more closely with iPhone services, Apple may appeal to tech-savvy consumers who are early adopters of mobile payments and contactless checkout. But the company also faces intense competition from other cards that offer airline miles, travel perks and cashback rewards.