On Monday Apple announced (NASDAQ: AAPL) a new streaming TV subscription service called Apple TV +. While the tech giant revealed an impressive cohort of producers and famous actors and actresses starting the service, as well as an entertaining seething role of upcoming shows for the platform, there were more questions than answers after the service was revealed.  Some prominent questions for the service, which is scheduled to launch this fall, are:
- How Will Apple Serve The Service?
- Will the service include a robust selection of licensed content in addition to Apple's original content? 19659005] Will the service be available on third-party platforms such as Roku ?
But here's a question that does not need to be answered: Can Apple TV + Rival Netflix (NASDAQ: NFLX) ?
Fortunately, Apple does not need the streaming TV service to succeed as the next Netflix. In fact, it does not even have to make money.
An Ecosystem Model
Thanks to Apple's diversified ecosystem, Apple TV + does not have to be a big hit. The tech giant's revenue comes from a combination of hardware and a range of services, making each new service a small piece of the pie. In fact, Apple has introduced three more services besides Apple TV +: Apple News +, a new credit card and a game service. These new services are based on a number of powerful existing services, including App Store, Apple Music and Apple Pay. While Netflix relies heavily on the continued growth of its platform as it is a pure streaming platform, Apple has developed an ecosystem model with a variety of services.
As a famous investor, Warren Buffett, whose Berkshire Hathaway (NYSE: BRK-B) (NYSE: BRK-A) owns 5.5% of Apple, said (via CNBC During a talk this week at The Gatehouse's Hands Up for Success on Apple's Advance in Streaming TV:
I'd like to see that they are successful [in the entertainment space] but [Apple is] a company that can afford to make one or two mistakes. You do not want to buy stocks in a company that has to do everything right.
In addition, while investors should be confident that the services offered by Apple are profitable (on a consolidated basis, they are extremely lucrative), they all do not necessarily contribute to the bottom line. Some services can simply help make the ecosystem stickier, keep customers loyal and continue to buy Apple products and subscribe to various Apple services. If this is all that Apple News + achieves, it would be a success.
Rating is important
Then there is the conservative rating from Apple. With less than 16x profit, the company simply does not need new services. The technology company already has a solid foundation for robust free cash flow and a diversified and fast growing service segment to justify its current valuation. If Apple TV + could possibly compete with Netflix – or even with smaller players such as the Prime Video of Amazon or Hulu (mainly owned by Disney ) – then this would just be a cherry on the cake ,