Market Overview

Needham's Martin Talks Apple Services, Streaming Video Competition

Needham's Martin Talks Apple Services, Streaming Video Competition

Apple Inc. (NASDAQ: AAPL)'s Services business collects an average of $50 in revenue from each unit user, Needham analyst Laura Martin said Friday on CNBC's "Worldwide Exchange." 

Apple Ecosystem

Apple's Services business collects around $46 billion in revenue from 950 million unique users worldwide, Martin said.

Aside from music, many of the new subscription services didn't exist a few years ago, but now generate margins as high as 80%, the analyst said. 

Apple has not only quietly built out a large Services business, but it plays a vital role in "locking in" users to the entire ecosystem, she said.

Seventy-five percent of iPhone purchasers are financing their device, which is a de facto subscription payment, Martin said. 

Streaming Video Isn't Big Enough For Everyone

The streaming video space is "definitely" not large enough for all players to thrive, and the ones that will emerge victorious are those offering a free platform as part of a broader bundle, the Needham analyst said.

The list includes Apple, which offers streaming free with a new iPhone purchase for one year, and, Inc. (NASDAQ: AMZN)'s Prime Video, which is offered at no extra charge to Prime users. Walt Disney Co (NYSE: DIS) video platform is a mere $3 a month on a three-year contract.

These companies can count on their multiple other business lines to support or finance free streaming video, unlike Netflix Inc (NASDAQ: NFLX), whose sole business is streaming video subscriptions, Martin said. 

Netflix "could be ... might be" in trouble, especially since CEO Reed Hastings refuses to open the platform to ads as part for a potential cheaper ad-supported subscription, the analyst said.

Apple shares were trading 0.5% higher at the time of publication, while Netflix shares were falling by 4.29%. 

Related Links:

Roku Vs. Netflix: Needham Compares Streaming Stocks

How Facebook, Comcast Just Shook Up The Streaming Video Wars

Photo courtesy of Apple. 

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