Metric sales

1 Metric Apple Investors Should Stop Worrying About

Like many of its streaming rivals, Apple (AAPL -1.06%) does not disclose the exact number of people who watch its TV shows and movies. In fact, Apple goes further than its competitors such as netflix and by Walt Disney Disney+ in that it also withholds Apple TV+ subscriber numbers. Instead, the company combines its video streaming numbers with the rest of its services business, which includes Apple Music, Apple Arcade, Apple TV+, and more.

For some investors, it may seem like Apple is hiding something. Here’s why you shouldn’t worry.

Hollywood would love to see the numbers

Apple’s low-key approach to viewership is in the spotlight after Ben Stiller spoke with Decider about his Apple TV+ show, Breakup. The actor and director said he didn’t know how many people watched the show because Apple only gave him partial data. However, Stiller even noted that the information is far from transparent: “[Y]You get these charts and tables…but you don’t know what the baseline is.”

Stiller’s comments highlight a common disconnect between how streamers operate and the metrics Hollywood has long relied on to determine whether a show or movie is a success. Studios, producers and agents have traditionally used Nielsen TV ratings and box office receipts to gauge what audiences are reacting to. These data points are the cornerstone of decisions about what gets done, what gets deleted, who to hire, how much they should be paid, etc. But as Stiller notes, “[It’s] a big mystery of who is watching what on stream.”

Apple caters to a different audience

While Apple TV+ viewership certainly matters to Apple, it’s not the only audience the company has in mind. With devices like the Mac, the Apple Watch and, of course, the iPhone, Apple has multiple revenue streams, with many overlapping customers. Leveraging its installed device user base, Apple has expanded into a diverse range of ancillary services such as video editing tools, payments, and music streaming to bolster its hardware operations and expand other sources of income.

Chief Financial Officer Luca Maestri explained how Apple’s hardware base is directly tied to its services business during the company’s third quarter fiscal 2022 earnings call. Maestri noted that devices are the “powerhouse” of Apple, and that services “tend to help [the company] long-term. Seen in this light, Apple TV+ is just another add-on feature that helps keep customers attached to Apple products, which drives growth.

Services as a growing business

The iPhone has been Apple’s big money maker for years. As the company revealed in its third-quarter results, iPhone sales rose nearly 3% year-over-year to $40.7 billion, representing nearly half of all of its earnings for the quarter. However, at $19.6 billion, Services is now Apple’s fastest growing sector, representing a 12% year-over-year increase.

The growth of Apple’s services division is positive for stakeholders as other parts of the company’s business struggle in the face of economic headwinds: iPad revenue for the third quarter was of $7.2 billion, down 2% year-over-year, while Apple’s wearables, home and accessories unit managed $8.1. billion, down 8% year-on-year.

The strength of the ecosystem

Apple certainly cares about the quality of the content it produces for Apple TV+ (the company cited its Emmy nominations during the third-quarter earnings call), but putting the streamer in the same category as Apple Pay and iCloud signals that it’s just one piece of a much bigger puzzle. And while that may irritate some in Hollywood, for investors it’s an indication that Apple knows its overall strength comes from its ecosystem rather than its building blocks.

While it seems unlikely that Apple will start releasing numbers for the various parts of its services business anytime soon, that could change if an individual offering gains dominance in its field. If Apple TV+ subscriber numbers start to look like they could challenge those of Netflix or Walt Disney, then Apple might choose to provide a better look. But as things stand, market watchers should focus more on how the services unit is doing as a whole, as it is clearly becoming one of the most important parts of the business. Apple.

Tom Wilton has no position in the stocks mentioned. The Motley Fool holds positions and recommends Apple, Netflix and Walt Disney. The Motley Fool recommends the following options: January 2024 Long Calls at $145 on Walt Disney, March 2023 Long Calls at $120 on Apple, January 2024 Short Calls at $155 on Walt Disney and March 2023 Short Calls at 130 $ on Apple. The Motley Fool has a disclosure policy.