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Why Apple's Just-Announced News Subscription Service Could Be a Hit

By Daniel Sparks – Updated Apr 15, 2019 at 3:38PM

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Early momentum in the Apple News app and strength in subscriptions in general could help drive adoption of the new service.

Apple's (AAPL -3.00%) rumored news service is finally here. The tech giant unveiled a subscription tier for its Apple News app on Monday that gave users access to hundreds of magazines and some of the world's leading newspapers.

The service, called Apple News+, is just one facet of Apple's invigorated effort to ramp up its services segment, making its business less dependent on iPhone sales. But can the service gain meaningful traction with users? Current trends in subscriptions in general, as well as Apple's progress so far with its Apple News app, suggest the new subscription tier for Apple News has significant potential.

Apple News subscription service on a MacBook Air, iPad, and iPhone.

Apple News+. Image source: Apple.

Building on 85 million active users

Apple News+ has an incredibly strong foundation. Indeed, the app has a larger audience than any news app in the U.S. and the U.K., according to data from comScore.

In addition, Apple said in its most recent earnings call that its Apple News readership hit a record high of more than 85 million monthly active users during the holiday quarter -- and that's in only three countries, as Apple had only launched the service in the U.S., the U.K., and Australia at the time.

Further, while the Apple News app is free, some users were likely already accustomed to paying for subscriptions through the app; users were able to pay for third-party news subscriptions and get access to premium content within the app. Apple News+, therefore, could be a logical add-on for some users -- particularly given how much is included in the subscription.

Apple News+ gives users access to over 300 popular magazines, such as Vogue, National Geographic Magazine, and People. In addition, The Wall Street Journal, Los Angeles Times, and Toronto Star are among the newspapers providing content for the service.

Check out the latest earnings call transcript for Apple.

A subscription frenzy

While Apple's early momentum with its news app and the compelling value proposition of Apple News+ are already good reasons to believe the app will be a success, there's another key reason the new service will likely flourish: Digital subscriptions, in general, are booming.

In Apple's most recent earnings call, for instance, Apple CFO Luca Maestri said the company had garnered 360 million subscriptions across its services portfolio, up 120 million compared to the year-ago quarter.

"Given the continued strength and momentum in this part of the business, we now expect the number of paid subscriptions to surpass half a billion during 2020," explained Maestri. "Our subscription business has become very large and diversified, covering many different categories from entertainment to health and fitness to lifestyle."

For a more specific example of a fast-growing news-based digital subscription, just look at The New York Times (NYT 0.45%). The company's digital subscription growth accelerated in the second half of 2018, with total digital subscriptions at 3.4 million by the end of the year, up 27% year over year. 

Suffice it to say, Apple News+ looks poised to benefit from a solid foundation in the Apple News app itself and strong momentum in subscriptions overall.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.

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