Apple (NASDAQ:AAPL) plans to reach $50 billion in services revenue next year, and its Apple TV+ promotion could be the key to getting there. The company is currently including a free year of Apple TV+ with new device purchases. Barclays analyst Tim Long expects the promotion to result in 100 million subscribers over the next year, assuming Apple maintains the promotion for the next 12 months.

Some simple, back-of-the-envelope math suggests those Apple TV+ subscribers will contribute nearly $6 billion to Apple's services revenue over the next year. Add that to the nearly $44 billion the company's services have generated over the trailing 12 months, and Apple will hit its goal.

The Apple TV+ logo on a black background

Image source: Apple.

Where did that money come from?

That $6 billion in Apple TV+ revenue won't be coming directly out of consumers' budgets. Long suggests Apple's accounting will include about $60 of contra revenue for each Apple TV+ signup in its device sales, and that revenue will be recognized as $5 per month for its services division. Goldman Sachs analyst Rod Hall suggested a similar accounting.

For its part, Apple says the introduction of Apple TV+, the promotion, and its accounting won't have a material impact on its financial results. 

That's hard to believe, considering the company is reportedly spending $6 billion on original content. Those costs will start amortizing in its fiscal first quarter after Apple launches its streaming service in November. At the very least, that should have a notable impact on its services gross margin. Cost of sales for services totaled just $12.3 billion through the first nine months of the year.

It also makes sense that Apple would account for the Apple TV+ promotion using contra revenue from its device sales and credit it to its services sales. Apple may choose a different method for accounting, and investors should look for an explanation if it does.

Why it matters and why it doesn't

Apple's iPhone average selling price and its services revenue have been two big areas of focus for investors over the last couple years. How Apple accounts for its Apple TV+ promotion could have a big impact on both. 

Apple already lowered the starting price of its flagship iPhone by $50 compared to last year. If half of iPhone purchasers sign up for the free year of Apple TV+, it could produce another $30 headwind to average selling price depending on the accounting.

Likewise, the extra revenue from Apple TV+ sign-ups that's coming from the promo could obfuscate the real demand growth for Apple's services. Tim Cook wants to reach $50 billion in services revenue, but it shouldn't come at the cost of device revenue.

It's important to fully understand how Apple accounts for the Apple TV+ promo next year in order to analyze how it impacts iPhone average selling price and services revenue. That way, investors can make a sound judgment about what exactly is going on with Apple and whether its quarterly results are good or bad.

But as Apple indicates, the bottom line won't see a material impact. It may have a minimal amount of deferred revenue liability (for the months of Apple TV+ it hasn't yet delivered for new-device signups), but ultimately, that number will be relatively small. The amount flowing to the bottom line will be just about the same, regardless of how Apple decides to apportion each dollar of revenue. Moreover, Apple's cash flow -- one of the most important metrics to Apple investors -- shouldn't see any impact from the accounting. 

Apple's promotion will likely complicate the company's earnings reports, but vigilant investors who are willing to look past the headline numbers and listen to management's commentary will come away with a good understanding of how well the promotion's working to increase both device sales and services revenue -- on top of the impact of Apple TV+ subscriptions.

If you want to keep things simple, consider this: More Apple TV+ subscribers, either paid directly or through the promotion, is good for Apple. Sixty dollars per subscriber and an accounting headache is a small price to pay for the potential payoff. No one should think 100 million Apple TV+ subscribers is bad for Apple, regardless of how they're paying.