Apple (NASDAQ:AAPL) has been working on a bundle of services composed of Apple Music, Apple News+, and Apple TV+ for more than a year. Reports of the effort first surfaced over the summer of 2018, and a bundle could be a powerful way to grow paid subscriptions while bolstering retention. More recently, record labels were cited as a major roadblock, since any bundling would likely dilute the music industry's average revenue per user (ARPU). While Apple owns all of the original video content for Apple TV+, it relies on third-party record labels and magazine publishers to provide content for the other services.

As Apple continues to negotiate with its content partners, the bundle might be ready to launch next year.

Apple News+ displayed on a laptop, an iPad, and an iPhone

Image source: Apple.

A bundle could hurt publishers

Bloomberg reports that Apple is hoping to release a bundle of those three services in 2020. The Cupertino tech giant had made sure to include provisions in its contracts with magazine publishers that allow it to bundle News+, according to the report.

The economic model that Apple has set up for Apple News+ is somewhat risky for publishers. Apple keeps a full half of all revenue, with publishers divvying up the remaining half proportionately based on engagement with their content. Many prominent publishers chose not to participate in Apple News+ due to the economics, particularly large outlets that have been nurturing direct subscription relationships with customers.

Apple TV+ interface displayed on a TV

Image source: Apple.

Considering the inherent discount associated with bundling, publishers could see their cut decline incrementally, even as some publishers told the outlet that they were receiving less revenue from Apple News+ than they were from Texture, the spiritual predecessor to Apple News+ that Apple acquired in early 2018. Apple finally shut down Texture roughly six months ago. While the company pointed former Texture subscribers to Apple News+, there was no comparable alternative on Android.

Advertising revenue in Apple News+ is also unimpressive since Apple's strict stance on privacy limits ad targeting and relevance, and Apple shields contact information that could otherwise be used for marketing purposes.

Family sharing may also complicate matters. Both Apple News+ and Apple TV+ are only available in one tier that is able to be shared within a household, while subscribers need to pay more for an Apple Music family plan. Currently, signing up for all three services separately costs $30 per month (with an Apple Music family plan).

There's no mention in the report about whether or not Apple has made progress in talks with record labels.

The road to 500 million

Bundling services together is a time-tested distribution strategy, particularly in the media and entertainment sector. Chief music-streaming rival Spotify ran a promotion earlier this year that bundled the ad-supported tier of Hulu for no additional cost, for example. Disney also has a bundle composed of Hulu (which it controls), ESPN+, and Disney+ for $13 per month. AT&T plans to offer various bundles that will include its forthcoming HBO Max service. The list goes on.

Apple had 450 million paid subscriptions across its platforms at last count and expects to hit 500 million in early 2020. The company's rate of subscription growth has remained at a steady 30 million per quarter for the past two years. Releasing a bundle of services could very well accelerate that rate.

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