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Sep 13, 2019

Apple says TV+ service won't harm results, refuting Goldman

Apple’s next step: Buy a major Hollywood studio to build out streaming service

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Apple Inc. said a new video service won’t have a material impact on its financial results, seeking to counter research from a Goldman Sachs analyst who cut his share price target on concern that aggressive pricing of the TV+ offering will trim profit.

Earlier this week, Apple outlined a strategy that involved lower prices on several devices and services, including a monthly cost of US$4.99 ($5.99 in Canada) for TV+. It will also be free for one year with purchases of new Apple devices. This is relatively rare for a company that has historically charged premium prices to support healthy profit margins.

Rod Hall, the Goldman Sachs analyst who covers Apple, cut his price target on Apple shares to US$165 from US$187, saying the company’s plan to offer a trial period for TV+ was “likely to have a material negative impact” on average selling prices and earnings per share.

“We do not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results,” Apple said in an email.

The stock jumped after the statement, trimming losses from earlier in the day. It traded down 1.8 per cent at US$219 at 2:56 p.m. in New York.

The TV+ service is entering a crowded video-streaming field that already includes Netflix Inc., Amazon.com Inc., Hulu and AT&T Inc.’s HBO. In November, Walt Disney Co. plans to launch a Disney+ streaming service, with a giant catalog of titles, for US$6.99 a month. Netflix’s entry-level subscription is US$8.99 a month in the U.S.

Apple, which doesn’t currently have a back catalog of content for TV+, announced the US$4.99-a-month pricing on Tuesday, sparking a rally in its shares and declines in Netflix and Disney stock. In India, the TV+ service will be 99 rupees (US$1.40) a month.