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Business

Apple rolls out streaming service for $5 a month

CUPERTINO, Calif. – Apple is finally taking on Netflix with its own streaming TV service and, uncharacteristically for the company, offering it at a bargain price – $5 a month beginning on Nov. 1.

Walt Disney Co. is launching its own assault on Netflix the same month, for just $7 a month.

It may be sheer coincidence that the cost of both Apple and Disney subscriptions will be a dollar less than Netflix’s main plan, priced at $12.99 a month. But the companies’ intent to disrupt Netflix’s huge lead in the streaming business couldn’t be clearer.

Apple delivered the news Tuesday while also unveiling three new iPhones that won’t look much different than last year’s model other than boasting an additional camera for taking pictures from extra-wide angles.

Hoping to propel its streaming service to a fast start while also boosting iPhone sales, Apple will give a year of free access to its original shows and films to anyone who buys an iPhone, iPad, iPod Touch or Mac.

The aggressive pricing is unusual for Apple, which typically charges a premium for products and services to burnish its brand. Most analysts expected Apple to charge $8 to $10 per month for the service, which will be called Apple TV Plus.

But Apple is coming into a market that Netflix practically created in 2007 – around the same time as the first iPhone came out – and now has more than 150 million subscribers, so it needed to do something extraordinary to make a big splash.

“It’s Apple. They’re going to be competitive, so you have to expect they’re going to do something, considering how hyper competitive the streaming video space is,” said Tim Hanlon, CEO of Vertere Group.

Apple CEO Tim Cook did not have much new to say about the TV service beyond its pricing and service date, although he did show a trailer for a new Jason Momoa-led series called “See.”

Like Netflix and similar services from Amazon and Hulu, Apple has been spending billions of dollars for original programs featuring stars such as Oprah Winfrey, Jennifer Aniston and Reese Witherspoon. The service will launch with nine original shows and films, with more expected each month. It will only carry Apple’s original programming, and will be available in 100 countries at launch.

Apple also announced a new video game subscription service that will cost $5 a month when it rolls out Sept. 19. Called Apple Arcade, the service will allow subscribers to play more than 100 games selected by Apple and exclusive to the service.

Disney Co., one of the most hallowed brands in entertainment, is also muscling its way into the market with a streaming service featuring its treasured vault of films and original programming.

That means both Apple and Disney will be undercutting the industry leaders. Besides Netflix, there is Amazon at $9 a month and Hulu at $8 a month.

The price war is unfolding as Netflix tries to bounce back from a rough spring in which it suffered its first quarterly drop in U.S. subscribers since 2011. Apple’s pricing tactics caught investors’ attention. Netflix’s stock fell 2% on Tuesday.

Apple is the latest entry to the crowded video subscription market, with each new service stretching the limits of just how many monthly plans people are willing to pay for.

The Apple streaming service will, at least for now, offer fewer viewing options than Netflix or Disney but also a significantly lower price.

Apple’s pricing shows it is serious in a field dominated by Netflix and in which Disney will likely also be a strong contender, said Colin Gillis, director of research at Chatham Road Partners.

“Apple is going to take most likely a loss on this as it plays catch-up,” he said.

The new iPhones were largely unchanged from previous models and were accompanied by an unexpected price cut for the cheapest model, which underscored the company’s efforts to counteract the deepest slump in sales for its flagship product in the 12 years since the phone was unveiled.

IPhone shipments are down 25% so far this year, according to the research firm IDC, putting more pressure on Apple to generate revenue from services such as music, video streaming, games and its App Store. Revenue from services rose 14% to nearly $23 billion during the first half of this year.

Apple is cutting the price of the iPhone 11 to $700 from $750, the price of last year’s XR. The lower prices reverses a trend in which premium phones get more expensive as people upgrade them less often.

The new phone models resemble last year’s iPhone XR, XS and XS Max. And they have the same design – with more display space, less bezel and no home button – that Apple switched to with the iPhone X in 2017.

Unlike some of the other devices coming out this year, the new iPhones won’t support upcoming ultrafast cellular networks known as 5G. Apple paid billions of dollars to settle a royalty dispute with chipmaker Qualcomm in April to gain the technology it needs for 5G iPhones, but those models will not be ready until next year.

Besides iPhones, Apple also showed off new versions of its internet-connected watch and iPads.

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AP Technology writers Mae Anderson in New York and Barbara Ortutay in San Francisco contributed to this story.

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