Apple revamps services team to focus on lucrative streaming and advertising markets

Apple is restructuring its services business to further tap into high-revenue segments such as streaming and advertising, the latter of which is now “big enough to live on its own”, according to a media report.

The world's most valuable company has restructured the team to focus on the new strategy, which will be headed by Eddy Cue, senior vice president for services, Business Insider reported on Tuesday, citing sources.

Revenue generated by Apple's services division — which groups Apple Pay, iCloud, Apple Music, Apple TV+, Apple News, AppleCare, advertising and the App Store — surged by 17.3 per cent annually to $19.8 billion in the second quarter, the company said in its quarterly report last month. The revenue growth, a quarterly record for services, contributed about 20.4 per cent to Apple's overall sales, the company said. Apple does not break down revenue for streaming and advertising separately in its financial reports.

Apple's overall revenue in the three-month period through to the end of March grew 9 per cent annually to $97.3bn, another record for the quarter.

The video-streaming market — which, like other mobile-based entertainment segments, gained ground at the onset of the Covid-19 pandemic in 2020 — is expected to reach about $82.4bn in 2022 and grow at a compound annual rate of about 9 per cent to 2026, resulting in a market volume of about $116bn, according to Statista data.

Apple's focus on streaming and advertising comes after Netflix, the world's largest streaming service, reported in April that it had lost 200,000 customers in the first quarter of this year.

It also projected that it will shrink by another two million customers in the second quarter, Bloomberg reported.

Apple is a latecomer to the streaming market after launching its Apple TV+ platform in November 2019. However, as the world's most valuable company, it can potentially afford to be more creative with its content and possibly lure star celebrities into its fold to attract more subscribers and grow its market share in the sector.

Peter Stern, Apple's vice president of services, will shift away from advertising to focus on iCloud, Apple Fitness+, video, news, books and the all-in-one Apple One subscription service.

Todd Teresi, vice president for advertising and who has been reporting to Mr Cue since the start of 2022, will take on more responsibilities, according to the Business Insider report. Apple typically does not comment on rumours or speculation.

The company's movie portfolio gained a significant boost when the coming-of-age drama Coda, whose distribution rights were acquired by the iPhone maker for a record $25 million, won Best Picture at this year's Academy Awards, making it the first film from a streaming service to win the coveted Oscar.

Other hits on Apple TV+ include Ted Lasso, which has won a number of Emmy awards, and Severance, which has a second season lined up.

Apple is also banking on sports to boost its streaming portfolio. It recently struck a deal with Major League Baseball and, in March, announced that it had acquired the rights to air Friday Night Baseball games.

There has also been talk that Apple is in negotiations to secure the rights to the National Football League's Sunday Ticket programme.

Business Insider also reported that the company is interested in acquiring the rights to the National Basketball Association, which is now in the middle of the playoffs.

If a deal can be agreed on soon, that could potentially allow Apple to air the finals, which start early next month.