Despite the launch of the iPhone 11 range, new iPads, and other hardware, Apple is increasingly embracing services to attract customers. One of the latest ventures in this area is Apple TV+, and Goldman Sachs — the company backing the Apple Card credit card — has warned that the streaming video service could negatively impact on Apple’s profits.
Apple, however, disputes this. The company dismisses Goldman Sachs’ analysis, marking an interesting twist in the relationship between Apple and its client.
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Rod Hall, an analyst from Goldman Sachs, was critical of Apple in a research note. He said that Apple TV+ was likely to have a “material negative impact” on the company’s results. He was critical of Apple’s accounting methods, and warned of lower gross margins and profits, as well as impacting on average selling prices and earnings per share.
Reuters reports that “at the beginning of its fiscal year, Apple changed where it accounts for the value and costs of free services – like Apple Maps – and moved it into its services segment”, and says:
In his note, Goldman’s Hall said Apple was likely to treat TV+ subscriptions in a similar way, by accounting for it as a discounted bundle of a free service paired with a hardware purchase. Hall said that would result in Apple investors seeing lower average selling prices for iPhones and other Apple devices but faster growth in the company’s services segment.
Apple has responded, saying to Reuters:
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.
As noted by Reuters, the dispute between Apple and Goldman Sachs is a rare public disagreement between two companies that are working together.