Cho Research

About the Author Cho Research

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

This Undexpected Apple (AAPL) Announcement Justifies the Potential of Services Revenue


Earlier this week, Apple (AAPL) made a big, and unexpected service product announcement called Apple News+. Now, on the surface, this new service has virtually no competition, but it provides a much needed and rich content experience, for those who like to read (people like me). If reading magazines matters to you then it’s going to be one of the most comprehensive products for readers ever created in a format that could have mass market appeal.

The Apple News+ bundle is what might turnaround the sluggish performance of the iPad business unit, but I’ll get to that in just a second. The bigger opportunity is captured by the fact that paid for news subscriptions or magazines are so difficult to access. Plus, finding the magazines you want to read has become so easy in comparison to browsing the endless magazine titles you will find at a Barnes and Noble store.

The fact is, the retail positioning of magazines has made it difficult to discover, and find unique sources of content that would appeal to you, because you either have to dig through the magazine aisle to find the unique stories or articles you would want to read, or you would have to pay for a lot of different magazine subscriptions to get access to the content you actually want to read. However, the transition of print magazines to a paid for subscription model that’s awfully similar to the Netflix subscription model could be the most disruptive or original idea Apple announced at its March 25th, 2019 Special Event.

However, not everyone can afford to buy magazines at the conventional retail rate. So, what’s most unique about the service is the content bundle, which gives consumers access to 300 different magazines (most of which are very recognizable), and with the addition of some premium-tier news services like the Wall Street Journal and also the Los Angeles Times.

This would cost in total $8,000 per year, or $600/month to gain access to all the individual magazines/news separately. But, what most surprising was the relative affordability of Apple News+ in comparison to the way magazines are marketed and sold today.

Yes, for just the low price of $9.99/month you can gain access to virtually any magazine you would ever want to read, and this is critical. Because, this price point has become the model by which Netflix could scale past 100M subscribers, and it’s what many would consider affordable at large scale. This ties into the networking model of television subscription packages, where you pay for a lot of different TV channels but watch a few channels. However, it doesn’t cost nowhere near as much as a TV bundle, and it’s specific to a content medium that many would want access to, but only if it were made affordable.

More importantly though, it has interesting implications for the magazine publishing industry, which has gone cold or flat in terms of industry aggregated revenue. Magazine publishing revenue hovers at around $30 Billion annually as of 2018, and it has remained flat since 2012 according to PricewaterhouseCoopers. The industry hasn’t transitioned to digital yet, but the launch of Apple News+ it will likely be very similar to the launch of music streaming services for music, or the launch of show streaming services for TV bundles. It’s an untapped category, and one that’s large enough with enough buyers to really move the needle for Apple’s Service business, which has become Apple’s biggest growth category and what analysts and shareholders have become more dependent upon to drive the growth story going forward.

What’s more interesting though is the potential for it become the “killer app” for iPad devices, which were recently updated with A12 chips on March 18th for both the iPad Mini and iPad Air. These two devices are great for media consumption, and when paired with Apple News+ the two tablets finally have a differentiated reading experience that’s similar to Amazon’s Kindle Unlimited subscription that goes with Kindle Devices.

More importantly though, it helps justifies the purchase of an iPad where the added screen size paired with the unique packaging of Apple News+ leads to a very desirable reading experience. Keep in mind, iPad shipments have trended lower over the past several years with iPad revenue remaining mostly flat at $20B to $18B/year (mostly because of higher device pricing despite the lower shipment figures).  This is a key revenue category for Apple, and with the addition of Apple News+ it helps keep the platform relevant in the minds of consumers.

The one downside with Apple News+ is that it won’t be available on non-Apple platforms, so it’s subscriber growth figures is dependent on Apple’s hardware installed base. This helps create Apple’s moated garden against competing tech giants Microsoft and Alphabet, but with great services tied to Apple products, it will lead to more hardware sales, and keep customers wedded to one Apple product or another.

 

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