Apple Inc. increased prices for its music and TV+ services for the first time, citing rising licensing costs, a move that risks giving rivals an edge in a fiercely competitive streaming industry.
The company increased the price of Apple Music to $10.99 a month from $9.99 for individuals, effective immediately, making it more expensive than services from Spotify Technology SA and Amazon.com Inc. Spotify surged as much as 9.4% to $97.07 in response to the news, its biggest intraday rally in almost three months.
With its video plan, TV+, Apple will continue to offer a lower price than companies like Netflix Inc. or Warner Bros. Discovery Inc., but that service has been slow to build as big a following as rival platforms. The price of Apple TV+ will climb to $6.99 from $4.99, and the standard Apple One bundle increases $2 to $16.95.
Apple’s push into streaming in recent years is part of a broader effort to generate more revenue from services. That category now generates nearly a quarter of the company’s sales — almost $20 billion in the June quarter — up from less than 10% in 2015. Apple is set to give its latest quarterly results this week.
The company said in a statement that the music price hike was due to “an increase in licensing costs” and that artists and songwriters will now earn more money. That came as good news for investors in Warner Music Group Corp., a top recording company, which sent the shares up as much as 15% on Monday.
Apple is also hiking its annual music plan to $109 from $99 and its TV+ yearly subscription to $69 from $49. Apple One bundles for families are going to $22.95 from $19.95, while the Premier package, which adds News+, Fitness+ and additional storage on top of Arcade, Music and TV+, is climbing $3 to $32.95.
Apple shares rose less than 1% to $148.56 on Monday. Though the stock is down 16% this year, that’s less of a rout than the broader indexes have suffered. The S&P 500 Index has fallen more than 20%.
In explaining the TV+ increase, Apple said that service was introduced “at a very low price” because it started with just a few shows and movies. It’s now “home to an extensive selection of award-winning and broadly acclaimed series, feature films, documentaries, and kids and family entertainment from the world’s most creative storytellers,” Apple said.
Still, the service’s viewership hasn’t matched that of other big streaming platforms. While Apple TV+ has had a run of critically acclaimed hits, including Oscar winner Coda and series such as Severance and Ted Lasso, it remains an also-ran in the hotly competitive streaming video space. Nielsen’s most recent report showed Americans spent more time watching at least five other paid services, plus ad-supported video from YouTube and Pluto TV.
Apple has increasingly relied on services to augment hardware sales in an environment where device upgrades have become pricier and less frequent. The Cupertino, California-based company has sped up the release of new digital offerings in recent years, including a credit card and, more recently, savings accounts.
Apple on Monday also released the first version of iPadOS 16 with Stage Manager multitasking software, as well as the macOS Ventura update for Mac desktops and laptops. It also rolled out iOS 16.1 with shared iCloud photo libraries and new features for smart homes.
The company isn’t alone in boosting streaming prices. The cost of Walt Disney Co.’s flagship Disney+ service will rise 38% to $11 later this year. The company is introducing a new ad-supported tier then that will be priced the same as its earlier offering at $8 a month. That follows a 43% price increase, to $10 a month, for its ESPN+ streaming service in August. Netflix, which raised prices earlier in the year, is also introducing an ad-supported plan, although — at $7-a-month — it will be cheaper than its existing offerings.