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March 28, 2019, 10:46 a.m. EDT

Bad news for Apple: People may be reaching their limit on streaming services

Apple wants viewers for its new media service. Are they ready — or have they reached a financial tipping point?

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By Andrew Keshner


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Consumers already spend about $15 to $30 on their monthly video-streaming subscriptions, but experts say they’re only willing to spend $45 to $50 per month.

Apple better hope there aren’t too many people like Ken Johnson, who’s hopped out of the video streaming pool and doesn’t miss it a bit.

The Milwaukee, Wisc.-area married father of two was soaking in subscriptions for years. But then he did the math, smarting from a one-two punch in higher rates from Hulu and Netflix /zigman2/quotes/202353025/composite NFLX -3.40%  earlier this year.

The finance professional realized he could save $30 monthly by opting for cable, dropping his Hulu account, letting his Amazon Prime /zigman2/quotes/210331248/composite AMZN -2.14%  account expire and putting an eventual bulls eye on his Netflix account. His HBO account /zigman2/quotes/203165245/composite T 0.00%  will also meet its maker after the final “Game of Thrones” season, he said.

“They basically invented a more expensive cable without the benefits of monopolistic power to spread out that cost,” Johnson, 36, said of all the many streaming services, with smaller individual bills that packed a wallop to the wallet when put together.

‘Once you get beyond three services, you’re kind of maxing out.’

—Emily Groch, director of insight, telecommunications at Mintel Comperemedia

“I think it’s too much and it’s getting too expensive,” he said.

After Apple’s star-studded streaming announcement, experts told MarketWatch that consumers still have the mental bandwidth and budget for some more content — but say that legacy cable and media companies shouldn’t push their luck.

Consumers already spend about $15 to $30 on their monthly video-streaming subscriptions, but studies suggest they’re only willing to spend $45 to $50 per month, said Daniel Ives, managing director, equity research at Wedbush Securities.

“Once you get beyond three services, you’re kind of maxing out,” Emily Groch, director of insight, telecommunications at Mintel Comperemedia, a market research firm. Most people spend $85 to $100 on their monthly cable bill, research suggest.

Apple /zigman2/quotes/202934861/composite AAPL -2.97%  hopes it can be one of those three — even though Netflix, Amazon Prime, Hulu, Sling TV, Roku /zigman2/quotes/205087179/composite ROKU -2.66%  and FuboTV. AT&T and Disney /zigman2/quotes/203410047/composite DIS +1.32%  also plan to wade into streaming game.

That’s not an exhaustive list of subscriptions, yet it shows how quickly consumers can get exhausted by everything out there in the massive market. “It’s really going to take something groundbreaking to tip beyond the three-service threshold we’re at now,” Groch said.

Consumers spend about $15 to $30 on monthly video-streaming, but studies suggest they’re only willing to spend $45 to $50 per month.

—Daniel Ives, managing director, equity research at Wedbush Securities

More than half (53%) of consumers said they were satisfied with their existing video content, according to a 2018 survey by Mintel Comperemedia. The 2,000 respondents had two to three services, and the median monthly bill was $25, Groch said.

Only 13% of those polled said they’d get another service if they could; one-quarter said they’d need to eliminate one streaming service if they were to subscribe to a new one, she said.

Others say there’s room for growth. Global subscriptions to online video services, like Netflix and Amazon Prime, surpassed cable television accounts for the first time in 2018, with 613 million subscribers compared to 556 million cable watchers, the Motion Picture Association of America said recently.

They could have up to 100 million users in three to five years, Ives said. “We believe there’s a clear opportunity for Apple to go after this market and monetize it,” he said. Apple has said there are approximately 900 million active iPhones in use worldwide.

(Apple did not immediately respond to a request for comment.)

‘No one has really cracked the nut of making the wealth of streaming content option less overwhelming.’

—Emily Groch

Oprah Winfrey made the same point speaking at Apple’s reveal Monday: “They’re in a billion pockets, y’all, ” she told the Cupertino, Calif. audience.

Apple’s announcement didn’t release the monthly fee, which left some analysts cool.

On Monday, Apple said it was also getting into game streaming, a news bundling subscription offer and an Apple Card, but the streaming service had the Hollywood star power, including Winfrey, Jennifer Aniston, Reese Witherspoon and Steve Carrell.

For all the advances and choices, Groch said there’s something that’s eluded all the players in the streaming game: a simple user experience. “No one has really cracked the nut of making the wealth of streaming content option less overwhelming,” she said.

Back in Wisconsin, Johnson’s taken it upon himself to keep things simple. He’ll plan to get the Disney service for his kids, but isn’t interested in what Apple’s doing. He started streaming Netflix 10 years ago when it was a free add-on to this DVD service. “In the next couple of years, people are going to be, like, ‘I’m really not saving money.’”

Apple’s stock is up almost 19% year to date. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.80%  is up about 12% over the same period and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.38% is up almost 10%.

Are you a young family thinking about budgeting, investing, saving for retirement or buying a home? We’d be eager to talk to you as part of a personal finance project we’re working on. E-mail raakhee.mirchandani@dowjones.com to learn more.

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Andrew Keshner is a personal finance reporter based in New York.

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