Apple is too dependent on Google for its services revenue, according to analysts at Goldman Sachs. Apple’s services revenue in the first quarter of 2019 (October to December 2018) was up nearly 19 per cent and stood at $10.8 billion compared to the $9.1 billion in the same quarter a year back.
However as the Goldman Sachs report claims, a majority of the revenue for Apple’s services is coming from Google, which pays the company a high amount in order to remain as the default search engine on Safari.
According to the report on CNBC, which quotes from analysts at Goldmnan Sachs, “more than 20 percent” of Apple’s Services revenue comes from Google. The firm has said that Apple might need a ‘Prime’ bundle for its services in order to boost revenues.
The note said, “Apple will need to add mid to high single digits growth back to Services revenues through successful launch of the ‘Apple Prime’ bundle including original video that we expect to be rolled out this Spring/Summer.”
Google pays Apple in order to remain the default research engine on Safari. Last year, Goldman Sachs had said in a note to investors that the company was paying nearly $9 billion to Apple, which is expected to rise to $12 billion this year in 2019.
The CNBC report says Apple is expected to get $9.5 billion from Google in what are traffic acquisition costs and these are third of Apple’s profit in the services segment.
Apple and Google have never officially revealed the details of the revenue arrangement. In 2014, this number stood at $1 billion, which was only confirmed because of court documents.
The report comes even as Apple is getting ready for a subscription based news service and a digital video streaming service.
A report on Bloomberg has said that Apple will reveal the video and news subscription offerings service next month on March 25, and plans to invite Hollywood celebrities like Jennifer Aniston, Reese Witherspoon, Jennifer Garner and director JJ Abrams to the event.
The paid service is expected to launch by summer of 2019, and will be a rival to Amazon’s Prime Video and Netflix. Apple will have original content on the subscription service as well. Apple will also launch a paid subscription service offered in its Apple News app.