The relationship between Google and Apple is probably best described as “special,” because the former is known to pay the latter a sizable chunk of change to make sure that its services remain top of the tree on iPhones, iPads, and Macs. It’s a deal that has never been confirmed, but multiple sources have had a go at guessing the amount of money that changes hands. Now, it’s Goldman Sachs’ turn, with $9.5 billion the number it believes Google paid Apple during 2018.
If that number seems huge, it’s because it is. It’s so huge, in fact, that it accounts for around a fifth of Apple’s entire Services revenue, a corner of its business that it is starting to rely on more and more as iPhone sales start to stagnate.
Speaking of Services, the Goldman Sachs report also mentions the media subscription service that is on the way, with the name “Apple Prime” used.
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.
Goldman Sachs estimates Google paid Apple nearly $9.5 billion in traffic acquisition costs (TAC) during calendar year 2018, representing a third of Apple’s profit in the segment. The fees will continue to make up a large portion of Apple’s services revenue into 2019, the firm said, but will grow at slower rates.
Apple Music is already a popular contender for the music streaming space, and both news and magazine subscriptions are expected to debut next month. Then there’s the video streaming service that has been in the works for a long, long time. Add it all together, and the idea of an Apple Prime subscription makes plenty of sense, especially if you start to throw in things like iCloud storage, and such.
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