The company also revealed positive metrics for its growing services business that includes its Apple News content aggregator.
On Jan. 2, CEO Tim Cook had braced investors for bad news in a letter that warned of lower sales in China and lopped off 9% of the company’s value in a day. As Apple managed to eke out results that leapt over Wall Street’s lowered hurdle, the stock erased those losses and recaptured a six-week high of about $163.
Cook also said Apple News reached a record of 85 million monthly active users, a 21% gain since the company last revealed readership of 70 million in November 2016. The service is available in the United States, the United Kingdom and Australia, even though Apple now has 1.4 billion active devices worldwide.
“In the U.S., the latest data from Comscore shows Apple News has the largest audience of all news apps,” Cook said in a conference call with investors. “The international audience will continue to grow with our first-ever bilingual launch in Canada available to customers later this quarter.”
Cook had promised to reveal more details about its services business after the company abruptly announced a decision to stop reporting unit sales for the iPhone, iPad and Mac. It was one of the first signs its hardware business was ailing, and that it wanted to shift focus to its “services” business.
That segment includes the App Store, Apple Pay payments, Apple Music streaming and iCloud storage. Its sales grew 19% to $10.9 billion in the most recent quarter, including revenue from Apple Music’s 50 million paid subscribers and fees from 1.8 billion Apple Pay transactions.
Still, that doesn’t make up for the 15% slump in iPhone sales to about $52 billion.
It remains to be seen how Apple will monetize Apple News, but there are indications the company plans to roll out a service called Apple News Magazines.
The tech giant this week provided a glimpse of the service with the first test version of iOS 12.2, the mobile operating system that runs iPhones and iPads. The company typically provides test versions of iOS to app designers to help them prep for major updates.
The iOS update mentions of a “bundle subscription” several times, possibly indicating the tech giant is planning a service that combines music, magazines and TV shows. The subscription bundle may confirm earlier reports that the company seeks to create a "Netflix of magazines" that urges subscribers to pay a flat monthly fee for access to hundreds of digital publications.
Also unknown is how Apple News is going to share subscription revenue with publishers. In 2016, Apple News set up a similar fee structure to its App Store, which takes a 30% cut of app purchases and a 15% commission on renewals after the first year.
Apple, which touts its privacy protections, also controls payments to the App Store and collects subscriber data, including address and payment information. The Financial Times has twice balked at Apple’s data-sharing policies, and still isn’t available on Apple News.
Instead, the financial newspaper in 2017 created a new mobile app for Apple devices in the United States and the United Kingdom, and devised a way to get around the App Store’s fee structure. The FT made new readers pay for a subscription on its website, then use their login information to access the app.
Ideally, Apple News will make its paid subscription bundle more seamless for readers while obtaining their informed consent to provide personal information to publishers. Publishers rely on reader data to support ad sales and list-marketing efforts, two businesses that privacy-focused Apple has yet to encourage.
But as the company tries to develop a services business to supplant declining iPhone sales, Apple will have to develop a strategy for Apple News that respects user privacy, while also meeting the needs of publishers.