Business Corpus: Apple Video Service Could Hit 100 Million Subscribers In 5 Years: ReportApple is set to unveil its long-awaited streaming video service on March 25. The Apple video service could hit 100 million subscribers within five years, a Wall Street analyst said Tuesday. The post Apple Video Service Could Hit 100 Million Subscribers In 5 Years: Report appeared first on Investor's Business Daily.

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Apple (AAPL) is expected to unveil its long-awaited streaming video service at a media event on March 25, joining an increasingly crowded market. The Apple video service could realistically reach 100 million subscribers within five years, a Wall Street analyst said Tuesday.

Apple announced its upcoming product launch event late Monday. It will take place at its corporate headquarters in Cupertino, Calif. Apple didn't specify what it will announce at the event, but analysts widely expect it to debut a streaming video service as well as a subscription news service.

Wedbush Securities analyst Daniel Ives said Apple is late to the streaming video market. It will have to ramp up its spending on content to compete with the likes of Netflix (NFLX), Amazon.com (AMZN) and Hulu, he said.

He estimates that Apple is spending $1 billion on original video content this year, an amount dwarfed by its rivals.

Apple Video Service Playing Catch-Up

"The company is definitely playing from behind the eight ball in this content arms race with Netflix, Amazon, Disney (DIS), Hulu, and AT&T (T)/Time Warner all going after this next consumer frontier investing significantly more dollars ($20 billion combined and counting per annum) on content," Ives said in a note to clients.

To compete, Apple might need to buy a movie studio, Ives said. Possible targets include A24, Lionsgate (LGFA), Sony Corp.'s (SNE) Sony Pictures, CBS (CBS) and Viacom (VIAB).

"While acquisitions have not been in Apple's core DNA, the clock has struck midnight for Cupertino in our opinion and building content organically is a slow and arduous path, which highlights the clear need for Apple to do larger, strategic M&A," Ives said.

Mix Of Original Content, Third-Party Services

The Apple video service is likely to include a mix of original content and a platform for selling third-party streaming services, Ives said. Apple would take a 30% cut of monthly subscriptions sold through its service, according to media reports.

It's a "realistic medium-term goal" for the Apple video service to reach 100 million subscribers, Ives believes. Apple could hit that milestone in three to five years, assuming that it ramps up its content spending and experiences minimal speed bumps, he said. That would translate to an annual revenue stream of $7 billion to $10 billion, he said.

Ives reiterated his outperform rating on Apple stock with a 12-month price target of 200.

Apple stock rose 1.1% to 180.91 on the stock market today. On Monday, Apple surged 3.5% after Bank of America upgraded the stock to buy from neutral. The bank upped its 12-month price target to 210 from 180.

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The post Apple Video Service Could Hit 100 Million Subscribers In 5 Years: Report appeared first on Investor's Business Daily.