Its $1 billion investment in original programming will make it a key player in video-streaming.
Apple is generally regarded as the creator of some of the coolest products in tech. In the recent past, however, it has increasingly been drawn to the world of entertainment. Silicon Valley is abuzz with the news of Apple earmarking $1 billion for the development of original video content. It’s also believed to have held conversations with A-list talent in Hollywood. CEO Tim Cook hinted at big media acquisitions during Apple’s Q1 earnings call in January. Apple has hired top television executives from Sony Pictures to lead its video efforts. Surely a lot’s brewing.
What does the iPhone-maker’s rising affinity towards original content mean for itself, its customers, its competitors, and the entertainment world in general? We’ll find out, but before that, let’s take stock of where Apple stands now.
Sub-par offerings
Apple’s existing efforts in original programming have been rather uninspiring. Both its shows, Carpool Karaoke and Planet of the Apps, have been called “lame”, “embarrassing” and “low-key” by the Western press. While Apple wanted to create a globally buzzing, Netflix-style drama like House of Cards or Stranger Things, what it delivered were duds. Planet of the Apps is largely juvenile and slightly wannabe too, though a lot of aspiring tech entrepreneurs might see value in it. And Carpool Karaoke is an overstretched late-night skit that barely qualifies as a full-fledged television show. Nothing that Apple has produced so far is even a blip on the Netflix universe.
Limited reach
Apple’s original shows are streamed on Apple Music. Going by the name, it should be streaming only music. But because Apple has struggled to launch its own video-streaming service for a while, Apple Music doubles up as its video platform. It reaches 27 million subscribers. In contrast, Netflix has 100 million, and has now surpassed cable TV in quarterly subscriber additions. Amazon Prime Video, which also has Prime Music for an additional fee, has about 66 million subscribers. So, clearly Apple is a long way off. It has been unable to ramp up Apple Music’s user-base mostly because the content on offer lacks imagination and originality.
‘Services’ is not core
Apple’s core business is products — iPhones, iPads, iPods, Macs, Apple TVs. Apple Services (that include iTunes, App Store, and Apple Music) is a non-core business. Prior to the Netflix era, people would rent and download movies from iTunes at will. Naturally, that revenue has fallen as the world has moved towards high-quality streaming services. It is only now that Apple is boosting its Services offering with significant investments. Yet, Apple is not the leader. Netflix, Amazon Prime, and even Hulu (with its marquee show The Handmaid’s Tale) are ahead in terms of reckoning.
That doesn’t mean that Apple’s $1 billion is ill-timed or misplaced. Apple has both the cash-pile and the intent to claim a size-able share of the video-streaming pie. Better late than never.
The $$$ could change things
Apple is acutely aware that its existing original content is not up to the mark. It’s not what ‘willing-to-pay-for-premium-content’ consumers want. It has been said that Apple’s approach to programming has been “disorganized” so far. But now, with a streamlined investment, Apple will not only handpick talent, studios and collaborators, it will also beef up its production quality. The capital allows Apple to not only produce its own content but also acquire small and big titles from established studios — a strategy that has worked well for Prime Video and Netflix.
There are tons of people eager to work with Apple and create content for its platform. With dedicated investments, Apple can pull the best talent in the world, and wouldn’t have to produce unscripted, watered down versions of other shows. (Well, Planet of the Apps is the poor man’s Shark Tank.) As the number of quality shows on Apple Music go up, it will draw newer subscriber, thus giving the streaming service a much-needed reboot. If any of Apple’s new shows become a global phenomenon like a Game of Thrones or a House of Cards, new subscribers and even content creators are bound to come by the hordes.
While Apple Music is available on Android, it is not clear whether all of the soon-to-be-created original content would be platform-agnostic. Apple could reserve some for iOS users only. In that case, the slate of original programming will help push product sales too. It wouldn’t be much of a stretch to imagine people lining up to buy Apple TVs just to be able to access Apple’s newest content offering. That’s a win-win situation for both business divisions at Apple.
Does competition need to worry?
Both yes and no. On the surface, Apple is just about getting into the content game. Netflix is already a global giant. Prime Video is well-established too. Every major market in the world has its own homegrown video-streaming services. India has Hotstar, Jio, Voot, Eros Now (which incidentally was pitching for a sale to Apple) and more. Hence, warding off competition is no child’s play.
But Apple being Apple doesn’t take long to take over the market, set trends and have swooning fanboys at its doorstep. At present, Apple earns 15 percent of every Netflix, Prime Video, Hulu subscription on the App Store. In future, once Apple’s content in well-regarded, it could well de-list competitor streaming apps from its ecosystem. This is pure conjecture for now but not without a precedent. Disney announced most recently that it would be pulling out all its content from Netflix by 2019 in order to fuel its own soon-to-be-launched streaming service. And Netflix stock tumbled 5 percent soon after the announcement. If Apple goes on to acquire Disney or CBS or Time Warner or HBO — all of which it can and has been advised to in the past— it would be catastrophic for its competitors.
Plus, Facebook is getting into original content creation too. We’re in for interesting times!