Apple has often seemed allergic to spending money, despite sitting on a cash mountain, but it may be overcoming that allergy in its quest to kickstart new growth. This week the Wall Street Journal quoted insiders who said the firm’s budget for original content for next year is $1bn, as it joins the race alongside Netflix, Amazon and several telcos.
That move was presaged by the appointment in June of two former presidents of Sony Pictures Television (SPT).
According to analysts at Wireless Watch’s sister service, Faultline Online Reporter, Apple has always wanted to do something radical in video content, but has always scared off the Hollywood studios, which have never cut extensive deals with the vendor for fear of cannibalizing their own business models. Netflix scared them less, but look where they are now – perhaps ready to take Apple’s dollars with fewer reservations. But Apple looks ready to pay for its own content instead.
Unless it makes a dramatic divergence from its normal strategy, Apple will want Apple content to play only on Apple devices, which will limit it in the end. It has managed to make software in its App Store exclusive to its devices, and music in iTunes mostly for iOS too (and of course PCs). So when the entire entertainment industry becomes the fodder to tempt people onto networks or devices Apple needs to be there – and so does Google. If Apple invests its $1bn wisely, and then perhaps adds another $2bn the following year, it is likely to drag Google into the war sooner rather than later.
Faultine Online Reporter believes, however, that it will take 4-5 long years for Apple to develop a really strong offering, by which time Netflix will be out of reach. A move into original content was something Apple should have considered before the Internet industry started bandying around the term ‘original content’ five or six years ago.
Netflix has already achieved disproportionate revenue growth for the $6bn it is now spending on original content each year, and given that it has $16bn promised to content providers in the future, even Apple is going to take a while to build an organization which can compete. The other global player, Amazon Prime Video, plans to spend $4.5bn in 2017, and accelerate thereafter.
Apple needs to take some tips from HBO, a great example of an organization which spends wisely – it spent just a couple of $1bn on original content last year, and boasts the Game of Thrones, one of the most followed (and pirated) series of all time.
Apple’s first attempts at original content were very much in the area of specialist offerings which were particularly suited to mobile phone viewing, such as ‘Carpool Karaoke’, and ‘Planet of the Apps,’ which debuted on Apple Music. That could point to the launch of a mobile-first video service like Verizon’s Go90 (although that has had only limited success). It can also continue to use Apple Music as a Trojan Horse, harnessing it to lever fans slowly towards video. If it sticks with specialist content, it should be able to add another 10 shows to its roster inside a year with that kind of money – but that would still not be enough to make a service to worry Netflix.
All the same, the idea of Apple competing with ‘Game of Thrones’ at the first attempt is far less likely.