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Apple, Spotify see their video strategies stumble outside music

Despite the breadth of content available online, cracking into the content business isn’t easy. Look at Yahoo Screen, or Verizon’s Go90, or any of the other short-lived content platforms that’ve come and gone in the past five years. So it’s no surprise that Apple and Spotify are both struggling to find their video footing.

Spotify has just announced it’ll shut down its current video offerings amid a strategy revamp. It’ll be the third strategy revamp in just as many years, and most Spotify users aren’t even aware the platform had video offerings.

Apple, too, is struggling to bring its video strategy to fruition. As sales of iPhones and iPads have slowed, the company is looking to drive up revenue across its service business, which includes iTunes, Apple Music and its TV app. But surprisingly, Apple’s video strategy is in a worse position than Spotify’s relatively unknown content offerings, even if Apple has more money to throw at content, more Hollywood insiders to navigate the waters, and more customers tied to its ecosystem.

The question for these companies is what type of content do consumers want to watch on these platforms? Answering this question has proven difficult.
A lot of the confusion around Apple’s strategy stems from the company’s early failures. Apple’s first foray into content was a reality TV show about app developers, called Planet of the Apps. It wasn’t a hit. Apple’s second big foray into content was a digital version of Carpool Karaoke. While this may be seen as a modestly successful evolution of Apple’s video strategy, it too hasn’t developed into anything like a viral hit that Apple was probably hoping it would become.

Despite these failures, Apple has pivoted its strategy to the higher stakes world of producing TV-like shows, an indication Apple CEO Tim Cook is hoping to follow Amazon’s path to original content success. Like Amazon, Apple’s iTunes sells tons of movies and TV shows that viewers watch on iPads, iPhones and Apple TVs. But the untold story around Apple’s video content business is that digital video rentals are on the decline and subscription streaming services are on the rise, according to data from a 2017 PricewaterhouseCoopers report, and Apple has rapidly lost market share in the transactional video business over the past few years. Apple commanded 50% of the transactional video business in 2012, but is now down to somewhere between 20% to 35%.

The tragedy is that Apple has seen examples of exclusive and original content that have performed brilliantly on its music platform. The main example is its annual Apple Music Festival, which viewers could stream live on their Apple TV-equipped TV sets or other Apple devices. After 10 years of production, Apple canceled the festival this year in light of its new content strategy. Another example of Apple’s potential content chops: Beyonce’s latest visual album, Lemonade – offering a mix of narrative storytelling and music videos – sold 828,773 copies on iTunes in three days, setting a new record. Prior to that, her first visual album released in 2013, self-named Beyonce, and which also included 18 videos, sold a record-setting 617,000 copies in three days.
These are stunning examples of new forms of storytelling that are resonating very well with listeners-turned-viewers on Apple’s music platform. Apple has developed such close relationships with other mainstream pop stars, it’s surprising the company isn’t trying to partner with musicians directly for creating original content a la Lemonade or its music festival.

Spotify’s past initiatives have taught it to keep its video content within musical parameters. After a failed partnership initiative with the likes of Viacom’s MTV, VH1 and Comedy Central in 2015, the company has stuck closer to its music roots. It created a number of shows based on popular playlists such as Rap Caviar, for example, and a Carpool Karaoke-inspired show, called Traffic Jams, in which two rappers write a song while stuck in traffic.

But things may be looking up for Spotify. After a series of failed starts, Spotify was able to lure digital content veteran Courtney Holt to head up its video initiative. Holt, who joined Disney through its acquisition of Maker Studios in 2014, is well known for his ability to create demand in the YouTube world of unlimited video supply. He is Spotify’s best hope to pull its content strategy out of the mud. Holt is reportedly working on developing a new content format, named Spotlight, that promises to merge audio and images and video. While it’s hard to imagine what the new format will look like, it probably won’t be any worse than Planet of the Apps, and may even prove more engaging for music fans than Traffic Jams.

Meanwhile, there are plenty of indications Apple is taking a route destined for failure, despite its high profile Hollywood hires. Apple may have reigned during the peak of transactional VoD, but those days are ending, and Apple’s new strategy of original content is about three years too late. Apple’s latest pricey projects aren’t scheduled for release until sometime in 2019, giving competitors Netflix, Amazon and even Facebook plenty of time to develop more eyeball-catching content.

And though it should have a ton of viewership data, Apple seems to be more interested in offering shows with broad appeal, like the kind that appear on network television, rather than niche programming that rules the world of OTT. That puts Apple’s strategy at odds with conventional wisdom about content and digital platforms. It’s unlikely the company will succeed in this endeavor. At this rate, Apple’s video strategy will be about as successful as Samsung’s long forgotten Milk music service.

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