The iPhone powered Apple (AAPL - Free Report) into a $1 trillion behemoth, but its flagship product’s days of massive unit growth finally appear to be over. This is part of the reason why Apple has committed at least $1 billion on TV content as it prepares its push into streaming to boost revenues and take on Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and Disney (DIS - Free Report) .
Apple has for years known that it had to expand beyond the iPhone in order to drive not only its top and bottom lines but also investor confidence. The success of Apple Music has helped it take on Spotify (SPOT - Free Report) in the U.S. and expand its growing services business, which saw its revenues jump 17% to reach $9.981 billion last quarter. This, however, marked a significant slowdown from Q3’s 31% growth and the year-ago quarter’s 34% expansion.
Overall, Apple’s total quarterly revenues jumped 20% to reach $62.9 billion, which came in well above our Zacks Consensus Estimate that called for $61.49 billion. But the company announced that it will no longer break down iPhone unit growth, and the stock has suffered ever since. Therefore, its planned jump into the streaming TV world, which is projected at some point in 2019, couldn’t come at a better time.
What We Know So Far
Apple has been extremely quiet about its plans in terms of a launch date and pricing, and really everything else expect the roughly dozen Hollywood projects it has scooped up during the past year.
The iPhone giant hired the former co-presidents of Sony Pictures Television, Zack Van Amburg and Jamie Erlicht, last June to head up its original programming division. Since then, Apple has gone on a major spending spree.
Apple currently owns the rights to a reboot of Steven Spielberg's original series Amazing Stories; an animated series from the from Emmy-winning creator of Bob's Burgers; a world-building drama from the Peaky Blinders creator and Hunger Games director; a drama series from La La Land director Damien Chazelle; a psychological thriller from M. Night Shyamalan; a Friday Night Lights-style drama about basketball star Kevin Durant; and many more.
Apple also signed a partnership with Oprah Winfrey and outbid Netflix and CBS’ (CBS - Free Report) Showtime to secure the rights to a drama starring Jennifer Aniston and Reese Witherspoon. The tech powerhouse just recently signed a multiyear deal to make independent, feature-length films with the Oscar-winning studio A24.
One potentially important issue to note is that Apple and CEO Tim Cook have focused on more family-friendly content, while trying to avoid anything too controversial.
Clearly, Apple’s overall streaming plan remains unclear and it will be hard to compete against Hulu, Amazon Prime, HBO, and Netflix. But the model isn’t that difficult to replicate, especially when you have the kind of money and infrastructure Apple does. Netflix itself proved that spending on the right content can turn your platform into an industry leader.
Remember House of Cards, its first original series, didn’t debut until February 2013. Still, the streaming TV market is growing more crowded, and consumers aren’t likely to subscribe to a seemingly endless amount of services.
Disney officially announced the name of its new streaming service, Disney+ on last week’s earnings call. The entertainment powerhouse is set to introduce its streaming app in late 2019 that will feature historic and original offerings from Disney, Pixar, Marvel, Star Wars, and National Geographic (also read: Everything You Need to Know About Netflix Rival Disney Plus).
It is also worth noting that AT&T (T - Free Report) is poised to introduce its own streaming service that is set to incorporate HBO. Meanwhile, the likes of Roku (ROKU - Free Report) and others offer access to streaming movies and video.
There are hardly enough details about Apple’s streaming service to know if it can really challenge Netflix. But the company could easily give its streaming offering away for free, at least at the start, to current iPhone and Apple users—to try to get them hooked. It is also worth remembering that Netflix has far less money to spend and its stock has continued to sink recently.
Therefore, it is not too hard to imagine a world where Apple's streaming TV offering competes alongside Amazon Prime, Netflix, Disney, and others because it has the money and perceived high-end appeal to attract consumers.
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