Apple (AAPL - Free Report) is looking to strengthen its content library with some older films and television series.
The tech giant has only released Apple original TV shows and movies since its launch. However, off-late the streaming service has been in talks with Hollywood executives about licensing older content, per a Bloomberg report.
Apple TV+, which costs only $4.99 per month with the sole target of streaming original series, movies, and documentaries, currently offers just 30 original shows and movies. However, it provides app users access to HBO, Showtime and other services for broader content variety.
However, the spread of coronavirus has shut down film and television production since mid-March. This will likely cause delays in Apple TV+ originals set to come out later this year and early 2021.
With fewer new originals in the pipeline and free trials starting to expire, the need for additional content is even more acute.
Rivals Gain on Backlog Content
Apple TV+’s direct competitors have found a lot of success in balancing the scales between developing original content and providing their audience with a backlog of licensed content.
Lacking the kind of back catalog that Walt Disney (DIS - Free Report) and Warner own and that Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) first acquired and then built, Apple’s limited original content library and a low cost of entry strategy have struggled to attract subscribers.
As of the end of February, Apple TV+ had 10 million users but the majority of those subscribers aren't paying for the service, which offered a free, year-long subscription for users who signed up immediately after its launch.
Netflix, by contrast, has more than 183 million subscribers while Disney+ had 10 million sign-ups for Disney+ on launch day (including presales and free trials), and reported 54.5 million subscribers as of the beginning of May.
Among popular content on Netflix in terms of time spent watching is old licensed series. As many media companies move to take back the streaming licenses on their most popular old shows, companies like Netflix are forced to pay extremely high prices for the few popular shows left available to license.
Shows like The Office and Friends, the latter of which is moving to HBO Max, became premier titles for Netflix while it bought the rights to Seinfeld for over $500 million.
Apple’s Efforts to Beat Competition
While acquiring the license to TV shows and movies should help bolster Apple TV+’s catalogue, it is also expected to be expensive.
Nonetheless, continued momentum in service offerings amid coronavirus-led lockdown is expected to aid Apple in the near term, Notably, Services (22.9% of sales) revenues grew 16.6% from the year-ago quarter to $13.35 billion, a record in the company’s history.
Apple is taking various other measures to improve subscriber growth on its Tv+ platform. From mid-April 2020, the company made a number of Apple TV+ shows free to watch, including popular shows such as Little America, Servant, For All Mankind and Dickinson.
Additionally, this Zacks Rank #2 (Buy) company has begun acquiring two types of original podcasts — one category is audio spinoffs of existing movies and programs on Apple TV+ service, and the other is original programs that could eventually be adapted into future TV+ video content. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Apple has asked some producers working on podcasts to provide versions of their offerings without advertisements, which fit into TV+’s ad-free approach.
Moreover, Apple TV+ will launch Greyhound, a World War II drama starring and written by Tom Hanks and produced by Sony Pictures. The film had originally been targeted for a theatrical release on Father’s Day weekend. Apple paid $70 million for the Sony Pictures movie.
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