Apple Inc (NASDAQ:AAPL) is reportedly planning to invest over billion dollars in original content programming.
Competition between the "FAANG" companies is all set to intensify as Cupertino based iPhone maker Apple (NASDAQ:AAPL) is throwing its hat in the original content programming space. Following in the footsteps of social media giant Facebook Inc (NASDAQ:FB), which recently launched a new tab for videos, Apple has reaffirmed its commitment to original video programming, according to a report by the Wall Street Journal. With Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) already in a heated competition for the dominance in this space, the entry of Apple and Facebook will only make this battle more interesting to watch. And FAANG companies are not the only ones competing in this space. There are players like Hulu and HBO, and Disney recently announced its intentions to launch a video streaming service in the next couple of years.
A billion dollar commitment.
Apple, the worlds largest company by market cap is reportedly investing over a billion dollars in producing original video content over the next year. Apple could acquire and produce as many as 10 television shows. Hollywood veterans Jamie Erlicht and Zack Van Amburg, whom Apple had poached from Sony will be overseeing Apple's media efforts. While Apple's billion dollar investment is not an insignificant amount of money, it is still a fraction of what other companies spend on content. Amazon is reportedly spending over $4.5 billion dollars in producing content this year, while Netflix has said that it could exceed its $6 billion spending target for FY 17.
Part of Apple's services segment.
The investment in the original content is part of Apple's effort to double the revenue from its services segment, which grew by over 25% in the most recent quarter, by 2020. Apple's existing video and movies offering, which is part of iTunes segment, has been hit by the rise of subscription video on demand services such as Netflix, Amazon and Hulu. Apple's market share in the video rentals and sales business has fallen from over 50% in 2012 to around 20%-30%. iTunes contributes around $4.1 billion in revenues and is second largest sub-segment in the services division, after App store, which was the key growth driver of the services segment in the previous quarter. Apple expects that original content could help bolster its video rental business and help it achieve its goal of doubling the service segment revenue.
Apple had also tried to shore its revenues from movie rentals by leveraging the shift towards subscription services by selling subscriptions for streaming services such as Netflix and Amazon through its Apple TV App Store. The company takes 15% cut of the subscription it sells. The Apple TV app store offers more than 1,300 video channels and 6,000 video, gaming and other apps, which Apple calls the future of TV. However, Apple TV itself has not found favors with many users.
Not so strong track record.
If Apple want's to be a serious contender to Netflix and Amazon it will need several strong hits. In this regard. Apple's past track record is not so inspiring. Apple has launched two "Original" shows this year, "Planet of the Apps" and "Carpool Karoke". Planet of Apps is an unscripted competition show, which follows enterprising hopefuls as they pitch new phone applications to a panel of celebrity judges, some what like Shark Tank. Carpool Karoke is an attempt to piggy back on the success of the hit segment on The Late Late Show with James Corden, which involves James Corden driving around with various celebrities, often singing and interacting with the surprized public.
Both these shows have received lukewarm reception from the public, in spite of the star power. One report on The Guardian had this to say about both the shows: " Planet of the Apps and now Carpool Karaoke, have been a curious hybrid of low-key ideas propped up by big-name celebrities with little else of substance to recommend them." While it is pretty early to judge Apple's performance in the media segment, the early signs have not been exactly encouraging.
Further, Netflix and Amazon are not sitting quietly. Both the companies are planning to bring on popular talents and are investing billions of dollars in producing world class content. While Apple has the money, it will still find it difficult to catch up with the streaming giants.
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