LOS ANGELES – We know that Apple is bankrolling Hollywood stars such as Oprah to make TV shows for the iPhone distributor. We don’t know when they will appear or in what form – could it be part of the existing Apple Music service or a new entertainment channel to take on Netflix and Amazon, perhaps?
Apple long has offered video-on-demand services, but it never has offered anything to rival Netflix or Hulu. Instead, it has directed viewers to its iTunes service, where they could buy and rent movies for viewing on computers, phones and via the Apple TV set-top box.
This à la carte service competes with YouTube and Amazon Video rentals. But so far, Apple doesn’t offer monthly video streaming, which soaked up nearly $15 billion in consumer dollars in 2018, according to eMarketer.
Instead, it’s mostly focused on a monthly music subscription, Apple Music, which charges $9.99 monthly and boasts 50 million subscribers, second to No. 1 Spotify with 75 million subscribers.
Apple doesn’t break out how much iTunes and Apple Music contribute to its Services division, but that unit has become Apple’s second-largest revenue generator, after the iPhone and above the iPad and Macintosh computers. Services, which also includes iCloud backup storage subscriptions, brought in more than $9 billion in the most recent quarter.
Services will represent 14 percent of Apple revenues in 2018 and grow to 20 percent by 2023, predicts Gene Munster, an analyst and investor with Minneapolis-based Loup Ventures.
Now, Apple looks like it’s building another service, for video, but hasn’t unveiled if that will be part of iTunes or something new. In the announcement about Winfrey joining the Apple fold, it said little about what the project would be, only: “Together, Winfrey and Apple will create original programs that embrace her incomparable ability to connect with audiences around the world.”
However, Apple clearly seems to be following a path laid by Netflix, Amazon Video and Hulu, which credit original content for subscriber growth.
Apple has reached out to some of the biggest names in entertainment, including producer/directors Steven Spielberg and Damien Chazelle and A-list actors Reese Witherspoon and Jennifer Aniston to produce shows for the company.
“I think you can be sure Apple will come to the market with something that will be instantly impactful to the already crowded entertainment marketplace, something that’s going to concern competition whether it’s a streaming service like Netflix or a broadcast network like NBC,” says Andrew Wallenstein, co-editor of the show biz bible “Variety.” “It’s a sure bet Apple is going to make a splash in Hollywood. We just don’t know yet what shape that splash will take.”
Apple needs to catch up to Netflix, which will end 2018 with nearly 1,000 original titles and an expense of $3.5 billion on programming, compared to $900 million for Apple.
So far, Apple’s two originals have not fared well. The first two projects, the “Planet of the Apps” game show and an extended reboot of the late night bit “Carpool Karaoke,” were panned by critics.
However, the company has an advantage in 1.3 billion iPhones in use around the globe, which can be used to plug the new shows.
“Apple Music’s market share gains over the past two years are a testimony to the power of coupling Services with widely adopted hardware,” Munster said in a note to investors. “An unrelated advantage is Apple’s brand, which, at its core, represents quality and attention to detail, and should translate into favorable initial adoption.”
Apple currently has a music subscription service with more than 50 million subscribers where it shows those two originals, “Planet of the Apps” and “Carpool Karaoke.”
In 2017, Apple hired two former Sony TV chiefs, Jamie Erlicht and Zack Van Amburg, to make deals and bring in talent to Apple.
The pair has been on a tear making deals in Hollywood. Munster estimates total productions at 19, highlighted by a remake of Spielberg’s 1980s era NBC anthology series “Amazing Stories,” movies about the lives of poet Emily Dickinson (starring Hailee Steinfeld (“True Grit”) and NBA great Kevin Durant, and a backstage look at a morning TV show in a series starring Witherspoon (“Little Big Lies”) and Aniston (“Friends.”)
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