From handsets to Hollywood: Apple joins the dash for content

[Len]

The tech giant is a latecomer to a market being transformed by Netflix and Amazon. But if it commits enough money, it could yet be a serious player.


Apple has Amazon, Netflix and the Hollywood studios in its sights. That is clear after a frenetic summer hiring big TV chiefs, scouting out space in a famous Hollywood studio and considering spending up to $5bn (£3.8bn) on the rights to distribute James Bond films. 

Apple has largely sat on the sidelines in the TV and film arms race being led by Netflix and Amazon. Until recently, its focus has been on providing the devices to get access to such content, led by the iPhone. But Apple has been slowly increasing its portfolio in recent years. First came music with the $3bn acquisition of Dr Dre’s Beats, followed by its own music service in 2015. Now the Silicon valley giant has set its sights on playing catch-up in TV and film.


“It is never too late to bring a billion dollars to any party, given Apple’s music-business domination,” says Paul Dergarabedian, senior media analyst at consultancy comScore. “It would be very wise to take their foray into the filmed content business very, very seriously. They are the next force to be reckoned with … to throw their hat in a very crowded ring.”


Apple stunned Hollywood in June by recruiting Jamie Erlicht and Zack van Amburg from Sony as its new TV chiefs. At Sony, the pair had been responsible for striking a £100m co-production deal with Netflix to make The Crown, and had overseen production of hit shows including Breaking Bad and The Blacklist.


Earlier this month it emerged Apple was laying down a marker in Hollywood by looking at taking space in California’s Culver Studios, known for films such as Gone with the Wind and The Matrix. This followed the news that Apple has earmarked $1bn over the next year to make at least 10 high-end TV shows.


Apple has so far only dipped its toe into original programming, striking a deal to spin the popular Carpool Karaoke segment from James Corden’s late night US TV show into a 16-episode series featuring stars such as Will Smith. There was also Planet of the Apps – a sort of Dragons’ Denfeaturing Gwyneth Paltrow, will.i.am, Jessica Alba and entrepreneur Gary Vaynerchuk on a panel that sees developers compete for funding – that Apple Music made available in June.


Also in development are documentaries about music industry svengalis Sean “P Diddy” Combs and Clive Davis, as well as a six-part series on Dr Dre.

“While Apple is getting serious, there are a lot of companies in the market already spending vastly more on content,” says Richard Broughton, analyst at media consultancy Ampere. “Apple’s investment looks fairly slim next to the incumbents. If they really want to make a mark it is a step in the right direction, but they’ll need a few more billions on top to really compete.”


Netflix is set to spend $6.6bn on TV and film content this year, Amazon $4.5bn, HBO (maker of Game of Thrones and The Sopranos) $2bn, and Sky more than $5bn.


Given Apple’s huge resources, it could theoretically buy its way to the top of Hollywood. Apple has a stock value of around $830bn, almost twice Jeff Bezos’s Amazon ($474bn), five times Disney ($168bn), more than 10 times Netflix ($77bn) and 15 times Rupert Murdoch’s 21st Century Fox.


“It really depends on what Apple’s ambitions are, but as Netflix has shown, you don’t really need to own studios to accumulate a library of intellectual property,” says Tim Westcott, analyst at IHS Markit. “You just need to make the right creative decisions and be prepared to take risks by fully funding new projects.”


Apple’s expansion into entertainment follows a stated ambition that it wants to double the amount of revenues it receives from services such as Apple Music, iCloud and the App Store by 2021. As businesses battle to make their products and services “sticky” for consumers – from Amazon launching a TV service to BT taking a slice of Premier League football rights – Apple’s main goal is keeping customers loyal.


“We can probably assume that content investments will be in support of the company’s device sales, given how Apple has treated content and services in the past – effectively subsidising them to encourage device usage, sales and loyalty,” says Broughton.


“Having an edge with exclusive content is one potential method of ensuring Apple brand loyalty and stimulating new device sales.”