Just how big in media does Apple want to be?

From The Economist:

AS VIOLINS PLAY mournfully, Jon Stewart, an American comic, makes a mock-emotional appeal to viewers. “Every year thousands of hours of high-quality content go unwatched,” he says seriously. “Because good, hard-working people…don’t know how to find Apple TV+.”

The world’s most valuable company can afford a few jokes at its own expense. In the past year the tech colossus has raked in $366bn in revenue, a third more than in 2020. On January 3rd its market capitalisation briefly exceeded $3trn (see chart 1). The mere billions that it is investing in media, including a new television show hosted by Mr Stewart, represent pocket change to the Silicon Valley giant.

Yet some 300 miles (480km) away in Hollywood, where executives used to snigger about the dilettantes from big-tech land up north, Apple’s dabbling in media is no joke. Though it lags well behind Netflix and the like, Apple has enough money to ride out the increasingly expensive streaming wars, which threaten to bankrupt other players. One question keeps its rivals awake at night: just how big in media does Apple want to be?

Apple became a big noise in music when it launched iTunes almost exactly 21 years ago. It took a cut of songs’ sales, and shifted hundreds of millions of iPods for people to play them. Later iTunes sold movies, too, and the firm hoped to make the same model work in television, where the market is an order of magnitude larger than music. But paying for downloads was superseded by all-you-can-eat subscriptions, pioneered by Spotify in music and Netflix in TV. Unlike downloaded music or films, subscriptions could be easily transferred between platforms. So Apple, seeing little opportunity to lock consumers into its devices, sat out the streaming revolution.

Today it is back in the media game, and a bigger force than Mr Stewart’s joke implies (see chart 2). Apple Music, launched in 2015, is the second-largest streamer after Spotify. Apple TV+, now two years old, is the fourth-largest video service outside China by the number of subscribers, according to Omdia, a data company. In the past couple of years Apple has made smaller media bets including Arcade, a subscription gaming package, News+, a publishing bundle, and Fitness+, which offers video aerobics classes. There is talk of an audiobooks service later this year.

Like Amazon, another tech giant with a sideline in media, Apple has been able to roll out its offerings more quickly in more countries than most of its Hollywood rivals, which have had to build direct-to-consumer businesses from scratch. And it can afford to be generous with free trials: less than a third of Apple TV+ subscribers pay for the service, Omdia believes. It has had some hits, notably “Ted Lasso”, which won a string of Emmy awards in September. But it lacks a back-catalogue, leading to high rates of customer churn. Smaller competitors like Paramount+ (part of ViacomCBS) and Peacock (from NBCUniversal) have limited new offerings but decades-old libraries.

. . . .

Apple’s renewed interest in media is best explained by the transformation in the company’s scale, which radically changes the calculation of which side-projects are worthwhile. Fifteen years ago, when Netflix started streaming, the billions involved in running a film studio would have represented close to a double-digit chunk of Apple’s annual revenues. Back then, Silicon Valley executives would fly down to Los Angeles, thinking “We’ve got a big chequebook, we could go and buy a bunch of content,” says Benedict Evans, a tech analyst and former venture capitalist. “And they would go and have their first meeting in LA. And the LA people would tell them the price”—at which point the tech people would go home. In 2021 Apple TV+’s estimated content budget represented 0.6% of company revenues: “play money”, as Mr Evans puts it.

Link to the rest at The Economist

Reading through the OP, PG thought it might be very interesting if Apple got into the book business. It could afford to buy any New York (or London, Paris, etc.) publisher it fancied with a few days worth of profits and could then give Amazon the first serious competition it’s had in the book business for a long time. Amazon pioneered the model and Apple could copy what worked.

By purchasing an established traditional publisher, Apple could also lock up a whole lot of non-Mickey-Mouse intellectual property for its video business. Amazon is too big in books to do that without getting caught up in significant antitrust issues, but Apple could play the anti-Amazon card to capture more than a little sympathetic noise from the book business.

PG also bets that Apple could buy Barnes & Noble at a very nice price and turn BN’s retail locations into Disney bookstores.

PG is just whirling his brain cells and hasn’t devoted any serious consideration of potential Disney antitrust issues that might arise. That said, PG thinks serious competition on this scale would sharpen up Amazon’s book business quite a lot.

PG is a big fan of Amazon for indie authors, but in his excessively-humble opinion, Amazon’s indie and commercial publishing arms haven’t done a whole lot of Amazon-brainy things for some time.

Exhibit A would be the difference between the POD backends of the Zon and Draft2Digital. Exhibit A.1 would be the limited and clunky POD templates Zon provides compared to D2D’s much more sophisticated looks.

4 thoughts on “Just how big in media does Apple want to be?”

  1. Apple is sitting on more money than Scrooge McDuck but they’re not interrested in spending it. Not on media. They looked at buying MGM and passed (thankfully!) presumably because the price (Amazon paid $9B) was too rich for them.

    Stewart isn’t right about people not knowing how to find Apple TV+ since it’s all over; they just don’t see why they should bother with it. It has at most a couple hundred hours of content, most of it big name, high concept mediocrities. The temptation is to think the Hollywood types saw them coming a mile away and dusted off their drawered proposals everybody else passed on. (Blind horse barbarians!, an Emily Dickinson sitcom!). Looking at their content list, there is no unifying vision other than it’s free to Apple gadget owners. It has no identity.


    Disney+ has MARVEL, STAR WARS, NATIONAL GEOGRAPHIC and the entire Disney family friendly back list going back 60 years.; HBOMAX has the entire catalogs from HBO, WB, TCM (including classic MGM) and way more; PRIME has 12 years of Emmy winners and Oscar contenders and winners–acclaimed content all over–and they went out and got 30 years of MGM (STARGATE, BOND, ROCKY, ROBOCOP, and another dozen franchises) to build up their content list. Even laggard Paramount+ can count on STAR TREK (FWIW) and the CBS procedurals (they just revived Criminal Minds and CSI).

    Discovery just merged with WarnerMedia so the only remaining independents are LIONSGATE, A&E, and a bunch of newer/smaller cable players. Nobody with much stature. (Sony/Columbia is worth buying but Sony can’t afford a silo or to give up the licensing money. And if they sell the movie business, Spider-man goes back to Disney. They’ll be the last independent standing.)

    Disney+ and HBOMAX launched with 20,000+ hours of content and a dozen franchises each. Netflix and Prime have built up comparable services. The only comparable catalog still in play is ViacomCBS (or maybe NBCUniversal) but if they didn’t have the stomach to buy MGM they aren’t going to go 11 figures.

    By all the evidence Apple has no real interest in media. They dropped $3B on Beats and that’s about it. If they had a chance for a redo, they would probably pass. Media doesn’t have the margins they prefer (300%% historically) and books even less.
    They didn’t rescue the BPHs during the Agency conspiracy, they’re not getting in that business again. Apple TV+ exists for the same reason as AppleBooks: an opportunistic play to squeeze a bit more coin out of the faithful. (Originally it was supposed to be free only for a year. Once tbey saw how “many” folks were willing to pay tbey extended it. Probably will again.)

    If/When Apple ever gets serious about video we’ll know it by the money tbey spend. Right now they’re *only* spending a billion a year. Netflix is spending $16B. Earner and Disney about the same. In that context, Amazon spending $9B+ for MGM plus over $2B (possibly $6B) for LoTR) is par for the course and $1B is peanuts.

    (Warner is merging with Discovery because even AT&T found growing a streaming silo at the same time as a 5G network was too big for them.)

    21st century streaming makes tons of money but it also *demands* tons to keep going. Another Rec Queen’s Race.

  2. I don’t know about Disney book stores, but there used to be Disney stuff-stores in malls. I have no idea if they still exist, but they seemed to be popular with window shoppers, if not money-spending shoppers.

    • Disney stores made tons of money back in tbe day. Especially tbe Princess line.
      There’s still some 20 left. The mall apocalypse had them on the ropes and covid is moving in for the deathblow.
      Only LUCASFILM has ever monetized IP in more different (and profitable) ways.
      No wonder Disney bought it.

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