The tech company has been in talks with the top Hollywood producers about launching original TV shows and movies as part of Apple's latest attempt to get on its rivals and compensate for sluggish iPhone sales.
The Wall Street Journal revealed Apple's yet unannounced plans to produce original content such as TV shows, movies and series, what would mark the company's first foray into the entertainment business. The company has already met with several "veteran" Hollywood producers and marketeers to discuss the possibilities for Apple (NASDAQ: Apple [AAPL]) to enter a new business area at the moment when Amazon (NASDAQ: Amazon.com [AMZN]) and Netflix (NASDAQ: Netflix [NFLX]) have built a large and loyal user base.
The sources said that Apple's content program would be part of Apple Music, its $10-per-month music streaming service that directly competes with Spotify. And the best part of this announcement is that Apple plans to air its first show already by the end of this year. Even though it seems to be a little late for the tech giant to enter the market with such high competition from much more seasoned players like Netflix, this could still become a turning point for Hollywood and for Apple.
It is still unclear what kind of content Apple has in mind, although a number of sources claimed that the company's executives reached out to Hollywood professionals with an idea to create shows similar to HBO's "Stranger Things" that was exclusively aired on Netflix as well as Time Warner's (NYSE: Time Warner [TWX]) "Westworld", with the latter one costing millions of dollars to produce. Next to that, the WSJ also mentioned Apple's interest in acquiring rights of scripted TV programs as well as hiring professionals working for Hollywood studios to join the company.
Apple's unexpected move has been associated with sluggish sales of iPhones that still remain the company's main revenue driver. Last year, the tech giant missed on earnings for the first time in more than a decade as well as reported the first annual sales decline since 2001, says Los Angeles Times. That is why investors are already quite anxious about Apple's plans for this year, after Nikkei Asia Review revealed a few days ago that the company had been dealing with an oversupply problem and planned to cut the production volumes of the newest iPhone 7 devices by as much as 10%.
In turn, the company's young music streaming service, Apple Music, has been moving in quite an opposite direction as iPhone sales slowed down. Back in October, Apple CEO Tim Cook mentioned a considerable improvement in the company's services segment that consists of Apple Music, App Store and iTunes. He called Apple Music a "huge highlight" as its revenue jumped 22% from the year before in the third quarter. The company's music streaming service was launched only in 2015 and has been closely competing with an older market player Spotify ever since. Some analysts believe that Apple's decision to offer entertainment content as part of its Apple Music bundle, could be nothing else but an aggressive attempt to outplay Spotify rather than to compete with seasoned entertainment players like Netflix and Amazon Prime.
Apple is already offering some shorter documentary films about musicians on the Apple Music platform, although the company's new idea seems to have little in common with producing music-related content, said the experts. One of the first Apple's steps into the entertainment business can be considered its recent purchase of rights for the James Corden's Carpool Karaoke show that features the host James Corden and top celebrities. Tim Cook himself also participated in an improvised Carpool Karaoke episode, which was part of his appearance at last year's Apple presentation on September 7.
Apple Prime
A few months ago, Goldman Sachs (TOCOM: Futures On Gasoline Mar 2017 [GS]) analysts said that it was time for Apple to expand its business into the content streaming domain that was becoming increasingly more popular among the customers. The analysts claimed that Apple shouldn't miss the moment to "go big" on content, although they envisioned the company developing something similar to the Amazon Prime platform rather than producing original TV shows on its own. The suggested "Apple Prime" could include a renewable iPhone subscription, services like Apple TV and Apple Music as well as possibly Apple's original content for the monthly subscription fee of $50.
"We think Apple should launch a subscription bundle as a way to reinforce iPhone loyalty and leverage it into content. This strategy would help Apple fend off smartphone commoditization and position it well vs. Amazon and Alphabet as content shifts to streaming," the analysts Simona Jankowski said.
Well, it seems like Goldman analysts were not so far from guessing Apple's actual business plans for this year. However, it is yet to see whether Apple will be able to actually pull that off.