Apple’s $1 Billion Drop in the Content Ocean

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Not to be outdone by the likes of Netflix, Amazon, Hulu, Facebook and Alphabet, Apple has entered the original programming arena with a billion-dollar budget for the next year, according to reporting by the Wall Street Journal.

June hires Jamie Erlicht and Zack Van Amburg, former Sony Corp. vets, will be taking over Apple Music programming responsibilities from the Apple Los Angeles office.

Changing Business Models for Apple

Until now, Apple’s video business model has been based on a one-time rental and purchase model of other programming produced elsewhere.

Although iTunes generated an estimated $4.1 billion last year in revenue, it lost considerable share to subscription services like Netflix, dropping below 35 percent market share from about 50 percent in 2012.

The hope is that original programming will make the idea of rentals and purchases through iTunes fresh again. With a goal of doubling annual services revenues to about $50 billion by 2020, Apple will have to make some huge strides to catch up to Amazon and Netflix.

Are There Too Many Players on the Field?

Apple will have to watch all the new players—both major and minor—coming on to the field. Facebook and Alphabet have both announced plans to offer streaming television programming. Disney has recently declared its intent to sever ties with Netflix in pursuit of its own streaming service.

With so many new players on the streaming field, will there even be room for iTunes’ long-standing pay as you go model? After all, a subscriber to Alphabet’s new service will be able to consume all the content they can stand for just $35 a month. iTunes users might spend that in a few hours, depending on how Apple chooses to price its original content.

Still, for high quality content, diehard iTunes users might see a value there. After all, Apple has never had a problem moving iPhones despite their hefty price tags when compared to the competition. The company will need a big hit, though, something much more successful than initial efforts “Planet of the Apps” or “Carpool Karaoke.”

Both shows met with some pushback from reviewers, but the addition of Erlicht and Van Amburg could be a major game changer for content as the pair scour Hollywood for shows Apple can acquire to shortcut the process.

 

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