Apple plans to spend a billion dollars on programming in the next year to compete with Netflix and Amazon. Big deal. With its enormous cash reserves, Apple could make a real impression, if only it had a video strategy.
Apple has hired production executives from Sony Television and is reported to be allocating a billion dollars in the next financial year. It is understood to be planning to release around ten original or acquired shows.
It’s current efforts at original production include reality shows Carpool Karaoke and Planet of the Apps.
The chief executive of Apple, supply chain supremo Tim Cook, does not seem like someone who is likely to take creative risks with programme production.
Hiring Zack Van Amberg and Jamie Erlicht from Sony Pictures Television, the producer and distributor of shows including Breaking Bad, may be a start. They will report to Eddy Cue, who is responsible for Apple software and services, including the iTunes Store and Apple Music, as well as other services including Apple Pay, Siri and iCloud subscriptions.
While $1 billion is a substantial budget, it is far les than Netflix or Amazon are spending on programming.
Netflix is planning to spend $7 billion a year, including original production and acquired programming. Amazon is estimated to be spending around $4.5 billion.
In comparison, HBO spends about $2 billion, including a reported $10 million per episode of Game of Thrones. The annual budget of the BBC One television channel is about $1.4 billion.
Apple reported quarterly earnings of $45.4 billion and returned $11.7 billion to in investors. It received $24.8 billion from the sale of 41 million iPhones. Services revenue, which includes digital content and other services, amounted to $7.2 billion, a figure that Apple hopes to double by 2020.
Apple has a cash pile of over $260 billion, which would be enough to buy any studio outright.
The company faces criticism and investigation of its complex operating structure, which has allowed it to shelter billions of dollars of revenue from corporation tax. It also means that it is disadvantageous to return some of its funds to the United States.
Apple has allowed Netflix, and to a lesser extent Amazon, to adopt a leading position in subscription video services, a market that it could have owned.
However, its strategy of developing an ecosystem around devices may be much more lucrative. Apple only needs a few standout shows that are exclusive to its customers. It does not necessarily need to control the world of video entertainment, which it has so far failed to achieve with products like Apple TV.