4C - leaderboard - 4-25-18
  • How is Apple Going to Monetize Its Expensive New TV Shows?

    It’s been exactly a year since the WSJ reported that Apple was planning to invest in original TV programs and movies. And sure enough, as 2017 unfolded, the company unveiled a plan to spend a $1 billion on programming, hired top Hollywood executives, and announced its first few programs.

    Yesterday, Apple continued its streak, with a straight-to-series order for “See” a drama from Chernin Entertainment and Endeavor Content including “Peaky Blinders” creator Steven Knight and “Hunger Games” director Francis Lawrence. That’s on top of 3 prior programs from A-listers Jennifer Anniston, Reese Witherspoon, Steven Spielberg, Bryan Fuller and Ronald D. Moore that were previously announced.

    Although Apple was incredibly late in pursuing original programming, it has proven it can do the relatively easy part - hire veteran executives and give them a pile of money to pursue projects (whether they become hits in the era of “Peak TV” when competition for viewers is more intense than ever, is of course to be determined). But Apple still hasn’t addressed the hard part: how is it going to distribute these programs and actually monetize them?

    I raised this question 6 months ago and since then we haven’t learned anything new from the company. While Apple included a couple of last year’s early programs (“Planet of the Apps” and “Carpool Karaoke”) in its Apple Music service, it’s hard to believe these expensive new dramas are likewise going to be thrown in as a bonus for music fans.

    But then, what is the model? Apple doesn’t have an SVOD service akin to Netflix or Hulu. It doesn’t have a membership service akin to Amazon Prime which video can help boost. And it doesn’t have an advertising business akin to YouTube or Facebook - not that ads alone could economically support expensive programs - a fact that both of these companies continue to wrestle with themselves.

    With its vast resources, Apple could start and/or acquire existing players to move into these businesses (e.g. a deal for Netflix, everyone’s favorite rumor). Another option is to simply make the shows available in iTunes on a transactional basis. But the problem is transactions alone don’t translate into big viewership numbers for originals the way subscriptions or ad-supported models can do.

    If you’re an A-lister signing up with Apple these days, there’s cachet in being early and no doubt the money is terrific. But what is Apple telling these people about how their work will end up being seen by millions of viewers, penetrate the zeitgeist and compete for awards as Netflix, Amazon or Hulu can all credibly offer?

    Another basic question for Apple is how do these high-profile shows contribute to the company’s overall strategy? Do they help sell more iPhones, which is still Apple’s most important revenue source? Or do they contribute something to its services and apps business, which are also growing strongly?

    The good news is these questions will be answered soon enough, because in 2018 these shows will begin to launch and we’ll see how Apple makes them available. What path Apple chooses will say a lot about how seriously Apple should be considered as a longer-term, successful new player in Hollywood.

     
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