• Mystery Solved: Apple Will Give Away $1 Billion of Original Programming

    The mystery of how Apple will monetize its $1 billion investment in original TV programming is finally solved. The answer is it won’t. Instead Apple will give its content away for free to its device owners, as part of its TV app, alongside the ability for users to subscribe to SVOD services, in a manner akin to how Amazon Channels works. I have speculated frequently over the past 21 months what Apple would do to monetize its huge content investment (here, here, here).

    The update was reported by CNBC yesterday, coincidentally just a day after Netflix’s Chief Content Officer Ted Sarandos said at the VF New Establishment Summit that no one, not even the people making Apple’s shows knew how the content will be offered. After almost 2 years of radio silence from Apple on how it would monetize its programming and endless rumors, it seems as though following Sarandos’s comments Apple may have finally felt compelled to leak some initial information.

    Be that as it may, the big news here is that Apple has eschewed traditional video monetization paths - advertising, subscription or even transactions - to instead simply give away its high profile content as a bonus for its device owners. It’s not unprecedented to do something like this - for example, Roku gave free access to The Roku Channel to Roku owners (though now it’s available online as well). But to be clear, Roku didn’t spend anything close to $1 billion on original content for The Roku Channel.

    Amazon is providing its original content only to its Prime members, but it can be viewed across many non-Amazon devices. And Amazon is doing it to support its Prime service, not help its own devices. In fact, Apple’s move is a little old school - content owners have long recognized that being device agnostic is the key to broad reach and optimal audience building, not to mention user satisfaction. 

    According to CNBC, Apple is going to include the free content in its TV app and also include the ability to subscribe to 3rd-party SVOD apps, taking a page from the Amazon Channels playbook. So the TV app becomes a hub for Apple’s originals plus 3rd party SVOD plus authenticated TV Everywhere apps with single sign-on. 

    It’s not a bad offering from Apple and no doubt some portion of device-owners will use it, especially if the programming is compelling (that’s another story though since Apple is only focusing on family-friendly fare).

    More broadly though, the approach doesn’t seem to create a meaningful new revenue stream for Apple. While others like Amazon, Google, Netflix and Hulu are already generating billions in revenue from their diverse video businesses, Apple is coming late to the party and without a clear cut business model for video monetization. Is there even a precedent for free content influencing choice in device purchase or satisfaction? I can think of many other factors that really do sway a consumer between an iOS device vs. an Android device.

    So while we finally have an answer for how Apple will bring its $1 billion of original content to market, it’s not exactly inspiring in terms of the company gaining a stronger position in the industry. $1 billion means nothing to Apple, but will it continue to ramp up its investment even further, without a clear ROI? That’s among the many questions still remaining for Apple.