The $1 Billion Question: Does Apple Want to Compete with Netflix?

August 22nd, 2017

What Apple plans to do to conquer the living room remains a question mark. We know the company is interested. Tim Cook has said so. But the rumors that there might be an Apple branded TV set never came to fruition. Even though there were reports about possible prototypes in the world, it never went beyond that.

Maybe Apple just realized there was no space in the saturated TV market in which to compete, and might as well put its efforts elsewhere. At the same time, the Apple TV set-top box remains an unrealized product. Apple added apps and Siri to the fourth generation model, which also claimed a much higher price tag. But such key features as 4K and HDR were missing in action.

All right, it may be true that HDR standards were fluid until the past year or so, and Apple might have been waiting for more efficient chips before including support for the higher resolution TV standard. Remember that Apple isn’t always first with a new feature, but the solution is usually more elegant.

Some published reports claimed, however, that the Apple TV was as stopgap. Apple wanted to assemble a low-cost TV subscription service, and use the streamer as its front end. Supposedly the entertainment companies balked at Apple’s stiff contract demands, and thus it didn’t happen. But it may well be that, if Apple really and truly wanted a deal, it would have found a way to make it so.

But that doesn’t mean Apple has lost interest in doing something in the TV space. Indeed, it has already created novelty content, “Carpool Karoke,” for Apple Music. Getting such A-list talent as Will Smith to participate may seem a coup. But Smith’s films haven’t done so well of late, and, as I said, this is hardly compelling entertainment.

It appears to be more of an experiment at this point, to provide exclusive content to help boost Apple Music against Spotify. But Apple appears to have bigger plans.

According to recent published reports in the Wall Street Journal, Variety and other newspapers, Apple has allocated $1 billion for original TV shows and movies for the coming year. The report indicates that it is seeking to buy up to ten TV series with that cash hoard. The company has also hired two skilled entertainment executives to head the project. They are identified as Jack Van Hamburg and Jamie Erlicht, both former presidents of Sony Pictures Television, who were reportedly responsible for such shows as “The Blacklist,” “The Goldbergs” and “Breaking Bad.”

In other words, solid people with solid credentials to match.

Now hit TV shows don’t happen overnight. Hit TV shows don’t grow on trees. It can take years to fund and produce the right projects, and, even then, there are no guarantees.

Clearly Apple is also entering the business gingerly. $1 billion may seem to be a huge investment, but it pales in comparison with Netflix, which plans to spend $7 billion on original content next year. Amazon Prime Video will do about half that.

The Netflix example is particularly compelling, and it came out of the blue.

So most of you recall that Netflix was originally a place from which to rent DVDs. Netflix killed the video rental store by allowing you to rent videos, keep them as long as you needed, and receive a replacement when it was returned and received. Different packages specified the number of videos you could keep at one time.

Compare that to the way a video store would work, where you had the disc for a few days, and if you failed to return it in time, you paid a hefty late fee.

As with Amazon, Netflix discovered how to establish efficient mailing centers in key locales, first in the U.S., where you could usually depend on one-day or two-day delivery of your selected video. Unfortunately, when a popular movie first came out, you might wait extra days or weeks to get your selection.

Netflix saw the future, and began to migrate to streaming video. Indeed, it dominates the Internet in such a way that some ISPs would routinely throttle Netflix content in favor of their own cable systems. That’s what forced net neutrality, although its future is dim with today’s FCC. That said, customers won’t stand for a recurrence of this untoward behavior.

In any case, streaming content tended to be a mixed bag, and not always the latest movies or TV shows. But Netflix had a trick up its corporate sleeve, which was original content. Beginning with such provocative shows as “House of Cards,” a compelling political thriller, Netflix got on the map real fast. Some of these shows have even earned Emmy nominations and wins when pitted against traditional TV stations and cable channels.

The Netflix stock-in-trade is to release all episodes of a season in one fell swoop. So you can sit there and binge on a full season in the space of a night or two. The typical Netflix series may consist of eight to 12 episodes, and is thus much shorter than the traditional network TV season, and the same as fare from such premium cable channels as HBO and Showtime. No ads, no restrictions on language and some explicit content, Netflix is doing the traditional premium channel routine one better.

On a smaller scale, Amazon Prime Video is a compelling competitor, and it also offers video sales and rentals, same as iTunes.

So is Apple planning to go up against Amazon and Netflix? Is it going to jumpstart yet another subscription service, or make those shows exclusive features of Apple Music? Does it mean that there’s an Apple Music & TV in our future?

Of course, it would help to see a true demonstration of compelling TV content rather than a silly novelty series. But Apple has certainly hired the right executives to deliver the goods.

My only concern is actually having time to watch yet another TV series. I’m just getting around to catching up on some Netflix fare, and I haven’t even considered Amazon. All right, I’m starting the second half of the new superhero series, “The Defenders,” but I can’t be alone in feeling overwhelmed.

Isn’t there quite enough out there already?

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