Apple’s short term plans are easy to predict. They exist on an annual cycle thanks to the frequency of iPhone refreshes, while rumors and product line leaks make up the rest. Longer term ambitions are a little trickier.
At an earnings call to investors at the start of the year, Apple CEO Tim Cook said he wanted to double services revenue by 2020. This is a good indicator of where Apple is going – services include things like Apple Music, Apple Pay, and the App Store. But what else might that entail in the future? Speculations over the last year or two, plus a few tentative steps, indicates Apple might wish to add another level to this group… in the form of video.
How likely is this to happen? And what shape will it take? Let’s take a look.
Will video be the next ‘Service’ for Apple?
If Apple decides to go all-in on video, it might be a risky move. Apple Music is still lagging behind Spotify with just over 20m users. However, analysts have most recently begun touting a big ‘media’ or ‘cloud’ service acquisition. But will these help to sustain the growth Apple is relying on as iPads decline and iPhone sales slow? It’s hard to say – but one thing’s for sure: over the past year or so, we’ve been hearing more and more about Apple’s film, TV and general video movements.
But now that the rest of the year is likely to be taken up with iOS 11, the iPhone tenth anniversary edition and then the big holiday quarter, has Apple already missed its mark this year? Will they be late to the party once more? Let’s take a look at where Apple is when it comes to video, TV, film and streaming, and what can be extrapolated to give us an idea of what Apple’s game plan might be as we look through to the end of 2017 and beyond.
A brief history…
Let’s start with the Apple TV. You may think the set-top box which allows users to stream video from other devices to a TV was a project that came off the back of the iPhone’s success, but it actually arrived earlier in 2007, a few months before the iPhone was unveiled. Here’s what it looked like:
Pretty primitive. While it could store movies and music on its expansive hard drive, it couldn’t stream content via AirPlay. Though it received some significant updates shortly after release, including connecting it to the iTunes store, by the time a second generation came along Apple was fully distracted by the iPhone, and later the iPad. Though it was periodically updated, it wasn’t until 2015 that we really got a sense that Apple was still interested in video with the release of the fourth-generation Apple TV. With the release came a brand new App Store. Still, the focus here was on developing apps and games, much the same as its iOS devices.
However, fast-forward a year and a new TV app was announced. Arriving with iOS 10.2 in December 2016, the app hoped to consolidate video from various sources, including iTunes, so users could access various content in one place: Apple’s place, using Universal Search as the selling point. Though its availability doesn’t stretch much beyond US users at the moment, it can be seen as a kind of proto-platform that could eventually serve the building blocks of Apple’s own service.
But ultimately we’ve heard little more as the platform struggles to sign up new services, meaning that users would still have to go into another app to access another service’s video library.
However, there is one more piece of the puzzle. Apple Music. Apple launched it back in 2014 and though it’s achieved steady growth and eased into second place in the music streaming game, it’s still 30m or so users behind Spotify at last count. What does this say to us? That the likelihood of Apple launching its own video streaming service to rival the likes of Netflix is highly unlikely. We’d say Apple learned a lot from the Apple Music launch, and it would be hesitant to go head-to-head with Netflix while Apple Music is still a fledgling service.
This is also supported by Apple’s decision to put its first video efforts into Apple Music.
Apple is already making video
Though this piece is about Apple’s video ambitions moving forward, let’s not forget that Apple is already working on original content. At Apple’s Worldwide Developers Conference in July 2016, it was announced that Apple would produce and distribute Carpool Karaoke: The Series. Based on the popular segment from James Corden’s Late Late Show, the 16-part series would pair various celebrities and musicians and be available only to Apple Music subscribers.
It was a fitting show for Apple to produce, as it allows it to justify its presence on Apple Music while still exploring video production. Though it was initially planned for spring 2017, it’s been delayed until later this year.
However, Apple’s other show is Planet of the Apps, a show about apps and their creators who will be mentored by celebrities like Gwyneth Paltrow and will.i.am.
It’s not groundbreaking, but it’s likely Apple is taking a multi-pronged approach here. Apple is using its influence and massive amounts of cash to dip its toes in. In fact, Jimmy Iovine, who helped spearhead Apple Music is now heading up much of Apple’s approach to video, and recently outlined this path in an article on Bloomberg. “We have the freedom, because it’s Apple, to make one show, three shows, see what works, see what doesn’t work until it feels good.”
He also goes on to say that “a music service needs to be more than a bunch of songs and a few playlists. I’m trying to help Apple Music be an overall movement in popular culture, everything from unsigned bands to video. We have a lot of plans.” This indicates that Apple is still far and away from moving outside of the Apple Music bubble. It might be the case that it’s far away from Hollywood too. After all, if it produced a movie where would it go? It’s unlikely Apple would help produce a movie without full control on where it can put it.
In the meantime, these shows might not change the world, but they might prove to Apple that it can make original content, giving it the confidence to push forward.
What might that future look like?
This is where the prospects get really exciting. We can easily look to the rumors over the last 12 months or so to get an idea of where Apple’s heading. And it really feels like there’s an important acquisition on the horizon – which would make sense, and help Apple avoid another major service launch from scratch.
The most current rumors suggest Apple is preparing an acquisition. This has ranged from cloud service providers, to car manufacturers, but right now, the most likely seems to be a film studio. Apple has roughly $250 billion of cash in the bank so its options are almost endless. It’s possible Apple will buy an entire studio – there are reports Apple’s met with both Paramount and Sony.
As for making its own platform? Again, it’s unlikely this late in the game – the time and resource it would take would push Apple even further back, and it’s likely an acquisition will kick Apple off down this route, as it did with Beats and Apple Music. Could Apple buy Netflix? It’s unlikely. They could afford it, sure, but Netflix is already so ingrained into the zeitgeist, Apple’s ownership would be more likely to hinder it than provide a jumping off point for the company.
Apple might also enter the producing game by buying up the rights to movies. They’ve been rumored to be in attendance at film festivals, and it’s likely Apple noticed Amazon’s first Oscar win with Manchester by the Sea and now wants a slice of that pie. But is that enough? This brings us back around to the likelihood of a studio acquisition, a way to spend its $250 billion in cash, and another tantalizing rumor.
Might Apple buy Disney? This is a heady prospect. As a recent article on the LA Times entertains, a merger would make this the world’s first 1 trillion dollar company. The article notes that, as one of the biggest companies in the world, Disney, if it was taken over, could only be done so by one other company: Apple. And how much might it cost them? About $250 billion. Considering Steve Jobs gained a 7 percent share in Disney after he sold his 50.1 percent majority stake in Pixar in 2006, this would be an apt takeover in many ways.
But how likely is it? Apple’s CFO Lucas Maestri recently gave an interview to Associated Press in which he said “We are looking at every size of acquisition, so we will see how it goes going forward.” It’s certainly an exciting prospect.
Movies? Or services…
Recent prospects have questioned whether Apple might focus on growing its services first, and while it may still do so, Apple is nothing if not bombastic in its achievements. Rarely an earnings call goes by without a record breaking moment. Of course, in its most recent earnings call, it noted a “strong momentum of our services business, with our highest revenue ever for a 13-week quarter.” If its major competitor is winning Oscars, then Apple will want in.
We’d say with video services dominated by Hulu and Netflix, Apple might be more likely to move into a hybrid of producing short order series for Apple Music and produce fully-fledge movies through an Apple Studio – most likely via an acquisition.
The idea of launching a full-on Apple Video service is unlikely – Adding another subscription when it’s already as tricky persuading its users to subscribe to iCloud or Music? It could dilute its own ability to gain subscribers.
For now – the above dreams of an Apple movie studio remains a pipe dream. It’s likely Apple will move slowly – with the rest of the year focused on the 10th anniversary iPhone, it’s unlikely we’ll see much movement in new services or products until at least next year.
Having said that – here’s a question. What might produce some much needed sparkle as we head towards the big iPhone event in September? Hollywood.