As a technology giant, Apple has made a lot of moves in popular fields such as AR/VR and autonomous driving in recent years. In the streaming market, which is a bit small for Apple, Apple is not idle. Although there are all indications that Apple only regards streaming as a side business, but with the family base, and its Apple Music and Apple TV+ and other brands are already not small, Apple's actions still have a lot of influence on the players on the field.
On January 4 this year, Apple's market value once exceeded $3 trillion, becoming the first company in history to break through this level.
The industry has speculated that Apple will lay out major businesses in the next step, so that its market value continues to be so stable and progressive. New outlets such as AR/VR and autonomous driving have become Apple's new favorites this year, and its every move has also entered the spotlight. By comparison, while Apple generated $366 billion last year, a third more than in 2020, its investment in the side business of streaming is only a few billion dollars. Some people joke that Apple seems to be using pocket money to casually engage in a side business.
Apple's historical market cap source/The Economists
The giant muffled into the head of the streaming media
Although Hollywood executives are not impressed with Apple's involvement in the streaming field, it is difficult for the giants to enter the game and make people laugh. Although Apple's streaming business is completely unable to fight compared with streaming giants such as Netflix, the streaming media industry is still in the stage of crazy burning money. After all, Apple is rich and rich, and it is not afraid to burn money. But there's always a question, what attracted Apple to the game?
21 years ago, Apple released iTunes, which had a huge impact on the music industry at that time. It grabbed a chunk of song sales and sold hundreds of millions of iPods for people to play music. Later, iTunes also sold movies. Apple hopes to replicate this marketing model to the TV industry, which is an order of magnitude larger than the music market. But in the TV space, the paid download model is a thing of the past, replaced by a paid subscription model – a monthly fee/annual membership, whatever. In the two major areas of music and TV, Spotify and Netflix have pioneered paid subscription models, respectively.
This paradigm shift brings about a core change – in the past, it was the downloaded resources that were bought, and now it is the platform membership that is bought. Apple decided it was unlikely that consumers would only watch audio and video on their own platforms, so they didn't participate in the first place.
But in the end, Apple did not stand idly by, but joined the competition in the field of streaming media, and the influence is not small. The company launched Apple Music in 2015, making it the second largest streaming music after Spotify. The data also shows that Apple TV+, which has been launched for two years, is already the fourth largest streaming video provider by the number of members. Over the past few years, Apple has made other small vertical streaming investments, including game streaming Apple Arcade, publishing streaming Apple News+, and fitness streaming Apple Fitness. There are also rumors that Apple will release audiobook logistics media later this year.
The number of paid subscriptions to the world's top streaming media at a glance Image source /The Economists
Apple was able to launch its streaming products in more countries faster than its Hollywood rivals. Hollywood streaming providers need to start from scratch and create streaming services that are directly targeted at foreign consumers. Apple has also generously offered free trials to consumers, with fewer than a third of Apple TV+ subscribers said to have paid for the service. Apple has also produced some high-quality streaming TV series. Apple TV+ has reportedly received 190 awards and 763 nominations since its launch two years ago, including Ted Lasso, which won 4 awards and 20 nominations at the 73rd Emmy Awards.
Apple's disadvantage is the lack of accumulation of old episodes, resulting in a high rate of customer churn. In this regard, some smaller competitors have an advantage, such as Paramount+ and Peacock , which offer limited new film and television products but have a huge library of old film and television episodes accumulated over the past few decades.
Apple's investment in the streaming field is intermittent, looking a bit half-hearted, and it is difficult to understand. "Content is king" is the consensus in the streaming media field, and to succeed in this field, you must invest a lot of money in content production. But in 2021, Apple's cost of film and television production will be $2 billion, and Amazon's $9 billion and Netflix's $14 billion will not be comparable.
Not only production, Apple is not careful enough in the promotion of the streaming business. Although Apple has recruited executives from some large film and television companies, Silicon Valley insiders say Apple has not placed its top tech talent on streaming projects.
Apple entered the streaming media, did it go out of mind?
While Hollywood is very concerned about Apple's next move, many people in Silicon Valley are questioning why Apple is in the streaming space. For the global market capitalization company no.1, the streaming space seems too small. Apple's 2020 iPad sales revenue ($26.182 billion) is more than the total sales of the global record industry ($22 billion) in the same year, not to mention the iPhone; Apple's monthly revenue is equivalent to Netflix's annual revenue. Apple's revenue on streaming today relies heavily on the sale of home-made shows, rather than taking commissions on other people's works as was the case in the iTunes era. In addition, Apple's streaming services have limited retention of members because these services are also available on other platforms.
The best explanation for Apple's involvement in streaming is that the company's skyrocketing size has fundamentally changed Apple's project evaluation model. According to China Economic Network, Apple's total revenue in the first fiscal quarter of fiscal 2006 was $5.75 billion; and 15 years ago, when Netflix began to develop streaming, it cost billions of dollars to run a film and television production company, which accounted for a large part of Apple's annual revenue, so Apple executives decided to give up after learning about Hollywood's expensive episode acquisition price. Unlike in the past, Apple TV+'s content production budget is only 0.6% of the company's revenue.
Running a studio can bring benefits to Apple. Although streaming subscriptions may not lock users firmly like iTunes, the various services that come with Apple will still attract customers, allowing them to spend more time on Apple's platform, and will also add some "exit costs" to users who want to leave Apple's platform - Apple ecology, that is, the deeper the pit, the harder it is to get out of the pit.
The iPhone sold $192 billion last year, accounting for more than half of Apple's total revenue, so any risk of losing iPhone users will be particularly important to Apple. Considering the user attraction effect of streaming media, even if the market capacity is not large, Apple has chosen to participate in it to improve its ecology.
In terms of marketing, Apple streaming has also made some achievements. By working with Steven Spielberg and Tom Hanks to produce films, Apple has further strengthened its high-end brand; Apple has also partnered with many other pop stars. At a time when Silicon Valley is under fire for industry monopolies and privacy violations, Apple is also busy promoting a podcast by Nobel laureate Malala Yousafzai. Not many companies can use the film and television department as a prist.
Some experts pointed out that Apple and other streaming counterparts are not actually playing the same game. For a king like Netflix, this is a very disturbing asymmetrical competition, fortunately Apple's main business is not in streaming, after all, the energy is limited.
Apple TV+'s lack of a repertoire library can be solved by buying another's repertoire library — Apple has been seen as a potential buyer for studios like Lionsgate and Disney. But Apple's acquisition is likely to anger the U.S. Federal Trade Commission (FTC), so the company is very cautious about acquisitions. The FTC has pointed its antitrust sword at Silicon Valley, and its head, Lina Khan, has been critical of big tech companies and is currently investigating Amazon's $8.5 billion acquisition of STUDIO MGM. Big tech companies are competing fiercely to control the next tech highs, such as decentralized Web3 and virtual reality. At this critical juncture of fierce competition, if the acquisition of old film and television programs leads to antitrust investigation by regulators, it will be a strategic mistake for Apple.
If streaming continues to help Apple sell its products and brands, then Apple will naturally continue to invest in the field. But the next investment will become very high: It is estimated that in 2022, the global cost of film and television production will exceed $230 billion, almost double that of a decade ago.
Some small-scale players may be out of the game because they can't afford high expenses, and the status of large households such as Apple is likely to be further strengthened. But given that Apple's ambitions behind it are mainly in AR/VR and car building, streaming may still be a "side business" for it.
Source: Sina Technology