AP NEWS

Apple’s Hollywood moment draws intense interest, skepticism

March 31, 2019

Hey, Siri, call Steven Spielberg.

Since Hollywood caught wind of Apple Inc.’s entertainment ambitions several years ago, filmmakers and studio executives have been wondering exactly how the iPhone maker will delve into the streaming video market — and whether it can dominate in the crowded and fast-growing arena.

The tech giant has spent the last two years securing deals with show business royalty such as Spielberg, Oprah Winfrey and Reese Witherspoon to create a lineup of programming to compete with Netflix Inc., Amazon.com Inc. and Walt Disney Co.

Apple’s streaming plans have been cloaked in characteristic secrecy. The company is expected to finally provide answers Monday morning when Chief Executive Tim Cook takes the stage at the Steve Jobs Theater in Cupertino, Calif. There, he will pitch Apple’s new streaming video strategy to a crowd of celebrities and studio executives.

There is intense pressure on Apple to deliver.

Filmmakers, writers and producers have been hoping that Apple would become a big buyer of premium content, filling a gap in an industry that is experiencing a wave of consolidation and disruption. (Just this month, 20th Century Fox, one of the oldest movie and television studios, was taken over by Walt Disney Co. in a $71.3-billion deal driven by Disney’s desire to charge aggressively into streaming.)

But people familiar with the effort say Apple’s Hollywood foray has suffered from inevitable growing pains and exposed a culture clash between Silicon Valley and the legacy studio business. Some filmmakers have complained that the tech company’s cautious approach to content could hinder its ability to compete with the likes of Netflix.

“There is a lot of catch-up, obviously,” said Kelli Richards, a former Apple executive who is now CEO of All Access Group, a digital music and entertainment industry consultancy. “They are just so far behind at this point with Netflix and Amazon.”

Apple, whose entertainment operations are building a growing presence in Culver City, brings deep pockets, an intensely loyal customer base and the credit card information of hundreds of millions of iPhone users.

Despite Apple’s reputation as a technology pioneer, many industry veterans and analysts remain skeptical of its move into original productions.

“Even if they’ve been an emperor of the consumer landscape, at least from the content perspective, they are on the outside looking in,” said Daniel Ives, a managing director of equity research for Wedbush Securities. “That’s not a position they are used to.”

Apple declined to comment or make its executives available for this story.

The content push comes as Apple is under pressure to find new ways to grow its business beyond its flagship iPhone. Sales of the device have been declining as smartphones have become more widely adopted.

Meanwhile, services, acategory that includes Apple Music, have been a bright spot. Apple wants to grow its services business, run by Eddy Cue, to roughly $50 billion in revenue by 2020, compared with $37 billion in fiscal 2018.

But Apple is also a late entrant in the streaming wars. Los Gatos, Calif.-based Netflix, which has about 140 million paid subscribers, will spend an estimated $15 billion on content this year. Hulu and Amazon also have aggressively expanded their entertainment offerings, while Disney and AT&T Inc.-owned WarnerMedia are ramping up their own streaming services to launch later this year.

While Apple has a long history of being a distributor and seller of music, books and movies, it has had limited experience producing original video content.

Some details and theories about Apple’s streaming plans have begun to emerge. Analysts have estimated the service could charge $8 to $15 a month, but Apple may initially offer its content for free for Apple device users.

Along with original shows, Apple is expected to offer subscriptions to other streamers through its own app, making it similar to Amazon’s Prime Video Channels platform, which allows users to sign up for premium channels like HBO, Starz and Showtime. (Netflix CEO Reed Hastings on Monday said it would not make its content available on the Apple service, citing competition.) Apple is also expected to launch a subscription service for news.