Tech giant Apple has reportedly set aside $1 billion to invest in the creation of original content as it looks to secure a firmer spot in the burgeoning over-the-top streaming market.
According to the Wall Street Journal, the budgeted funds will be expended over the course of the next year, and will be used to fund up to 10 shows. Production efforts will reportedly be led by Jamie Erlicht and Zack Van Amburg, both former Sony executives Apple hired back in June.
The $1 billion figure is equal to the amount allotted by Amazon for original content back in 2013, and comes in at fraction of projected $6 billion and $4.5 billion Netflix and Amazon are expected to spend on programming this year.
The move comes as Apple looks to gain a firmer foothold in a media market that is increasingly focused on original content – with high costs.
It will be interesting to see how Apple navigates the challenge, especially given its recent battle against dipping device sales.
In its third fiscal quarter report,though Apple made a comeback, posting a 2 percent uptick in iPhone sales, a 15 percent improvement in iPad sales, an earnings boost of 12 percent to $8.7 billion, and a revenue increase of 7 percent to $45.4 billion.
Those figures could improve even further later this year with the planned launch of the next iPhone. The device will reportedly include a bigger screen – a helpful asset for a company looking to push more video into user’s hands.
However, Apple is far from alone in spending on content.
U.S. wireless carriers AT&T and Verizon have adopted two very different content-focused strategies. The former is working to transform itself into a heavy hitting wireless and media company, as evidenced by its DirecTV acquisition and recent deal with Time Warner. Verizon, on the other hand, seems to be angling itself more as a wireless company that offers media on the side, as seen with the launch of its go90 mobile video app and acquisitions of companies like AwesomenessTV.
But those seeking to play the content game are up against popular streaming competitors like Netflix and Hulu.
Netflix earlier this week announced it has successfully wooed television titan Shonda Rhimes away from ABC with an exclusive, multi-year agreement. Rhimes’ longtime producing partner Betsy Beers will also make the move.
That deal is part of Netflix’s programming strategy, which is almost laser focused on original content. In the second quarter, the company said it launched 14 new seasons of original series, 13 original comedy specials, six original documentaries, two original documentary series, nine original feature films, and seven original kids’ series. That trend is expected to continue, as Netflix indicated it plans to continue investing in content, particularly in owned originals.
This approach has been a boon for Netflix, helping the company grow to more than 100 million subscribers in the most recent quarter. But it comes with a cost.
Netflix’s negative free cash flow figure more than doubled year over year, with the total shortfall expected to reach upwards of $2.5 billion by year’s end. Netflix indicated it “expects(s) to be FCF negative for many years.”
Similarly, losses are piling up at fellow streaming company Hulu. According to figures posted by BTIG Analyst Richard Greenfield, Hulu lost $353 million in the first half of 2017. That figure was nearly five times the company’s loss of $72 million in the first half of 2015, and approaching double its loss of $195 million in the first half of 2016.