Apple is reportedly entering the video streaming wars and is budgeting $1 billion for original and exclusive content in the next year, though analysts don’t expect the tech giant to go toe-to-toe with industry behemoths like Netflix quite yet.
The Wall Street Journal and Bloomberg reported yesterday on Apple’s first big foray into original video content, saying the iPhone maker would seek out and produce its own material. Apple could end up funding as many as 10 shows over the course of a year, the Journal reported.
“It would certainly make sense for Apple to do this,” said Dan Rayburn, an analyst with Frost & Sullivan. “It makes sense, but it’s not a way for Apple to compete with Netflix or Amazon. They wouldn’t spend $1 billion on a video subscription service, they’d have to spend a lot more than that.”
Though eye-popping, the $1 billion pales in comparison to streaming giants. Analysts estimate Amazon spends about $4.5 billion on content annually, and Netflix said recently it will spend $6 billion this year.
Rayburn said Apple will probably use its new content to help sell devices and other services, such as its subscription music service.
“They’re going to use those video services to promote other products and platforms they sell,” Rayburn said. “It’s about the larger ecosystem.”
Already this week, there are signs the streaming video arms race is heating up. On Monday, Disney said it would stop licensing its movies to Netflix, including Pixar, Star Wars and Marvel films as it pursues its own streaming service.
Also Monday, Netflix said it has hired Shonda Rimes away from Disney. Rimes is responsible for some of ABC’s biggest hits, including “Grey’s Anatomy” and “Scandal.” Rimes will now exclusively develop shows for Netflix.
Apple, meanwhile, hired Jamie Erlicht and Zack Van Amburg, former Sony TV executives behind the show “Breaking Bad.”
Brett Sappington, a digital entertainment analyst with Parks Associates, said Apple is entering an increasingly competitive market.
“There’s a bit of a bidding war going on in content today,” Sappington said. “Having original or exclusive content, particularly popular content, is a key.”
Apple already has two shows, “Carpool Karaoke,” based on the viral segment from “The Late Late Show with James Corden,” and “Planet of the Apps,” a Shark-Tank style show where app-makers pitch their ideas.
Apple did not respond to a request for comment.
Shares of the company closed yesterday at $160.95, down 65 cents. They have advanced more than 40 percent so far this year.
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