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Apple To Spend $900 Million On Original Video Content This Year: Analyst

Apple (AAPL) is likely to spend about $900 million on video content this year as it ramps up production of original TV shows to take on Netflix (NFLX) and others in subscription video on demand, a prominent analyst said Friday.

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Apple has yet to announce a streaming video service. Hollywood media outlets, however, have reported it has 16 shows in the works. That's comparable to Netflix in its first year of original programming in 2013. At that time, it released 13 originals, Gene Munster, managing partner of Loup Ventures, said in a blog post Friday.

On Friday, Apple announced a multiyear content partnership with Oprah Winfrey. It didn't, however, provide details about where people will watch that content.

"Together, Winfrey and Apple will create original programs that embrace her incomparable ability to connect with audiences around the world," Apple said in a news release. "Winfrey's projects will be released as part of a lineup of original content from Apple."

Munster expects Apple to spend about $900 million on TV content in 2018, growing to $4.2 billion by 2022.

Going To 20% Of Revenue

The company's video plans are part of its major push into services, which include Apple Music and other offerings. Services will account for about 14% of Apple's revenue this calendar year, growing to 20% by 2023, Munster said.

"Content is an emerging part of the (company's) services pillar, as evidenced by the success of Apple Music, now with over 50 million paying subscribers," Munster said. "Original video content is a new category for Apple and represents optionality to services revenue growth and is not yet reflected in the value of Apple shares."

Munster believes Apple will start generating revenue from its video service in 2019 or 2020.

Apple Video Service Advantage

The Cupertino, Calif.-based company is late to the subscription video business. However, its huge hardware installed base gives it an edge.

"What separates Apple is the company's access to 1.3 billion active devices through which they can subtly encourage adoption," Munster said. "Apple Music's market share gains over the past two years are a testimony to the power of coupling services with widely adopted hardware."

Apple's original content orders include series from filmmakers Steven Spielberg and M. Night Shyamalan, various reports have said. It also has shows coming from "Battlestar Galactica" remake developer Ronald Moore and actresses Jennifer Aniston and Reese Witherspoon.

Apple shares were down 1% to 188.84 on the stock market today.

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