Apple AAPL is reportedly planning to release films at theaters first and give them a wider window to run (by weeks) before bringing them to its upcoming streaming service, Apple TV+.

Per The Wall Street Journal, the iPhone-maker is already discussing plans with executives from the theater industry. Apple has also appointed Greg Foster, the former head of entertainment at IMAX IMAX, as a consultant to help with the plan.

Apple’s plan is much similar to Amazon’s AMZN film-release model. Notably, Amazon allowed its movie Manchester by the Sea to run for three months at cinema halls before bringing it to Prime video service. Moreover, Late Night, which the company bought in a bidding war at the 2019 Sundance Film Festival, hit theaters in June.

Did J.J. Abrams’ Snub Prompt Change in Apple’s Strategy?

The likely change in Apple’s strategy is due to the snub it received from  well-known director and producer J.J. Abrams despite prolonged negotiations and a $500-million offer.

Reportedly, Abrams and his team at Bad Robot found Apple’s “lack of demonstrable commitment to theatrical releases” unappealing. Per The Verge, the director signed a deal with AT&T’s T WarnerMedia for $250 million. The deal allows Abrams to direct, write and produce projects at Bad Robot for other third-party companies.

Notably, Abrams is co-producing Warner Bros. television drama Lisey’s Story alongside Stephen King and Julianne Moore for Apple TV+.

Why Netflix Should Worry?

Netflix NFLX insists on releasing movies it owns or produces simultaneously on its streaming platform and theaters, which has been a major bone of contention between the company and theater owners.

The company had been facing issues with theater owners over the upcoming release of the Martin Scorsese drama The Irishman. Notably, the movie premiered at the New York Film Festival, ahead of a limited theatrical run beginning Nov 1.

However, per The Washington Post, the movie will not be available in AMC, Regal and Cinemark — the three biggest theater chains in the United States — due to the absence of the “traditional three-month exclusive window.” Notably, The Irishman is set to release on Netflix on Nov 27.

Hence, Apple’s “Theater-First” strategy for its movies can deal a serious blow to Netflix’s movie ambition. The latest plan will now help Apple to woo prominent Hollywood filmmakers to develop content for Apple TV+.

Moreover, the price war that is set to intensify with the launch of Apple TV+ and Disney+ doesn’t bode well for Netflix’s investors.

Notably, Apple TV+ will be launched in more than 100 countries on Nov 1. The service will be available on the Apple TV app on iPhone, iPad, Apple TV and other platforms for $4.99 a month. Further, Disney DIS is set to launch (Nov 12) Disney+ at $6.99 a month and a Disney+, ESPN+ and Hulu bundle for $12.99 a month.

Notably, Netflix is the worst-performing stock among the FAANG group, which also comprises Apple. The stock has lost 1.8% on a year-to-date basis compared with Apple’s surge of 38.7%.

Year-to-date Performance

Apple’s Strong Content Makes It a Potent Challenger

The company is trying to build a solid content portfolio to stay ahead of the competition in the streaming space, which is set to get crowded with the launch of Disney+ and NBCUniversal’s Peacock.

Although its content portfolio is not as expansive as Netflix or the upcoming Disney+ (due to the inclusion of 21st Century Fox content), Apple’s focus on partnering with Oscar-winning content creators and popular Hollywood stars is expected to be a game changer.

Apple has inked major content deals with the likes of Oprah Winfrey, Octavia Spencer, Steven Spielberg, Francis Lawrence, Damien Chazelle, M. Night Shyamalan and Kristen Wiig. Also, its shows like See and The Morning Show feature the likes of Jason Momoa and Reese Witherspoon & Jennifer Aniston, respectively. Furthermore, the feature film The Banker stars Anthony Mackie and Samuel L. Jackson.

The company has also acquired global distribution rights of The Elephant Queen and Hala, an official selection of the 2019 Sundance Film Festival and 2019 Toronto International Film Festival.

Moreover, per Variety, Apple has acquired worldwide distribution rights to the Bryce Dallas Howard documentary Dads.

Zacks Rank

Apple currently has Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Netflix currently has a Zacks Rank #4 (Sell), Disney carries a Zacks Rank #5 (Strong Sell).


Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
IMAX Corporation (IMAX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research