Althouse: "But in Hollywood, Apple must hone its identity and reputation in an entertainment market crowded with competitors, from Netflix and Hulu to HBO and Disney."

March 24, 2019

"But in Hollywood, Apple must hone its identity and reputation in an entertainment market crowded with competitors, from Netflix and Hulu to HBO and Disney."

"It’s using its deep pockets to buy itself a name in Hollywood. Apple is paying Witherspoon and Aniston about $1.1 million an episode each, according to a Hollywood executive with knowledge of Apple’s plans.... Apple has been trying to shed the notion that it is different because it hails from Silicon Valley. Hollywood is programmed to be skeptical of outsiders who don’t understand the intricacies of filmmaking.... Still, Apple has no Hollywood track record, and people who have inked deals with the company described the decision as a leap of faith in Apple’s ability to execute on its plans and deliver big audiences.... 'Apple is the only company in the world that can drop a couple million dollars in entertainment and get Reese Witherspoon and M. Night Shyamalan on board without any articulation of a plan in terms of marketing or distribution,' said one well-connected Hollywood executive, who spoke on the condition of anonymity so as not to upset Apple.... "[Apple CEO Tim Cook] is paranoid about anything that affects his brand,” the Hollywood executive said. Now that Apple is becoming its own film studio, it’s in direct competition with other services."

WaPo reports.

Apple, the TV/film studio. What do you think? I care a lot more about Apple's various devices than I do about whatever TV and film it might be able to throw into the already-huge mix of TV and film. There's a high chance of diluting the brand. The brand for the devices is so clean and neutral. A TV show or film with the same kind of aesthetic would be so incredibly dull that it is, realistically, impossible.

29 comments:

tim in vermont said...: If they are not in either news or entertainment, how will they be able to do favors for the powerful in DC?; 3/24/19, 8:56 AM
rhhardin said...: Do The Switch (2010) with apple products.; 3/24/19, 8:59 AM
Phil 314 said...: Money to burn. Is Netflix a long term viable financial model and if any doubt why try to emulate it?; 3/24/19, 9:01 AM
David Begley said...: Recall how Coke bought Columbia or Paramount. Gulf & Western also bought a studio.

Why? Big profits! Great margins!

Apple has good margins but it is in the gadget business. Much better business in IP and Apple knows that.; 3/24/19, 9:03 AM
Charlie Currie said...: To paraphrase Instapundit, Apple/Cook are out of ideas when it comes to devices.

Plus, if a book and shampoo seller can get into the movie business, why not a music and watch seller?; 3/24/19, 9:08 AM
SDaly said...: Netflix is not a long term model. It had the advantage of being a "first mover" but it loses money hand over fist and will collapse like a House of Cards, as streaming competition intensifies.

Netflix Inc. must grow. It has no choice. Sharks must keep swimming, and Netflix needs to keep signing up as many newcomers as it can. This is the path the company has chosen. Netflix’s blueprint is to spend money it doesn’t have today to land alluring programming and sign up as many customers as possible — and worry about the bill later.

It’s a rational strategy to take advantage of a unique moment when competition is relatively subpar, viewing of streaming video is exploding, borrowing is cheap and investors are happy to let Netflix be financially irrational. The idea is Netflix can gather up customers now and squeeze them for more money and profits once they’re happy long-term customers and conditions are right.

All that investors ask for now is that Netflix add new customers so quickly they won’t think about five consecutive years of burning cash or the more than $32 billion the company owes in coming years for TV series and movies, plus debt repayments, lease costs and other expenses. That figure is 115 times Netflix’s peak year of cash generation in its history. So yeah, Netflix has to grow.; 3/24/19, 9:10 AM
steve uhr said...: Music didn't dilute the brand and Amazon Prime TV didn't dilute the Amazon brand. Hollywood is "skeptical"? What does that even mean. Apple is a new competitor on the block, of course Netflix, etc. don't like that. But the people who benefit from more competition, including actors, directors, others in the movie business apart than owners, and consumers of course, should be happy.; 3/24/19, 9:10 AM
Curious George said...: Nobody has done more with less than Jennifer Aniston. I don't get it.; 3/24/19, 9:11 AM
Kevin said...: Here's the question for Tim Cook:

If Apple's future is in the entertainment business, why is Tim Cook the right person to be CEO?

Both of these things cannot be true.; 3/24/19, 9:12 AM
Michael K said...: SONY found out how hard it is to make money isn Hollywood. There is even a book about it.; 3/24/19, 9:14 AM
Quaestor said...: I like macOS because it's UNIX and consequently not so vulnerable to malware and penetration as Windows, but I run it mainly on generic hardware. I own a few iMacs and an iPad Pro, but they are secondary to my hacks, which are functionally equivalent to the high-end Mac Pros.

In spite of my admiration for their flagship operating system, I have little love for Apple as a corporate entity, especially since Cook took over. I hold him personally responsible for Apple's betrayal of its uses when it severed OS support for Nvidia GPUs.; 3/24/19, 9:14 AM
Maillard Reactionary said...: Fully agree with the Professor and with Phil 3:14. Senior management is always under pressure to "grow the business". Apple's key competency was always developing functionally clean, aesthetically pleasing products that had an intuitive user interface and which played together seamlessly and dependably. Unfortunately, at this point, just about everyone who wants an iPhone, IPad, Macbook, or IMac has one, so there is only population growth and the replacement market to drive sales growth.

Confronted by such a scenario companies typically look for acquisitions or try to diversify into other markets, or both. I recall analysts 10 years back or more calling on Apple to buy back stock or up their dividends, they were sitting on so much cash. (Warren Buffett freely admits that Berkshire has this problem, but in their case, the company is so big that it's hard to find acquisitions that would make a material difference in their results.)

Acquisitions tend to have a success rate of about 30%, which is terrible. Apple did pretty well diversifying into the music business, but that's probably saturating too.

This is a hard problem, and I don't have any smart ideas for them. Really, returning some of the retained earnings to the shareholders might be the best thing to do, but who needs high-paid executives to do that? Plus, it's hard for guys with egos like that to admit defeat or bafflement.; 3/24/19, 9:24 AM
Darrell said...: Apple could make TV shows and Movies bashing Trump.
Like the rest of the Hollywood/Left.; 3/24/19, 9:25 AM
Quayle said...: This was inevitable. There’s no money in the transportation of content - there’s only real profit in the content itself. I used to work at one of the major Telecommunication companies back in the 90s when we were all scrambling to build out networks. I was part of an ‘expeditionary force’ sent to Europe to work with two other major telecom companies from Europe in a joint venture, to build out a global network. Even back then the VP of strategy used to tell me that long-term the networks had no value. He used to say to me, “what brand of asphalt did you drive to work on today? You don’t know and you don’t care. That’s what’s going to happen to networks: you’ll just expected them to be there but you won’t care what brand it is. And clearly, in hindsight, that went precisely as he envisioned. That’s why AT&T and Comcast are now gobbling up media companies. There’s no profit in transporting the content. That’s why New York Times’ profit keeps falling. Their monopoly on the transport of content - on getting information from point A to point B - has been shattered by the Internet.

But that devaluation of the transportation of content is inevitably going to find its way to the display devices. Apples work hard to make their brand part of your self image but ultimately it’s all just gonna be “screens all around you” and who cares what brand they are. So I will have no choice but to move in this direction toward content as every other media transport and communication device company has; 3/24/19, 9:35 AM
Bruce Hayden said...: Notice that it never has been “Apple Music”, but rather “iTunes”. Why? Likelihood of confusion with Apple Records. And, I think an agreement decades ago between the two companies. Someone else may know more about this. But if it is an issue, Apple probably could afford to buy Apple Records now.; 3/24/19, 9:36 AM
buwaya said...: Apple and Silicon Valley in general aren't out of ideas, its just that they are not set up to use ideas and turn them into products. They are consolidated bureaucratic systems unable and unwilling to disrupt themselves. This is why Xerox almost accidentally invented modern computing in the 1970s but failed to make anything of it.

The business environment there has mutated away from the revolutionary, creative chaos of the 1960s-1990s where gangs of engineers would bail out of established businesses, find independent venture capital financing, and set out to murder their old employer.

Now all potential good ideas are bought up, and creative persons hired in, to a small number of established giant entities, which naturally smother change. The giant entities are protected by IP laws and their cash-cow revenue streams and market valuation. They can afford to buy out any potential disruptors.; 3/24/19, 9:40 AM
John henry said...: I've never understood the Apple cultism.

I'm sure they'll have an audience among their cult members.

Anyone else? Perhaps. Perhaps not

John Henry; 3/24/19, 10:04 AM
cubanbob said...: I suspect Apple is trying to go the RCA-NBC path. However in today's market I'm not so sure that will work when the likes of Netflix are burning tremendous amounts of money without any real profits to show for it.; 3/24/19, 10:05 AM
William said...: Maybe they can produce virtual reality movies?...... The reality which I'm currently forced to inhabit is stale and flat. I loook forward to saving the universe with my trusty sidekick, Jennifer Lawrence, in a future Apple production.; 3/24/19, 10:39 AM
Mountain Maven said...: Apple is on the way out.; 3/24/19, 11:25 AM
SDaly said...: What revolutionary computing advances are out there? I'm not a sci-fi fan, so maybe there are untapped veins of consumer products waiting to be born, but I'm already starting to pull back from tech as overly intrusive and anti-human. There is talk of implanting devices in our bodies to allow us to communicate our thoughts to others, but do people want this? Self-driving cars are, to me, a horror.

I suppose the medical field and space exploration will always be an area for advances, but those are not Apple's sandbox.; 3/24/19, 11:49 AM
PB said...: This is not innovation, but they haven't innovated in years. Witherspoon and Aniston should have gotten more.; 3/24/19, 12:05 PM
Bob_R said...: I'm using a wireless mouse that is rendered useless when it is being recharged. It's a small thing, but one of the reasons I'm skeptical of Cook's leadership. Apple used to get the small things right.

Apple's music delivery service had a huge head start because of the iPod and iTunes. It has squandered that with worse and worse versions of iTunes. Chris Thiele had a joke - "Apple: Well, we can't make it sound as good as vinyl; maybe we can make it as inconvenient as vinyl." I have a large music library loaded in to iTunes, but now use Spotify almost exclusively.

So I'll be very surprised if they can make a go with video. They are behind and it's been a long time since they've succeeded at something new.; 3/24/19, 12:19 PM
Rigelsen said...: Notice that it never has been “Apple Music”, but rather “iTunes”. Why? Likelihood of confusion with Apple Records.

You’re a bit out of date. Apple Music already exists. It’s their subscription music service.

Apple and Apple Records struck a deal a decade or more ago to resolve all trademark issues between them. Apple now owns the trademark full and clear, and licenses it to Apple Records for use as part of that specific mark. However, Apple is free to do anything else it wants with the mark, including music or wherever.; 3/24/19, 12:21 PM
Ralph L said...: A conglomerate is so 20th century foxy.

It'll be spun off or sold later when Apple is in decline, having sped up that decline.; 3/24/19, 12:29 PM
Kevin said...: Apple did pretty well diversifying into the music business, but that's probably saturating too.

The Apple way was to disrupt the music business.

There is a way to disrupt the entertainment business, but since they've failed to do that with AppleTV, I have no hope they have what it takes to disrupt Hollywood.

And if I want to invest in movies, there are plenty of other places who've already proven they know how to work the current system better than Apple can.; 3/24/19, 2:35 PM
Maillard Reactionary said...: Even disrupted business models eventually lead to saturated markets.

I was interviewed once by a firm (ca. 2000) that was based on the idea of the "cloud DVR", i.e., you could store and view recordings on their servers, rather than your own box, the idea (hope) being that people would watch more movies that way, how could it miss?

I asked my interviewer what the company would do if it turned out that people were already spending about as much time watching TV as... they had time to.

He said he would probably jump off a cliff (he was one of those enthusiastic Persians that tend to do so much better here than back home). I hope he had a soft landing, the company was gone in a year or so. I saw from their 10-Qs that they were into negative amortization on their debt, so I had decided that it didn't look like my kind of place.

I didn't actually get an offer, but I attribute this to my offering a different opinion on the best wine for our dinner that evening.

There's a lesson in there somewhere for the youngsters among us, I will let them figure out what it might be.; 3/24/19, 3:19 PM
n.n said...: Apple must self-identity as Goofy.; 3/24/19, 5:35 PM
MB said...: Within Apple there is to be a struggle between two types of people, the designers on one hand (who supplanted the engineers 20+ years ago) and the marketing and media types on the other.
The designers haven't put out any exciting new devices for years. Technology progresses relatively slowly, compared to fashion, which changes every season. Few get excited about technology anymore. So if Apple wants to stay relevant, to not be left behind, it cannot depend on technology. It's the cycle of life.
The media types have the upper hand. Now they are getting more allies.
It's clear where Apple is heading. It will be a platform and produce its own content, like HBO, Netflix and Amazon. They're counting on aggressively pushing these new services to their existing customer base to get back into the game.; 3/30/19, 9:43 AM