Cook sees a changing media industry
If there were any doubts about Apple’s (AAPL) media agenda, the company seems to have clarified its plans during its fiscal 1Q17 earnings call, when CEO Tim Cook talked at length about original content and changes in the media industry.
Cook’s comments appeared to put Netflix (NFLX), Amazon (AMZN), Facebook (FB), and Alphabet’s (GOOGL) Google on notice regarding a fierce upcoming contest for original digital content. According to a Wall Street Journal report last month, Apple has discussed with Hollywood studios the idea of acquiring exclusive rights to their shows and movies to add to Apple Music.
Apple Music is part of Apple’s Services business, whose sales rose 18% to $7.2 billion in fiscal 1Q17. Its service revenue hit ~$25 billion in fiscal 2016, and it’s expected to rise to $50 billion by 2020. The chart above shows Apple’s service revenue trend over the last five quarters.
Potential cash windfall for Hollywood studios
While Apple’s media push will yield more revenue for the company and boost its revenue diversification efforts, such a push could also put billions of dollars into the bank accounts of Hollywood studios as demand for original content soars.
The Walt Disney Company (DIS) and Time Warner (TWX) could reap big benefits if Apple joins Netflix and Amazon in the original content buying spree. Apple has ~$200 billion overseas that it’s hoping to repatriate and invest in content acquisition under a tax amnesty promised by President Donald Trump.