Taking on SVOD market leaders
If Apple (AAPL) plans to operate an online television service, its recent actions like aggressive talent hiring leave little doubt that it has Netflix (NFLX) and Amazon (AMZN) in its sights. With their global reach, Netflix and Amazon are largely regarded as the leaders in the SVOD (subscription video-on-demand) market.
Netflix closed 3Q17 with 109.3 million subscribers. It added 5.3 million new subscribers during the quarter. Amazon’s Prime Video is offered as part of it Prime membership program. The program had 90 million subscribers in the US (SPY) at the end of 3Q17, according to estimates by Consumer Intelligence Research Partners. The Prime program is also available in Europe (EFA).
Apple’s war chest
Currently, Apple offers video as part of Apple Music. It’s expected to transform into a standalone online video service.
According to research firm Future Market Insights, the worldwide SVOD market will be worth $108.6 billion by 2026—compared to $48.9 billion in 2015.
To expand its video business in pursuit of the $108.6 billion revenue opportunity in the SVOD market, Apple is preparing a $1 billion video war chest, according to a Wall Street Journal report. Apple’s video budget would go into acquiring and producing original content.
Netflix could face increased pressure
Considering that Netflix and Amazon have largely distinguished themselves in the SVOD market because of their large menu of original shows, Apple’s move in this space could increase the competition for subscribers and talents. Apple recently hired top television executives from Sony (SNE) and Amazon. Apple seems to be hinting that there aren’t any bounds to will do to staff its video team with high achievers in the industry.