uploads/2018/09/apples-service-revenues-2-1.png

Could Apple’s Spending on Original Content Hurt Netflix?

By

Updated

Apple to boost its investment in original content

Apple (AAPL) has been a late entrant into the video streaming market, where streaming giants Netflix (NFLX), Hulu, and Amazon (AMZN) have already invested billions in original content. In 2017, Netflix spent ~$6.3 billion on original programming. Amazon and Hulu spent $4.5 billion and $2.5 billion, respectively, on original and acquired content in 2017.

Last year, the iPhone maker committed to investing ~$1 billion in original content in 2018, but reports have suggested that the company might surpass this budget. According to Loup Ventures, Apple is expected to grow its video investment from ~$500 million in 2017 to $4.2 billion in 2022. However, Apple may not be able to compete with streaming giant Netflix, as the companies have vastly different content.

Article continues below advertisement

How Apple’s investment could differ from Netflix’s

According to a Wall Street Journal report, Apple would prefer to invest in original shows that are family friendly and that don’t have “gratuitous sex, profanity, or violence.” Investment in original content is reportedly vital for the company, as it will grow its services business. Apple’s services revenue rose 31.4% year-over-year to $9.5 billion in the third quarter of fiscal 2018. Apple’s services business includes Apple Music, iCloud, iTunes, and others.

Apple is also expected to use its music platform for its upcoming shows, as it did with its last two shows. Carpool Karaoke and Planet of the Apps, which were launched in 2017, were available only to Apple Music subscribers. The company is also expected to persuade its customers to adopt its streaming services through the iPhone medium.

On the other hand, Netflix prefers to show customers what they want to watch. In the second quarter, the company debuted a science-fiction action series and several non-English originals. The company is also investing in original kids’ programming and has also spent on original movies. For instance, the romantic comedies Set It Up and The Kissing Booth became very popular in the second quarter. These two films were watched by tens of millions of Netflix members. Netflix is also set to make a new film called Six Underground with commercially successful action director Michael Bay.

Advertisement

More From Market Realist