Published 9:00 AM EDT Mar 16, 2019
In 20 short years of its existence, streaming service Netflix has rewritten the rules for home entertainment, helping to cause traditional TV ratings to tumble, viewers to ditch their cable subscriptions and Hollywood to change the type of content it makes.
When a made-for-streaming movie like Roma sweeps many of the Academy Awards categories, you know something radically different has happened.
Now, Apple is looking to take on entertainment’s huge gorilla, with a new streaming entertainment service. Apple invited reporters this week to its Cupertino, California campus on March 25, where the company is expected to officially unveil the service at the “It’s Show Time,” event.
The as-yet-unnamed service will feature programming from the likes of Oprah Winfrey, Steven Spielberg, Reese Witherspoon and Jennifer Aniston, who have all been commissioned to create series and movies for Apple and the 1.4 billion plus folks who own iPhones, iPads and the Apple TV set-top box.
More: Oprah, Brie, Snoopy and Jen: Here’s a list of the Apple TV shows and movies coming soon
More: ‘Let’s clear this one up right away’: Apple throws jabs at Spotify’s complaint in Europe
My question: Does Apple have another iPhone-size hit here, or is it too late? Deeply entrenched Netflix has 140 million subscribers, No. 2 Amazon (which also includes subscriptions for expedited shipping) has 100 million subscribers and No. 3 Hulu has 25 million subscribers. Can Apple cut a slice of home entertainment for itself?
Apple, believes analyst Daniel Ives from Wedbush Securities, could have as many as 100 million subscribers within three to five years and be a firm No. 2 to Netflix. More on that in a second. Apple’s programming track record is extremely mixed.
The streaming services have given us hits like “House of Cards,” Stranger Things” and “Orange is the New Black,” on Netflix, the Emmy winning “Marvelous Mrs. Maisel,” on Amazon and Hulu’s “Handmade’s Tale,” also an Emmy winner.
Apple gave us the “Planet of the Apps” game show and a reboot of “Carpool Karaoke” as its first two streaming entertainment tries, and both were critical flops.
But since then, Apple has hired former Sony TV toppers to run the division and said it would spend up to $1 billion on programming. It went on a spending spree to nab folks like Spielberg and Winfrey to work with Apple. A billion dollars may sound like a lot, but Netflix spends $8 billion – yearly.
Additionally, Netflix is known as a place where creators can let loose, without the restrictions they’ve endured on network TV and cable. Apple reportedly wants a family-friendly environment, and CEO Tim Cook himself reportedly canceled a series from rapper Dr. Dre before launch because it had too much sex and violence, according to the Wall Street Journal.
Meanwhile, Ives says Apple can get to 100 million subscribers by working its base. The company, which has been experiencing slower iPhone sales, still has 1.4 billion owners of iPhones. A 7 percent buy-in from the base would get the service to 100 million.
However, it’s not that simple. Apple Music, the Spotify-like music streaming service that launched in 2015, currently has just over 50 million subscribers, or 3.5 percent of the iPhone base. And despite all of those iPhone owners, Spotify is still firmly the No. 1 music service, with nearly double Apple’s numbers, at 96 million subscribers.
Gene Munster, an analyst with Loup Ventures, thinks Apple would more likely to be able to achieve 50 million subscribers, as it has done with Apple Music.
Apple needs the new entertainment service to take off because “sales of iPhones have fallen off a cliff, and services is the key,” Ives says.
In the most recent holiday quarter, iPhone sales fell 15%, while Services, which includes iCloud, iTunes and Apple Music, grew 19%.
Services, which generated $10 billion in the quarter, now generates more revenues than iPads, Macintosh computers and the Apple Watch.
But for the entertainment service to click, Ives says it needs more than the 30 plus shows and movies Apple has put into production. For a service to charge $12 monthly and take on Netflix and Amazon, it needs hundreds of shows, he says.
Ives expects Apple to acquire a production company like A24 (which made the movies Eighth Grade and Lady Bird) or a really big “get,” like CBS and/or Viacom in order to feed the programming beast and go toe to toe with Netflix and Amazon.
“There’s a content arms race going on, and Apple is on the outside looking in,” he says.
And to fund all those new shows, Apple is looking at you Talking Tech readers.
That’s why you’re getting nagged every morning to increase your iCloud storage, subscribe to Apple Music or rent a movie on iTunes. Apple has two choices: come up with new features for a smartphone that will make people camp out again and have to have – which seems unlikely, based on the last few years – or work the existing base to sell to.
When’s the last time you bought a new iPhone?
When’s the last time you watched a movie on Netflix?
I guess that answers it, doesn’t it?
In other tech news this week
DirecTV Now dramatically hiked subscription rates for its cable alternative. The service, which had been billed as a cheaper way to get TV than cable, now adds $10 monthly to its bill, making it hands down the most expensive of the streaming TV options, starting at $50 monthly. YouTube TV, for instance, is $40 monthly. In other streaming news, music streamer Spotify and TV’s Hulu said it would combine an offering for $9.99 monthly. The offering runs through June 10th.
Facebook went down this week, blaming a “server configuration change.” reminding us that once again, it’s a good idea to protect your digital identity by strengthening your credentials. We show you some simple steps to get it done.
Our favorite hack of the week: We show you how to ditch Siri and use the Google Assistant instead, on your iPhone. Just say, “Hey, Siri; Hey, Google,” and you’re halfway there.
This week’s Talking Tech podcasts
Are you excited about the latest $1,000 smartphone from Samsung? I’m not. I explain why, on #TalkingTech.
Imagine this: living without a smartphone. I’m going to try. For a few days.
Tesla Model Y preview
Protect your Facebook credentials
Telsa Model Y report
Below: our favorite image we snapped this week. What’s yours? Share with me on Instagram (@jeffersongraham.)
And that’s a wrap for this week’s Talking Tech news wrap. Please subscribe, http://technewsletter.usatoday.com, listen to the daily #TalkingTech podcast where you get online audio, and follow me (@jeffersongraham) on Twitter, Instagram and YouTube.