Apple has sunk a few billions dollars into a project to turn the company into a purveyor of finely crafted content. You know. Like Disney. Netflix. Hulu. And CBS, NBC, ABC, BBC, USA, Hallmark, and a growing number of networks that create their own content.
Why is Apple getting into content, too? It’s the nature of business. Diversification. The disease is worse for technology companies than it was for companies that grew up in the industrial age.
Sell. More. Again.
This week I read a piece in The Hollywood Reporter. Yes, it’s my Bible for everything happening in, well, uh– Hollywood. Guess where Apple is spending money these days? Hollywood. Why has Apple jumped into the content creation business with billion-dollar shoes?
It’s called diversification and it becomes a disease that nearly every technology company catches at some point after the success of its first widget. Let’s say a company designs and builds and sells a successful techno-widget. With a growing customer base, the company needs ever more revenue and profits, so it builds another widget, but more expensive; then repeats the process. At some point, the company decides to build something else that it’s now much larger customer base will like.
Apple is a diversified company already, but the disease never goes away and cannot be cured. When Steve Jobs took over Apple mid-way through 1997, Apple and the Mac were mostly synonymous. Apple was the Mac. Then along came the iPod, iTunes, iTunes Music Store, and Apple had diversified. Along the way, Apple opened retail stores that sold iPods and the Mac. Diversification again.
See how that works? It worked for Apple. It’s still working. Apple cannot rid itself of the disease.
Along came the iPhone, App Store, iPad, Apple Pay, Apple Music, Beats headphones, Apple Watch, and AirPods. See? Now we have app subscriptions, Apple News+, Apple Arcade, AppleCare+, and soon, the most Disneyesque revenue stream ever– Apple TV+.
Apple did not just stick with the Mac; the company diversified beyond the origins and core. Today, Apple might be the most diversified techno-gadget maker in the country, and with a few billion dollars dumped into Hollywood, it might not take long for the company to become ever more Disneyesque with yet another link in the chain of diversification.
Do the math.
Like Disney, it’s all about the numbers. Apple has more than 1-billion customers and gets over 100-million new customers each year. It also sells about 200-million new iPhones, iPads, and Macs each year. For now, Apple is giving away a $4.99 Apple TV+ subscription whenever someone buys a new iPhone, iPad, or Mac. That’s 200-million Apple TV+ subscribers in a year. Every year. Some of those will continue their subscription each year, so let’s say that half do just that, on average, after two years.
That’s 200-million paid Apple TV+ subscriptions at $4.99 a month in just a few years after launch. Round off to $5 a month for easy math, and the revenue stream is $1-billion a month. $12-billion a year. Just for customers to watch Apple-branded television shows and movies.
Even better, the content never goes away, and as Apple adds 200-million new customers each year, they have access to an ever-growing supply of new and original content.
Just like Disney.
The Hollywood Reporter piece flips the idea around.
Apple’s TV Goal Becomes Clear: Sell More iPhones
No, Apple, has a bigger idea. Rich Greenfield:
All of these companies are trying to keep you in their ecosystem for as much time as possible… If Apple can get people spending hours a week watching its content, they’re going to be more likely to buy its devices.
Bingo. Jackpot. Except that Apple is better than any other company at squeezing revenue and profit from every new product.