At Least the ROI Gods Are Watching Apple TV+
Lucas Shaw
How much has Apple spent to get into the content game with Apple TV+ over the past five years? Lucas Shaw both puts a number on it and notes that such spend is going to start decreasing:
After spending more than $20 billion to produce original TV shows and movies that not a lot of people watch, Apple is starting to refine its strategy in Hollywood.
Based on interviews with more than a dozen people, including former employees, current employees and business partners, Apple services boss Eddy Cue has been having regular meetings with studio chiefs Zack Van Amburg and Jamie Erlicht to go over budgets, pushing them to exert more control over spending on projects. Van Amburg and Erlicht have told some of their top creative partners that they want to change their reputation as the biggest spender in town, according to these people.
I talk around these parts ad nauseam about how the quality of the Apple TV+ content is actually quite strong. Pound-for-pound, they may even be the best right now given that Warner Bros Discovery has merged HBO into the Max machine. But it sounds like even Apple, the most valuable and profitable company in the world, has to answer to the ROI gods:
Apple doesn’t buy the most projects in Hollywood — that is still Netflix. But it splurges on individual titles. The studio spent more than $500 million combined on movies from directors Martin Scorsese, Ridley Scott and Matthew Vaughn, and upward of $250 million on the World War II miniseries Masters of the Air, one of more than a dozen new series released this year.
Those pictures were all disappointments at the box office, and only Killers of the Flower Moon registered in Nielsen’s rankings of the most-popular streaming titles. Masters of the Air delivered a smaller US audience than House of Ninjas, a Netflix show in Japanese, according to Nielsen. Even so, it’s the only new Apple show this year to appear in Nielsen’s rankings.
Apple is spending billions of dollars a year on original programming that has received strong reviews and many awards nominations. But its streaming service is attracting just 0.2% of TV viewing in the US. Apple TV+ generates less viewing in one month than Netflix does in one day.
I went ahead and added highlights to the biggest yikes elements above. And yeah, from that perspective, yikes. And Shaw goes on to report that for the upcoming season of The Morning Show, Apple will be spending $50M just on the cast alone, before anything is even shot. That's what tends to happen as shows age – and shows usually only age if they're popular. But per above, "popular" seems quite relative here. We know that Ted Lasso did some good streaming numbers, but is The Morning Show worth that type of investment from Apple?
Some Apple employees push back on the Nielsen figures, arguing they are inaccurate and incomplete. Nielsen only measures US viewing on certain devices. And if you exclude Netflix, Apple’s share of top shows isn’t that far behind most of its peers.
That's one hell of an ad for Netflix. There's the streaming wars, and then there's Netflix. Which is closer to cable – all of it – than a rival to any of the other players (outside of YouTube, which has a completely different model, of course). As Shaw kicked off his newsletter noting from Netflix's earnings last week:
The company now has 277.7 million subscribers and reaches more than 600 million people around the world. Quarterly profit rose 44% from 2023 and is up more than sevenfold from 2019.
But back to Apple:
They also say that outside criticism and analysis fail to capture the metrics that matter to Apple (in part because Apple shares so little data with the outside world). Apple invests in entertainment to sell more consumer devices – not to make money in Hollywood. Entertainment services like music, TV and games generate billions of dollars in sales, but they also create a halo effect around the brand. They make you more likely to buy an iPhone.
It would be very interesting to know if and how Apple actually tracks such things. Fittingly, a WSJ report from yesterday about Amazon's Alexa/Echo spend is predicated around "DSI" or "downstream impact" – that is the notion that you shouldn't just measure the revenue brought in from device sales, but also how those devices impact tangential sales for Amazon. The article is about how after years of such metrics covering Alexa's ass, Andy Jassy has thrown it out in order to try to turn Alexa into an actual business. Will Apple eventually feel the same? Do they already, hence the belt tightening?
Or perhaps they just saw the reported $20M-an-episode price tag (!) for the upcoming second season of Severance and just thought... WTF?1 People like that show and seem excited for it to come back, but should it really be one of the most expensive shows on television? It takes place in an office.2
I continue to wonder how much of this couldn't be fixed, even just a bit, by Apple doing a better job at marketing their content. Yes, I'm suggesting Apple is bad at marketing. Yes, that's wild. But I'd love to know what the brand awareness is around their content. I'm guessing it's extremely low beyond perhaps Ted Lasso.3 And on the flipside, I think Apple could be helped a lot by beefing up their catalog – something I made the case for before they even launched. It sounds like they're trying to do that now by cutting third-party content deals. But I wonder if they shouldn't make a bigger splash and buy the aforementioned HBO. That will turn some heads – towards the television sets.
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 At the risk of pissing off some readers, I'm bury my thoughtson Severance down here. Which are: I don't get it. I mean, I get what the show is about. But I don't get the love for it. I've tried now three different times to watch it. I just can't do it. I find it beyond tedious. And I'm someone who typically sticks with a show, even when I don't like it, just to see. I'm through six episodes of Serverance and I just can't do it. I'm sorry.
2 You know what doesn't take place in an office? F1. That movie sure looks like it will be amazing. As it should given what Apple undoubtedly spent on it! Apple's first real cinematic hit? Hope they figure out the marketing by then!
3 How long until they bring back Ted Lasso? I give it a year, max.