Apple’s announcement that its upcoming Apple TV+ service will have ‘dozens’ of original shows when it launches in the fall puts it in a hopeless position in the short-term, say analysts. They believe Apple can make a success of it long-term, but the company will have to be willing to burn through huge amounts of money for years to get there …
Business Insider saw the investors note from Morgan Stanley, noted for taking a generally upbeat of the company’s activities.
Apple needs to have the appetite to spend enormous sums for years — without generating much revenue in return — to make a dent in showbiz […]
The media business is not going to be the same immediate cash-generating success for Apple. It is facing the necessity of enormous outlays to procure top tier talent and produce new video content from scratch, with no guarantee of success. Apple TV Plus may be in the red for years before it hits a critical mass of users to make it sustainable on its own merits.
Such profligate spending is necessary because without the content there in the first place, users simply won’t pay to sign up. You wouldn’t sign up for a paid streaming service with only three shows and a dozen movies — there needs to be a key level of content before the entire enterprise even becomes viable. That means burning cash lots of cash.
Morgan Stanley pointed to Netflix as an example. The bank estimates that Netflix will have burned through $13B cash to turn a profit.
The note acknowledges that Apple can do it.
Apple enters the content publishing business with two distinct strengths — a global user base and a massive checkbook.
But it will have to be willing to spend a lot of money, and rack up a lot of losses, along the way.
It’s as yet unclear how Apple plans to persuade people to subscribe to the service. It is pitching Apple TV+ as ‘the new home for the world’s most creative storytellers,’ and has lined up some big names, but with extremely limited content it’s unlikely many would be willing to pay much when it launches. Apple has not yet revealed its intended pricing.
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