On March 25, Apple is set to reveal its new strategy on the TV market. Investors have met this news with measured caution however, as the first news of Apple tapping the TV market dates back to Steve Jobs’s autobiography in 2011, and since then it has only managed limited success.
For more than a decade, Apple has been debating whether to make their own television sets to complement its bundled services. To date, we have Apple TV, a streaming service, which although it is viewed as a step in the right direction, has failed to capture the imagination of consumers like the popular iPhone does. In fact, Apple TV significantly trails competitors in the US connected television market with around 26 million users compared with 70 million using Roku, over 55 million using Amazon Fire TV and over 30 million using Google’s Chromecast, according to the Financial Times.
Apple’s event next week is called “It’s Showtime”, with consensus being that the company is betting on a proliferation of streaming services, whereby the company is planning to move aggressively into the market via a wider range of sources, including content of its own.
Apple’s move is in sync with the company’s reality that the growth of its iPhone sales has slowed significantly, and that the company’s revenue from its services division remains comparatively low.
Tim Cook’s bet that the “next big thing” is set to come from its services division is viewed positively all round, and in line with the technology sectors move onto cloud-based services and content. In fact, most recently Google got their investors all excited after announcing that they shall also aggressively tap a new market, the video gaming market.
Apple embarked on a sweeping change in its television strategy two years ago. It hired new high level executives from Sony Pictures TV and armed them with a billion-dollar budget to commission its own original TV shows.
It now has more than 30 series in the works from big-name talents including Oprah Winfrey and Steven Spielberg. It is said that Apple’s focus will be on high-quality content as opposed to the huge volume of shows offered by Netflix.
Some on Wall Street are sceptical that a video service can make a meaningful impact. Analysts are forecasting that even if 20 million people sign up to a $15 monthly fee, by 2020 it would generate only $3.6bn in annual revenues, barely 1 per cent of Apple’s $265.6bn total sales last year. In order to boost the income generated from their own shows Apple is reportedly negotiating deals with television networks and film studios to offer their content too.
Elsewhere, Disney is gearing up to reveal plans for its own streaming service just two weeks after Apple’s event. The media group has been outspoken about its plans, with chief executive Bob Iger dropping details during earnings calls through the past year.
This article was issued by Simon Psaila, financial analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.
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