The Economist (2022-01-08)

54 Business TheEconomistJanuary8th 2022

whichsometimesseemhalf­hearted.Win­

ning at streaming depends mainly on

splurgingoncontent.Butdeep­pocketed

Applespentjustover$2bnonfilmandtv

in2021,againstAmazon’s$9bnandNet­

flix’s$14bn,estimatesAmpereAnalysis,a

research company. It doesn’t bother to

market its efforts much. And although

medialandhascooedattheexecutivesthat

Applehaspoached,suchasJamieErlicht

andZackVanAmburgfromSonyandRich­

ardPleplerfromhbo, SiliconValleyinsid­

erssaythatApplekeepsitsowntoptech

peopleonotherprojects.

Indeed, while Hollywood fretsabout

Apple’snextmove,manyinSiliconValley

wonderwhyitisinmediaatall.Noneof

themarketsisa bigprizefortheworld’s

mostvaluablefirm.Theentireglobalre­

cordedmusicindustryhadsalesof$22bn

in2020,lessthanApplemadejustfrom

sellingiPads.Inabouta monthApplegen­

eratesasmuchrevenueasNetflixmakesin

ayear. Apple’s tv business dependson

buyingshows,ratherthanextractingrents

from others’ creations as it did in the

iTunesdays(andasitstilldoesinitsapp

store).Andthe“lock­in”effectonconsum­

ersisweak,sinceApple’smainmediaser­

vicesareavailableonallplatforms.

Apple’s renewedinterest inmedia is

bestexplained bythe transformationin

the company’s scale, which radically

changesthecalculationofwhichside­pro­

jects are worthwhile. Fifteen years ago,

when Netflixstartedstreaming,the bil­

lions involvedin runningafilm studio

wouldhaverepresentedclosetoa double­

digit chunkofApple’s annualrevenues.

Backthen,SiliconValleyexecutiveswould

flydowntoLosAngeles,thinking“We’ve

gota bigchequebook,wecouldgoandbuy

a bunchofcontent,”saysBenedictEvans,a

techanalystandformerventurecapitalist.

“Andtheywouldgoandhavetheirfirst

meetinginLA.AndtheLApeoplewould

tellthemtheprice”—atwhichpointthe

techpeoplewouldgohome.In 2021 Apple

tv+’sestimatedcontentbudgetrepresent­

ed0.6%ofcompanyrevenues:“playmon­

ey”,asMrEvansputsit.

Thecostofrunninga studiocanthere­

forebejustifiedbywhatareonlymodest

benefitstoApple.Streamingsubscriptions

may not lock people in as strongly as

iTunespurchasesdid,butApple’svarious

servicesstillsink“meathooks”intocus­

tomers, making them spend more time

withtheirdevicesandmakingit a bitmore

inconvenienttoleaveApple’secosystem,

saysNickLightle,a formerSpotifyexecu­

tive. The iPhone itself, which generated

$192bninsalesinthepastyear,morethan

halfofApple’stotalrevenues,issoldasa

sortofsubscription,pointsoutMrEvans.

AnythingthatcutschurnamongiPhone

subscribersbyevena smallamountislike­

lytopayforitself.

Mediaalsomakesgoodmarketing.Pro­

ducing films with Steven Spielberg and

Tom Hanks reinforces Apple’s premium

brand.Partnershipswithpopstarskeepit

cool.Andata timewhenSiliconValleyis

under attack formonopolisticpractices,

invasionofprivacy,subversionofdemoc­

racy and more, Apple is churning out

worthypodcastsbyMalalaYousafzai,a No­

bellaureate,andteachingfitnessroutines

to children. Not many companies can

thinkofa filmstudioasa public­relations

arm.A $3trncompanycan.

“Appleisnotplayingthesamegameas

many ofits other[media] competitors,”

says JuliaAlexanderofParrot Analytics,

anotherdatafirm.Forone­trickrivalslike

Netflix,it isanuncomfortablyasymmetric

competition.YetApple’sbroaderpriorities

canalsohamstringitsmediaambitions.

Appletv+’slackofa librarycouldbesolved

by buying someone else’s;the firmhas

beentoutedasa potentialbuyerofsmall

studioslikeLionsgateaswellasgiantones

likeDisney.ButApplemaybewaryofpro­

vokingAmerica’sFederalTradeCommis­

sion(ftc),whichhasitssightsonSilicon

Valley.“Ifyou’reAppleandtheftcislook­

ingatbigtech,thelastthingyouwanttodo

ismakea hugeacquisition,”notesMsAlex­

ander.LinaKhan,theftc’stech­bashing

head, is examining Amazon’s recent

$8.5bnpurchase ofmgmStudios; never

mindthatthetargetisa relativetiddlerina

fragmentedmarket.Asfirmsvieforcon­

troloftech’s nextcommandingheights,

fromdecentralisedWeb3tovirtualreality,

drawing regulators’ attention by buying

oldtvepisodescouldbea strategicerror.

Foraslongastheycontinuetohelpsell

itsdevicesandburnishitsbrand,Apple

willkeepdrippinginvestmentintoitsme­

diaservices.Doingsowillgetmoreexpen­

sive:globalspendingonvideocontentwill

exceed$230bnin2022,accordingtoAm­

pere,nearlydoublewhatitwasa decade

ago.Assmallercompetitorsareoutspent

andgiveup,Apple’spositioncouldeven

strengthen.Butgivenitsbiggerambitions

inotherindustries,inmediaAppleislikely

tobesatisfiedtosticktoitsroleasa sup­

portingactor.n

A star turn

Apple, market capitalisation, $trn

Source:RefinitivDatastream

1

*To January th

3.0

2.5

2.0

1.5

1.0

0.5

0

15100520009590851981 22*

Show tunes

Global paid subscriptions*, m

Source:Omdia

2

*Excluding China; includes free trials †Estimate

‡Prime members who use video service

Others

Google/YouTube

Amazon

Apple

Spotify

200150100500

Music, 2020†

Video, 202†

Others

HBO Max

Discovery+

Paramount+

Hulu

Apple TV+

Amazon

Prime Video‡

Disney+/Hotstar

Netflix

200150100500

Entertainment

No child’s play

T

he pandemichas  been  tough  for  par­

ents  of  young  children.  With  schools

shut, many had to keep an eye on their off­

spring  while  juggling  chores  and  remote

work.  Succour  came  courtesy  of  Holly­

wood.  A  study  by  Parrot  Analytics,  a  data

firm,  found  that  demand  for  children’s

shows  in  America—measured  by  video

views, social­media mentions, searches on

imdb,  a  platform  for  film  buffs,  and  the

like—grew by nearly 60% from the start of

2020, before covid­19 hit, to last September

(see chart on next page). Demand for other

genres rose by 23% in that period. 

At  the  same  time,  parental  concerns

about  their  progeny’s  media  diets  have

grown.  A  recent  Pew  survey  found  nearly

half  of  parents  saying  that  YouTube,  the

most  popular  destination  for  young  audi­

ences,  exposed  their  children  to  inappro­

priate  content.  Many  are  chary  of  social­

N EW YORK

Streaming giants get more serious

about children’s shows