Bloomberg Businessweek USA - October 30, 2017

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*BY BLOOMBERG DIVIDEND FORECASTING ANALYSTS, AS OF OCT. 24, 2017; DATA COMPILED BY BLOOMBERG. FLANNERY: CHRISTOPHER GOODNEY/BLO

OMBERG.

THE BOTTOM LINE Apple will spend $1 billion next year on

programming for television. By sticking with mainstream shows, it

could miss out on viewers who increasingly favor edgier fare.

Apple isn’t the first tech company to under-

whelm Hollywood. Yahoo! Inc. and Microsoft

Corp. spent millions of dollars on TV shows before

pulling back within a couple of years, frustrated

by the slow pace of development and their inabil-

ity to attract audiences. Even Amazon, at first con-

sidered a success story, is now drawing complaints

from writers and producers over casting decisions

and instances of buying scripts but not producing

them. The online retailer also fired its studio chief

in October over allegations of sexual harassment.

Streaming video is just one of many fronts in the

global battle between technology titans. After years

of flirting with Hollywood, Silicon Valley companies

are finally writing big checks, spurring a doubling

of video production over the past decade. Amazon

spent an estimated $4.5 billion this year on movies

and TV shows, while Facebook and YouTube will

spend more than $1 billion each. Netflix, which plans

to spend $8 billion in 2018, dwarfs them all.

Yet no one arouses more interest in Hollywood

than Apple. One reason it quickly climbed the list

of places to pitch new shows: the almost cult-like

attachment many have for its phones. “Their brand

is the most important thing,” says Avnet, who’s

made shows for Snapchat and YouTube and is in

the process of making one for Facebook.

By funding original shows, the company also

can remind customers to think of the Apple TV

streaming device before the Roku or Amazon Fire

TV Stick and to use Apple’s year-old TV app instead

of Amazon Prime Video or YouTube. With iPhone

growth slowing, the company is looking to other

divisions to deliver sales. ITunes, Apple Music,

and the TV app are part of its services business,

where CEO Cook wants to double revenue by 2020,

to about $50 billion.

Yet Apple isn’t trying to compete with Walt

Disney Co. or Netflix to become the biggest backer

of TV shows and movies on the planet. Instead, the

company wants its shows to complement those of

other networks and streaming services that consum-

ers already watch on Apple devices. Its new shows,

however, will no longer be placed on Apple Music,

which will limit its focus to music-related video.

Whether Apple can channel consumer demand

in TV as well as it does in smartphones remains to

be seen. Around the time Apple delayed the release

of Carpool Karaoke, its top brass also decided the TV

unit should move up the release of Planet of the Apps,

a reality competition series in which entrepreneurs

pitched celebrity investors on their idea for an app,

so it would make its debut on Apple Music in time

for the company’s Worldwide Developers Conference

in June. Apple execs loved the show and thought it

would endear the tech giant to software writers. The

show wasn’t supposed to be released for a couple of

months, and there was no marketing plan in place—a

vital step in the age of too much TV. Apple pressed

ahead, and the show came and went with little fanfare

○ Flannery

GE Turns the

Lights Out on the

Immelt Era

○ The slimmed-down industrial icon still pays a fat dividend.

Can new CEO Flannery maintain it?

For much of the past century, General Electric Co.—

whose history stretches back to Thomas Edison’s

lightbulb—had been a symbol of the by-the-numbers

management credo that ruled American busi-

ness before the digital age. But GE’s eyesore of

an earnings report on Oct. 20 leaves little doubt

that the 125-year-old company, with a market value

of $186 billion, is facing a financial and cultural

senior moment.

This icon of American industry has been forced

to cut its earnings and cash flow outlook so dras-

tically that investors are now preparing for a

once-unthinkable cut to its dividend. A rapid-fire

series of high-level departures over the past few

months, beginning with longtime Chief Executive

Officer Jeff Immelt, represents a jarring transition

for the company. There’s even speculation that

GE, the only member of the original Dow Jones

industrial average still on the benchmark, could

get dropped from the list.

“There was a long stretch where GE was viewed

as a management leader,” says Scott Lawson, a vice

president at Westwood Holdings Group Inc., which

oversees more than $20 billion in assets. “Sometimes

the memories last much longer than the reality.”

GE’s shares have fallen 32 percent in 2017, their

worst year-to-date performance since the financial

crisis. But there’s no market crash to blame this

time. Instead, some analysts say much of the cause

lies with management’s poor capital-allocation

decisions and GE’s cultural shortcomings—and

those are actually harder problems to fix.

beyond a couple of savage reviews. The show is “a

bland, tepid, barely competent knock-off of Shark

Tank,” according to Variety’s Maureen Ryan. “There’s

no reason” for Hollywood to lose sleep over it, she

wrote. Apple is betting the same won’t be said about

its broader TV strategy. —Lucas Shaw

 BUSINESS Bloomberg Businessweek October 30, 2017