In June news broke that Apple had signed up American television giant Oprah Winfrey in a multimillion deal to create original television content for the iPhone maker. Oprah, who Apple beat reportedly strong overtures from both Amazon and Netflix to sign, joined Steven Spielberg who had already been bagged by the company to make 10 new episodes of his 1980s Amazing Stories anthology series. Both deals are part of a reported ‘initial’ $1 billion set aside for the production of original television content. However, the missing piece in the news jigsaw has been what Apple’s actual strategy or business model is for the distribution of that content.
For some time now it has been rumoured that the tech giant has been preparing a move into the new content streaming market currently dominated by FAANG peers Netflix and Amazon, through its Prime service. But despite commissioning some of the biggest stars in U.S. film and television to make shows for it, exactly what Apple plans to do with these shows has been a closely guarded corporate secret.
That is now beginning to become clearer. Apple’s drive into content streaming looks like it will be based around getting Apple set-top boxes into as many homes as possible through tie-ups with major telecoms companies. The boxes come with Apple apps pre-installed that will include subscription services including for new original Apple-produced TV content as well as bundles such as combining Apple Music, News App and new magazine subscription service.
Today it has been reported that Apple is in advanced discussions with BT in the UK over a deal that would see the company’s EE mobile network, that also provides domestic broad band services, become a major distributor of Apple set-top boxes. If the partnership is finalised it is likely to resemble that which the U.S. company has already established with Salt in Switzerland. The move would also seem a logical fit with BT consumer chief Marc Allera’s known reticence for his company to compete with the likes of Apple and Amazon on set-top boxes with their own. EE also has an established partnership with Apple to offer iPhones to mobile services subscribers.
With the Apple share price having passed the $1 trillion milestone in August, becoming the first company in stock market history to do so, the company needs new high growth units to keep capital markets happy. The company has had huge success in consistently managing to first sustain growth in iPhone sales and latterly increase revenues and profits by selling more and more expensive models at better margins. However, revenue growth from iPhone sales, by far Apple’s biggest contributor to income and profit, is thought to be peaking. iPhones are likely to continue to be a cash cow for the foreseeable future but the growth required to maintain Apple’s huge valuation will need to be found from new products and services in the near future.
The strategy for that appears to be focused on subscription services around content, including TV show streaming. This morning markets appear to have reacted positively to the prospect of the BT tie-up with the BT share price up 1.6% by lunchtime in London trading. Those investing online in BT shares have seen their holdings with online stock breakers endure a tough time over the past few years. The company’s battle with Sky over lucrative but hugely expensive rights for major sporting events such as the English Premier League and Champions League has won subscribers to BT Sports but been costly. BT will also hope that a partnership with Apple will offer it an additional advantage over Sky on the UK market. Both Apple and BT have declined to comment on this morning’s reports on a potential partnership agreement.