Apple (NASDAQ:AAPL) just signed Oprah Winfrey to a multiyear content development deal, adding to its growing list of video deals. It previously signed showrunner Kerry Ehrin to produce a show starring Reese Witherspoon and Jennifer Aniston. It's rebooting Steven Spielberg's Amazing Stories. M. Night Shyamalan has signed on to produce a series. And NBA star Kevin Durant is going to produce a show for Apple as well.

Apple has a ton of star power lined up already, and it doesn't even have a stand-alone video-streaming product. Apple could spend $3 billion to $4 billion on content next year, according to Daniel Ives, an analyst at GBH Insights. That's still well short of Netflix's (NASDAQ:NFLX) $8 billion budget, as well as Amazon's growing content budget.

But after proving it can successfully sell a subscription service like Apple Music, the company behind the iPhone, iPad, and Apple TV clearly has its sights set on video.

The Apple TV home screen displayed on a TV with an Apple TV and remote below it.

Image source: Apple.

Video might be easier than music...at least for Apple

Apple's success in music streaming is a testament to the strength of Apple's ability to craft a great user experience. There's very little differentiation in music-streaming services -- each offers comparable catalogs of tens of millions of songs -- and Apple got a late start.

But video services are increasingly varied in their content offerings. With the growth in original content on platforms like Netflix and Amazon Prime Video, consumers are finding reasons to subscribe to more than one service. That's why the explosion in video-streaming services over the last few years hasn't hurt Netflix or Amazon. If anything, the increasing number of over-the-top choices has only strengthened their positions.

The fact that subscription video services are much more easily differentiated should give investors confidence in Apple's ability to succeed in the space. And Apple has the cash to invest in making a quality differentiated service. The company is repatriating $285 billion in cash and investments to the United States. While a lot of that will go toward its recently increased capital returns program, Apple can certainly spare a few billion dollars to invest in video content.

Add that to the fact that Apple has some billion devices in use, including iPhones, iPads, Apple TVs, and Mac computers, all of which lend themselves toward watching video. That was one way Apple was able to grow Apple Music so well: by leveraging its built-in user base. It could do the same with a video-streaming service.

Money to be made

Global spending on subscription video on demand services is expected to climb from $18.7 billion in 2017 to $30.1 billion by 2020, according to Gartner. Netflix captures the lion's share of that revenue, bringing in a total of $11.7 billion last year thanks to its 117 million subscribers.

But Apple could carve out a sizable chunk of that incremental revenue over time. Apple's total revenue increased $13.4 billion last year, but still came in below its 2015 revenue. Adding another source of recurring revenue from subscription video would provide another way to offset the expanding device upgrade cycles challenging Apple.

If Apple's service is a hit, it could encourage more customers to use Apple's products over competitors' or improve retention of existing customers. That adds another layer of revenue to Apple's subscription services, and it's a key piece of Apple's strategy.

Everything seems to be in place for Apple to launch a subscription video on demand service in the very near future. Ives believes we'll see Apple continue making new investments and have a product launched by the end of 2019. We could be just 12 to 18 months away from Apple launching its own video-streaming service.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy owns shares of AMZN and Apple. The Motley Fool owns shares of and recommends AMZN, Apple, and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends IT. The Motley Fool has a disclosure policy.