There has been no end to the theories and rumors regarding Apple's (NASDAQ:AAPL) entry into the highly competitive streaming video market. The move will put the company in competition with established players like Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN), and Hulu. A number of reports have suggested that Apple budgeted more than $1 billion in 2018 to develop original content, and there have been corresponding reports of high-profile deals with elite Hollywood talent, confirming its spending spree.
More recent stories have indicated that Apple would provide movies and television series for free to owners of Apple devices and offer subscriptions to other steaming providers like HBO, Showtime, and Starz -- all within the TV app found on the iPhone, iPad, and Apple TV.
An intriguing tale has emerged that Apple is planning to launch a global streaming service that could compete with Netflix and Amazon Prime Video as early as next year.
A much more ambitious approach
Apple plans to debut its streaming service in the U.S. during the first half of 2019, and will roll the service out globally in the months that follow, according to a recent report in The Information (subscription required). Citing "three people familiar with the company's plans", the report said that Apple will bring the nascent streaming service to 100 countries, putting the company in direct competition with Netflix and Amazon Prime Video, which are both widely available across the globe.
Amazon Prime Video is said to be available in about 200 countries, while Netflix can be streamed in more than 190. This reality leaves Apple playing catch-up in a market that is dominated by the incumbents. Netflix, for example, has a head start of more than a decade in terms of technology and penetration, so Apple finds itself at a decided disadvantage.
This latest report corroborates earlier suspicions that Apple would offer subscriptions to other services via its app, similar to a strategy that Amazon has employed called Amazon Channels. Prime customers can sign up for the likes of HBO, Starz, and Showtime as well as specialty services like BritBox, Cheddar, and Mubi.
Currently, Apple offers subscribers a way to watch many of their favorite shows, including programs from some linear TV channels like ABC and NBC. It seems Apple wants to become a one-stop shop for viewers, also providing access to its own original content and that of other streaming services like HBO and Netflix. This approach would help to differentiate the service from some of its existing competitors.
Aside from Apple's original programming, the channels offered would differ by region, due to existing agreements in each country. As an example, HBO is available via Amazon Channels in the U.S., but HBO has licensed some of its content to providers in other countries, which prohibits its inclusion in some foreign locales. Apple's international streaming efforts might encounter similar challenges.
Top shelf talent
Apple hasn't been shy about laying out large sums to secure programming that it hopes will be "must-see TV." The company has signed deals with Sesame Workshop -- creators of Sesame Street -- as well as media maven Oprah Winfrey to create new content. Apple also has projects involving such well-known names as M. Night Shyamalan, Jennifer Aniston, and Reese Witherspoon, and has tapped J.J. Abrams and Sara Bareilles to helm a show.
The company may be at a decided disadvantage, however, when it comes to platforms. Existing services like Netflix and Amazon are platform agnostic, and can be accessed on any number of existing smart televisions, Blu-ray players, or gaming consoles. If Apple's service is available only on its devices, that could limit the potential audience for its upcoming service. Apple controls just 15% of the global smartphone market and about 28% of the streaming device market in the U.S. -- leaving much of the market out of its reach.
A parting thought
Apple's reported streaming service is still months away and we don't yet know how the offering will play out. Apple has yet to confirm any of its plans, but the company has a track record of coming in and disrupting existing markets, so a threat from Apple can't be ignored. However, based on what's been reported, Netflix and Amazon don't have anything to worry about -- at least not yet.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon, Apple, and Netflix. The Motley Fool owns shares of and recommends Amazon, Apple, and Netflix and is long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.