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Don’t Believe It: Apple Inc. Isn't Getting Into the TV Business

By Andrew Tonner - Feb 21, 2016 at 7:47AM

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An Apple TV services is indeed coming, but don't expect the show to signal Apple's long-awaited entry into the streaming TV business.

Source: Apple.

From a journalist's standpoint, the headline "Apple (AAPL 2.45%) Prepares To Enter TV Business" is something of a lay-up. It's also not true.

As the business press reported earlier this week, tech giant Apple is indeed producing its own TV show. And while the news represents a noteworthy progression for the world's largest public company, its ultimate goals are likely to be far humbler than most headlines might imply.

Apple enters TV production
The show, titled Vital Signs, will star Apple executive and hip-hop legend Dr. Dre, according to The Hollywood Reporter. The show's storyline will loosely mirror Dr. Dre's unlikely rise from the violent streets of L.A.'s notorious Compton neighborhood to the heights of the global entertainment and business elite.

Source: YouTube.

The news also represents Apple's gradual and overlooked progression deeper into video content production. Apple financed Drake's hugely popular "Hotline Bling" music video last year, a business arrangement that was something of a double-edged sword for the hip-hop hit maker. Apple also financed Taylor Swift's live concert video from last year's 1989 tour. Both Drake's and Swift's projects were exclusive to Apple Music, an important common thread in this narrative and one that speaks to the strategic value of Vital Signs as well.

Not the next Netflix
In theory, Apple's strategy mirrors the original content that Netflix and have created to such great success. Like smash hits House of Cards and Transparent before it, Apple also clearly intends to use Vital Signs to drive subscribers to one of its entertainment services. However, the service in question is Apple Music, not the much-rumored Apple over-the-top television product.

Source: Apple.

Entering the on-demand streaming market well behind first mover Spotify, Apple has struggled to create key points of differentiation between Apple Music and its Swedish rival. Apple originally attempted to do so by marketing Apple Music around its curation capabilities, only to have Spotify introduce its own compelling music discovery tools only months after Apple Music's launch. With Vital Signs, it appears Apple hopes to borrow Netflix's original-content insight, creating something no one else has to attract users to the platform. Though this makes sense and has worked to great effect with video streaming services, Vital Signs will be a fascinating case study to determine if this same principle holds true for streaming music as well.

We've also seen some evidence that the video and music streaming platforms are already converging. Spotify recently launched its own video feature that incorporates short video clips from networks such as ESPN, ABC, and others. And with Apple Music also headed deeper into video content, the trend gives rise to an interesting discussion about to what extent on-demand video and music platforms are likely to merge in the future.

This move also contains a certain degree of inherent optionality for Apple. If the series is successful, Apple could leverage it as the first flagship series in its oft-discussed foray into TV content. However, while this would arguably strengthen Apple's ecosystem, launching a full-fledged Netflix competitor would represent a historic business-model shift for a company that for decades has focused on selling high-margin hardware.

So while Vital Signs presents a number of interesting strategic opportunities for the world's largest tech company, it will probably be used first and foremost as a tool to help aid the ongoing expansion of Apple Music.

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