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Apple, Inc. Should Not Mess With Original TV Content

By Evan Niu, CFA - Apr 20, 2016 at 10:00AM

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The Mac maker's exclusive-content strategy lacks direction.

Apple TV. Image source: Apple.

I don't say this very often, but Apple (AAPL 0.11%) has no idea what it's doing.

A couple months ago, reports circulated that the Mac maker was developing an original TV series based on now-Apple-employee Dr. Dre. The semi-autobiographical drama sounded like a bizarre experiment in original content -- an area where Apple has absolutely no experience. Strategically, the idea was that this series, dubbed Vital Signs, would be intended to support Apple Music as an exclusive.

But just last month, Apple said its first original TV series would be focused on app developers, partnering with Will.i.am and a couple of TV veterans. Services chief Eddy Cue made it clear that the move did not represent some broader push into content.

Still, it's unsurprising that Apple's TV plans are apparently "disorganized," according to Fast Company.

Since when does Apple lack focus?
Apple has long had a cozy relationship with Hollywood; iTunes has become an important distribution channel for TV and movies. Apple also gets plenty of free exposure through product placement, which it famously pays nothing for. Yet Hollywood executives are reportedly frustrated that Apple doesn't have a clear plan in place.

The Mac maker has high hopes for a handful of highly successful original series, despite Cue's comments that its forays will be limited in scope. Cue hedged his comments though, saying the company would keep on exploring various exclusive projects.

Successful exclusives are expensive
When it comes to TV content, you get what you pay for, and high-quality exclusives are expensive. That amplifies the financial risk that Apple will take on as it considers launching exclusive content. Netflix has made a killing investing heavily in original programming, but that's because it makes complete sense for its core business.

It's highly questionable how much upside Apple could realize from original TV content, irrespective of its deep pockets. If the end goal is to support Apple Music, investing hundreds of millions of dollars doesn't make sense. Beyond its money, Apple also has very little sway among content creators since it doesn't have a large existing presence, nor a particularly large user base for Apple Music.

What's the point?
Exclusive content makes sense for a video streaming service, but the music streaming industry is extremely commoditized as far as most services go.

Occasionally, an artist will launch an album exclusive to a service, but that exclusivity window is almost always small. For example, Kanye West promised to keep his new album The Life of Pablo exclusive to Tidal before quickly changing his tune and bringing it to Apple Music. People don't subscribe to music streaming services for original content in the way that they do for video streaming services.

Creating entertainment content is simply not something that Apple should be distracting itself with.

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