To be clear, because the article isn't obvious about it: the $20B figure is total expenditure since its inception, not a yearly figure.
For comparison, Netflix spent $17B in 2022, and $13B in 2023 (it was lower due to strikes). Disney spent $33B on content in 2022. Meanwhile, Apple spent $7B in 2022. (All numbers from Google top results).
So Apple's still spending significantly less than main "competitors", of course.
It's extremely weird for an article to give an all-time spending figure and then call it "unsustainable", when obviously sustainability depends entirely on spending per year compared with revenue per year, and this article doesn't even talk about the revenue side at all (Apple TV+ costs $9.99/mo. standalone.)
It's also hard to define "sustainability" when it's not even clear that Apple's goal is to make a profit directly, but may be to take a loss that is less than the perceived marketing value that this adds to the Apple aura/brand.
The recent estimate of Apple TV+ paid subscriber is 25M from 2022, with additional 50M on trial from other promotions. Let say we have 30M now, at $10 a month, this is at best $3.6B per year. Considering Apple didn't charge anything for the first 20 months, and the initial price was $4.99, $6.99 by October 2022 before coming to $9.99. And that is excluding yearly discount from subscriber, iTunes Account Top Up Credit discount etc. I dont think Apple would have $10B of Apple TV+ revenue since its inception. i.e Apple is now at a loss of $10B in total excluding the encoding and delivery expenses which I expect to be a rounding error in the grand scheme of things.
>sustainability.......but may be to take a loss
I dont record any single feature or product that Apple provides and uses a loss leader. You may get freemium type of services that is iCloud but even that is accounted for in their book in every single Apple products sales. Their culture has always been paid for the product or services. It is very rarely a loss.
But I have been saying for now close to a decade the whole point of Apple Music, Apple TV+ etc were to increase their Services Revenue while diluting down their Services Profits margin since a lot of these Services are razor thin margin, but for App Store and Google Search placement are both at 90%+ Gross. By combining them together and bundling these products as Apple One they have managed to substantially increase their subscription base to 1 billion+.
The only problem is both Google Search Placement deal and App Store revenue are under heavy attack and scrutiny by officials and politicians.
> I dont record any single feature or product that Apple provides and uses a loss leader.
Sure, I think Apple TV+ might be their only product like this. In a lot of business analysis of streamers, Apple and Amazon are the two that are widely believed they won't get shut down (or sold/merged) even if they never make a profit at all -- because of the marketing value to Apple, and the Prime stickiness value for Amazon.
So just because Apple has never done it before, doesn't mean they aren't doing it now. Apple TV+ is unique in a lot of ways for Apple. The rest of Services, and Apple TV+, seem to have such different business models that it doesn't make a lot of sense to combine them when analyzing Apple's strategies (even if they are combined in quarterly reports).
The free 5GB of cloud storage must be considered a loss leader. It’s essential 5GB for free for the lifetime of your device, which can easily be 10-15 years when you consider secondhand devices.
> this article doesn't even talk about the revenue side at all (Apple TV+ costs $9.99/mo. standalone.)
Apple TV+ isn't the only way to monetize the projects either. One hopes at least some of these will come out on disc, and many of them are likely to show up on other streaming and perhaps even broadcast. Media has a long tail of revenue, although it's often unclear who has rights to that revenue.
Apple TV+ has 0.2% of US TV views compared to 8% of Netflix. So Apple's monthly viewership is less than a day views of Netflix. In that context 20 billions is big amount.
Streaming fatigue is real. All streaming services are feeling this. And that's why so much of HBO content re-appearing on Netflix. Disney, Paramount will follow suit in search for money.
> when it's not even clear that Apple's goal is to make a profit directly,
I mean that sounds like calling We can't make money as `We don't want to make money*
Personally ive canceled all streaming svc (in 2023) and just watch youtube and FB reels. I think that's where it's all going and soon Hollywood will continue to increase the amount of content on youtube (have it all there) possibly break their shows into short form content or create short form content tv shows and movies. I have trouble watching long form content alone. It now has to be a social endeavor for myself to watch it one sitting.
Yeah, the opaqueness of the profits and losses of Hollywood's production process have been infamous since Mel Brooks' The Producers - in 1967.
A few stars, directors, producers or etc can determine the success of a production when there's full competition - maybe, everything is uncertain. The gist of the discussion is that Neflix is will to pay less by virtue of having become such a monopoly it can just dictate the winners. But as the parent says, what's happening with Apple is likely much more opaque.
It's a shame because Apple TV is producing some wonderful sci-fi right now, arguably they're about the only ones doing it to this level. And I'm sure it'll be first on the chopping block while the inflated budgets for the star-studded Morning Show are more likely to be maintained.
I hope I'm wrong and that Apple sees value in producing wonderful, niche TV. But at the same time that's not really Apple's ethos.
I'm endlessly amused about how the most compelling aspects of Foundation are those disconnected from the source material. It's not how things go usually, but they made some great content.
To be fair Asimov himself kept us hanging with the books and only completed the series (making it worse imo), just because the commercial publishers wanted the money.
Agreed. Getting season 3 of Foundation is literally the only thing Eddy Cue needs to do. Hope he's reminded every day. Once Foundation is done, they can shut down all the Apple TV+ servers.
Rather put the money into an Apple Robot. The robot needs to have Eddye Cue eyes and that constant grin.
It does feel like Apple TV has gained a reputation for science fiction (and just generally nerdy things), there are multiple articles out there on it. Putting out the type of content we used to expect from HBO.
So my hope would be they would realize that, lean into it, and cut their other experiments or just not do movies as much.
I know for me anytime I see a new science fiction show on Apple TV I feel like it is at least worth checking out the first couple episodes, and I have not been upset yet.
This seems like an odd spin/reeks of PR and politics more than the reality. $20B spend is just fine if you have the revenue to justify it. They've just struggled with the revenue. Killers of the Flower Moon brought in $157 million at the box office --that's without streaming revenue, but I think even that would still be considered a failure... and some of the others have been huge stinkers.
AppleTV+ is a tiny business. It's nowhere near of generating enough revenue to cover a $20B hole in content production costs.
Yes, Apple generates LOTS of revenue overall, but that doesn't justify bleeding cash on a business line that hasn't produced material returns and has no significant positive trajectory in sight.
It's clear that Apple saw this as their Prime Video bet on their services strategy, but that hasn't worked out. Just look at AppleTV+ market share. It's hilariously miniscule.
Apple can afford to play the long game here though.
TV+ is nice value add on their bundled subscription package so may be driving more people to opt for that. I know it was a major factor in my decision and now I am playing Apple Arcade games and use Apple Music as my primary music service.
Operating TV+ as a halo or loss leader product to get people to try other services within the ecosystem could be a winning strategy for them. Also likely drives some hardware sales.
It's a "tiny" part of a services business with a billion subscribers, that generates $20B of revenue in a quarter. $20B in production costs over 4.5 years works out to less than $5B/year in costs, against competitors like Netflix and Disney+ that are spending $20B a year.
I actually haven't seen any numbers on their current marketshare, but I'll give you that they aren't anywhere near their competitors. I don't think the problem is that they're spending too much money.
It certainly _could_ be a loss leader but I can't think of a single instance I've heard where someone switched to an iPhone/Apple TV because of an Apple TV show they wanted to watch.
(wouldn't even make sense to, they have an Android app)
They don't just have an Android app, they have an app everywhere. Apple TV+ is as ubiquitous as Netflix at this point. Hell, they have an Xbox app! How minuscule is the confluence of I have an Xbox, and I pay for Apple TV+, but I don't have an Apple TV device.
I'm wondering if at some point Apple doesn't look at how much engineering effort goes into all those useless apps for a service that is bleeding money and decides to reassign the workforce. Money is basically infinite for Apple, but good engineers are its most valuable resource.
It doesn't necessarily have to lead to any specific "I'm buying an Apple device because of Apple TV+" to be positive ROI marketing, the same way not all adverts have to be aimed at direct conversion to be useful.
Just getting Android users to have a daily reminder of "Apple makes something that is high quality and I enjoy" could be enough to influence future purchasing decisions even if those people wouldn't explicitly consider their enjoyment of Apple TV+ to be the reason they eventually bought an Apple device.
(I have no reason to specifically believe that Apple TV+ is ROI-positive in this way, just pointing out that non-conversion brand awareness marketing is a huge part of the marketing world, with often very positive results.)
On one hand, yes, exactly. It’s building a brand and the company has money to burn.
On the other hand, that brand boost had an estimated value associated with it, and it’s wasting money to overpay for it, hence “Company Executive Taking Various Measures To Bring Costs Down Considerably” — only worth running a loss leader if it’s overall profitable.
Is Apple really eating "years of losses". Or are they making a strategic play to pick up most of the prestige television market, without needing to push an M&A through the FTC (and they're doing it, just as David Zaslav is finishing killing the historic-largest player there, as HBO dies on the vine at Warner Brothers)
To me, it sure feels like the latter.
Apple spending $20 billion to pick up all this prestige TV and Film, is kind of a great deal, when compared to say, the $43 billion Discovery just paid for Warner, just to kill half of it (and then lose another $7 billon on it over the past 2-3 years)
The entire steaming sector has become unsustainable. On the one hand, for a service to be successful in the space they have to dump millions if not billions of dollars towards developing content. The problem is that with so many streaming platforms doing the same thing dilutes the value of that content and makes it unsustainable.
There's also so much good existing content across all the streaming services that a typical adult with a job and responsibilities has enough to watch right now for the next several years, without watching anything "new".
When I had a mail-by-DVD Netflix account, I don't think my queue ever dropped below 20. I have a sizeable watchlist / saved list on every streaming service I have used, and it also never goes down to zero.
Same with all media to be honest. Literature, videogames, music. There's been an uncountable number of masterworks over the past decades and you could fill a whole lifetime with incredible content. We're drowning in slop and we don't need the floodgates fully open for another decade to find the occasional nugget.
I don't know if I'd say it dilutes the value of the content per-se. But more that when you add it all up, to see everything, you have to spend quiet a bit in stream services. By the time you pay for Hulu, Disney, Netflix, Paramount+, Peacock, Amazon's PrimeTV, and who knows how many other service. We ended up in a space where to have access to most content, its gotten almost just as expensive, if not more expensive, than having cable.
It's worse than a that! Nobody wants/needs to "see everything." They typically want to see 5-10 different shows or movies, but that content always seems to be spread across all of the services, so you have to buy each services just to access That One Show that's exclusively on that service. The overall product (streaming) is distinctly worse than Cable. If I was a conspiracy theorist, I'd almost believe that the companies work together on their content lists to make sure that the show a given person wants to watch is always on the service they aren't paying for yet.
I think you are painting with a very broad brush. In general Wall St keeps very close tabs on every big streamer and is pushing them all to be profitable yesterday. There was a time when investors were happy to subsidize customer acquisition, but that time is over and I think you haven't updated your outlook. That said, there is still some room to run.
Chris Rock and Dave Chappelle's Netflix deals make that point more than anything I've seen. Rock got $20M each for 2 specials. I think Dave has made that (or more) for a bunch of specials.
How does it dilute the value of the content? Dilution occurs when you add more meh-level content to your pool of content. These studios are trying to produce very high-prestige content like Rings of Power (which flopped) or Game of Thrones / House of Dragons, which increases signal.
I really enjoy the programming on Apple TV+. I've also never paid for it. Through various promotions and bundles I've had it continuously for 5 years $0 spent on it. Just purchasing Apple products over time I racked up 3-12 month free offers and now its bundled in my internet package.
They are also doing that traditional HBO thing where they get AAA movies for a limited time and then poof.
I'm hoping they continue to update the UI to make it easier to find new shows and viewing history.
Readit News
For comparison, Netflix spent $17B in 2022, and $13B in 2023 (it was lower due to strikes). Disney spent $33B on content in 2022. Meanwhile, Apple spent $7B in 2022. (All numbers from Google top results).
So Apple's still spending significantly less than main "competitors", of course.
It's extremely weird for an article to give an all-time spending figure and then call it "unsustainable", when obviously sustainability depends entirely on spending per year compared with revenue per year, and this article doesn't even talk about the revenue side at all (Apple TV+ costs $9.99/mo. standalone.)
It's also hard to define "sustainability" when it's not even clear that Apple's goal is to make a profit directly, but may be to take a loss that is less than the perceived marketing value that this adds to the Apple aura/brand.
EDIT: my comment is referring to the original URL for this post which was https://wccftech.com/apple-tv-expenditure-crossed-20-billion... , not the Bloomberg article which the URL has since been changed to
>sustainability.......but may be to take a loss
I dont record any single feature or product that Apple provides and uses a loss leader. You may get freemium type of services that is iCloud but even that is accounted for in their book in every single Apple products sales. Their culture has always been paid for the product or services. It is very rarely a loss.
But I have been saying for now close to a decade the whole point of Apple Music, Apple TV+ etc were to increase their Services Revenue while diluting down their Services Profits margin since a lot of these Services are razor thin margin, but for App Store and Google Search placement are both at 90%+ Gross. By combining them together and bundling these products as Apple One they have managed to substantially increase their subscription base to 1 billion+.
The only problem is both Google Search Placement deal and App Store revenue are under heavy attack and scrutiny by officials and politicians.
Sure, I think Apple TV+ might be their only product like this. In a lot of business analysis of streamers, Apple and Amazon are the two that are widely believed they won't get shut down (or sold/merged) even if they never make a profit at all -- because of the marketing value to Apple, and the Prime stickiness value for Amazon.
So just because Apple has never done it before, doesn't mean they aren't doing it now. Apple TV+ is unique in a lot of ways for Apple. The rest of Services, and Apple TV+, seem to have such different business models that it doesn't make a lot of sense to combine them when analyzing Apple's strategies (even if they are combined in quarterly reports).
Apple TV+ isn't the only way to monetize the projects either. One hopes at least some of these will come out on disc, and many of them are likely to show up on other streaming and perhaps even broadcast. Media has a long tail of revenue, although it's often unclear who has rights to that revenue.
It needs to for Oscar contention though but I am sure some money can be made.
Streaming fatigue is real. All streaming services are feeling this. And that's why so much of HBO content re-appearing on Netflix. Disney, Paramount will follow suit in search for money.
> when it's not even clear that Apple's goal is to make a profit directly,
I mean that sounds like calling We can't make money as `We don't want to make money*
When the industry finally figured out Netflix was eating their lunch it was too late to catch up.
A few stars, directors, producers or etc can determine the success of a production when there's full competition - maybe, everything is uncertain. The gist of the discussion is that Neflix is will to pay less by virtue of having become such a monopoly it can just dictate the winners. But as the parent says, what's happening with Apple is likely much more opaque.
I hope I'm wrong and that Apple sees value in producing wonderful, niche TV. But at the same time that's not really Apple's ethos.
Sometimes less is more.
It's a reddit link but some details in the comments and the original source did seem a bit tabloidy.
https://www.reddit.com/r/scifi/s/SP85IxZmiy
Rather put the money into an Apple Robot. The robot needs to have Eddye Cue eyes and that constant grin.
So my hope would be they would realize that, lean into it, and cut their other experiments or just not do movies as much.
I know for me anytime I see a new science fiction show on Apple TV I feel like it is at least worth checking out the first couple episodes, and I have not been upset yet.
Dead Comment
And how much did it cost to make that movie[0]?
"Budget $200–215 million
Box office $157 million "
[0]https://en.wikipedia.org/wiki/Killers_of_the_Flower_Moon_(fi...
You typically would double it i.e. about $400 million needed to break even.
It would be considered a flop if it was just a theatrical release.
Deleted Comment
Yes, Apple generates LOTS of revenue overall, but that doesn't justify bleeding cash on a business line that hasn't produced material returns and has no significant positive trajectory in sight.
It's clear that Apple saw this as their Prime Video bet on their services strategy, but that hasn't worked out. Just look at AppleTV+ market share. It's hilariously miniscule.
TV+ is nice value add on their bundled subscription package so may be driving more people to opt for that. I know it was a major factor in my decision and now I am playing Apple Arcade games and use Apple Music as my primary music service.
Operating TV+ as a halo or loss leader product to get people to try other services within the ecosystem could be a winning strategy for them. Also likely drives some hardware sales.
I actually haven't seen any numbers on their current marketshare, but I'll give you that they aren't anywhere near their competitors. I don't think the problem is that they're spending too much money.
(wouldn't even make sense to, they have an Android app)
I'm wondering if at some point Apple doesn't look at how much engineering effort goes into all those useless apps for a service that is bleeding money and decides to reassign the workforce. Money is basically infinite for Apple, but good engineers are its most valuable resource.
Just getting Android users to have a daily reminder of "Apple makes something that is high quality and I enjoy" could be enough to influence future purchasing decisions even if those people wouldn't explicitly consider their enjoyment of Apple TV+ to be the reason they eventually bought an Apple device.
(I have no reason to specifically believe that Apple TV+ is ROI-positive in this way, just pointing out that non-conversion brand awareness marketing is a huge part of the marketing world, with often very positive results.)
On the other hand, that brand boost had an estimated value associated with it, and it’s wasting money to overpay for it, hence “Company Executive Taking Various Measures To Bring Costs Down Considerably” — only worth running a loss leader if it’s overall profitable.
To me, it sure feels like the latter.
Apple spending $20 billion to pick up all this prestige TV and Film, is kind of a great deal, when compared to say, the $43 billion Discovery just paid for Warner, just to kill half of it (and then lose another $7 billon on it over the past 2-3 years)
When I had a mail-by-DVD Netflix account, I don't think my queue ever dropped below 20. I have a sizeable watchlist / saved list on every streaming service I have used, and it also never goes down to zero.
They are also doing that traditional HBO thing where they get AAA movies for a limited time and then poof.
I'm hoping they continue to update the UI to make it easier to find new shows and viewing history.