Apple's Hollywood Plan Becomes Clear: The "Cable Box of Streaming"
The tech giant’s content push signals an intent to dethrone Comcast, not Netflix, as consumers increasingly cut the cord on traditional pay television: "You need good content and a service that works really well."
From inside the Steve Jobs Theater in Cupertino, California, on March 25, Apple's top executives outlined a vision for a future in which live sports events, breaking news, prestige hourlong dramas and kids cartoons can all be accessed through one hub that is available across multiple screens. If that future sounds a lot like cable television's present, well, that's because it is.
As streaming becomes the primary method through which many households access film and TV programming, Apple is at the center of a new fight to own the living room — not so much directly taking on Amazon, Hulu and forthcoming services from Disney and WarnerMedia, but potentially competing on an even bigger scale with the goal of aggregating content from all those platforms.
"Today, there is so much to watch in more ways than ever before, and with so many choices, sometimes it's hard to know where to start," CEO Tim Cook said from the stage before unfurling a plan that will begin in May with the relaunch of the Apple TV app, now a central hub where consumers can watch live and on-demand programming through their existing Hulu and ESPN+ subscriptions or sign up for HBO and Starz.
Then, this fall, Apple will supercharge the platform by introducing the subscription offering TV+ for originals like The Morning Show starring Jennifer Aniston, Steve Carell and Reese Witherspoon and See with Jason Momoa. "Apple is looking to become the cable box of streaming," says Wedbush analyst Daniel Ives, who predicts that in the age of cord-cutting, "the distribution platforms are going to be as valuable as the content itself."
Apple, which disappointed media by not revealing pricing details for its TV offering, is playing catch-up. Amazon has been bundling programming from third-party services through its Channels program since 2015. Roku began selling subscriptions to Showtime, Starz and Epix alongside its open app platform in January. And just four days before Apple's event, Comcast unveiled a streaming-only TV box, Xfinity Flex, for watching Netflix, HBO and more than 10,000 free titles. "We believe that, in a sea of apps, there is app fatigue," Xfinity Services executive vp Matt Strauss said of the cable giant's foray into a streaming-first offering. "It's really about aggregating the experience of all the different content within these apps."
The market that tech giants are eyeing is only growing as consumers abandon costly pay TV packages. In three years, the number of U.S. cable subscribers is expected to fall below 170 million, per eMarketer, while over-the-top viewership will reach 205 million people before 2019 is over. With an install base of 1.4 billion users (900 million of them iPhone owners), Apple needs only a fraction of its customers to sign up for a TV offering to become a real threat.
While its channels program won't have Netflix — CEO Reed Hastings said March 18 that he wants people to "watch our content on our service" — Apple will be able to sell subscriptions to some 20 networks and take a cut of the revenue. Ives figures a streaming bundle could reach 100 million subscribers in the next five years, while Morgan Stanley has projected that a service combining several of Apple's entertainment offerings could generate more than $22 billion in revenue by 2025. That's needed revenue as iPhone sales plateau.
Apple will be relying on the star-studded slate it has assembled to lure people into its TV ecosystem. The company has been carefully courting Hollywood for the better part of two years, hiring well-regarded Sony TV veterans Jamie Erlicht and Zack Van Amburg to lead the outreach effort. And it's already paid off. A group of 30 actors, showrunners and directors flew to Cupertino for Apple's showcase, and a video of Witherspoon, Jennifer Garner and Rashida Jones palling around with Oprah Winfrey posted after the event would make any marketer drool. In Los Angeles, meanwhile, the live stream became appointment viewing for many, though the majority of TV execs THR polled say they didn't bother to tune in. In fact, so many agents at WME were watching the show that, sources say, the agency's server briefly went down.
Among the most discussed announcements in Hollywood was that the TV app will be available in more than 100 countries and distributed on non-Apple platforms, including Samsung sets and Roku boxes, a sign that Apple is committed to widely distributing its originals. One network executive calls the pitch for the TV app the "most impressive" part of the presentation.
But it will be months before Apple's streaming prowess is put to the test, and there are still several unknowns. While there was a parade of high-wattage talent onstage — Steven Spielberg! Sara Bareilles! Big Bird! — Apple showed little video footage and offered up few details. "Any other company announcing what they announced, they'd be like, 'snore,' " says a top entertainment dealmaker. "I don't see what's so compelling about what they're offering."
Some observers have argued that Apple wouldn't want to reveal too much to competitors months before the launch of TV+. (Disney is hosting its own showcase for its direct-to-consumer offering April 11, after all.) But the absence of concrete information gave the appearance that executives are still searching for a strategy. "Spending money doesn't guarantee success," cautions BTIG media analyst Rich Greenfield, who estimates that Apple is writing $2 billion in checks annually for its original programming. "You need a combination of good content and a service that works really well."
While questions linger, there's no denying that Apple has an opportunity to define what it means to be a new type of entertainment hub. Winfrey, perhaps, summed up the sentiment best in the video with Witherspoon, Garner and Jones. "I think we're Apple girls," she said, before adding, "I'm not even sure what that means."
Lesley Goldberg contributed to this report.
This story first appeared in the March 27 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.