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Why Apple will not be the next Netflix – The Motley Fool

Investors hoping that the event by Apple (NASDAQ: AAPL) on March 25 finally marks the company's sparkling entry into video streaming could be disappointed.


Apple does not plan to establish a direct competitor to Netflix (NASDAQ: NFLX) [or Hulu]but intends to bundle streaming services such as HBO and Starz into its ecosystem and more convenience to provide access to the streaming services. While Apple is already cutting in-app payments for such services, the difference is that the iPhone maker plans to add a more visible façade to Apple TV and other Apple devices for using such streaming services.

Apple will, as expected, add original programming. The company has teamed up with stars such as Reese Witherspoon, Jennifer Aniston and Oprah Winfrey, as well as top directors like Steven Spielberg and J. J. Abrams for various shows. However, the focus of Apple's initiatives seems to be to provide a new portal for existing services, rather than emphasizing Apple's own program.

Even if financial experts have been waiting for years for Apple to challenge Netflix, which many even suggest If Apple fully acquires the streaming service, Apple will not play this game, or at least not near Netflix. Here is the reason.

  An Apple TV interface.

Source: Apple.

Cultural Collapse

Netflix is ​​a nuisance, and to be a nuisance one has to take risks. Netflix has revalued the entertainment industry several times, first with its DVD-by-Mail service, then pioneering streaming and finally spending billions on original content, challenging traditional studios and changing the way Hollywood does business.

Apple under Tim Cook, however, is characterized by a risk appetite. Cook has prevented the company from developing breakthrough products like iPod and iPhone that revolutionized the tech world over ten years ago. Instead, the company focused on incremental enhancements to the iPhone, continued the company's product ecosystem, and installed a user base of 1.4 billion users in its rapidly growing service segment including the App Store, Apple Music, Apple Pay, and other companies use their trademark smartphone.

Unlike other technology giants, Apple has also refused to make large acquisitions, returning more than $ 300 billion to shareholders through share repurchases and dividends.

Apple's Odyssey on TV ahead of Monday's event may best illustrate the company's risk aversion culture. Apple launched the Apple TV set-top box over ten years ago. Despite years of tormenting about its television ambitions, the company has never really taken a next step. Even Steve Jobs struggled to convince TV and movie studios to license content to Apple, as record companies licensed content for iTunes, and the company never made a standalone television as some hoped.

In 2017, Apple made small steps into the original content and launched two shows, Carpool Karaoke of which he borrowed the Late Late Show with James Corden . Hai Tank inspired Planet of the Apps but both flopped.

Now Apple has several shows with A-list talents in a row, but reports have already surfaced that the talent is under the control of the tech giants. According to The New York Post Hollywood heavyweights have resisted the company, calling it "difficult" to sue for excessive interference and "intrusive" executives including CEO Cook. Several executive executives have led to delays in production, and Apple has a creative talent to avoid controversial storylines and a positive attitude to technology. Cook's favorite reminders are, "Do not be so mean." This approach could condemn Apple's creative impetus, as many hit shows have turned a controversial topic in recent years, including The Sopranos Breaking Bad Mad Men ] House of Cards and Transparent .

Part of Apple's problem seems to be that the company does not want to risk harm to its brand or tie it to a controversial issue, as it could potentially lead to setbacks and jeopardize sales of equipment. This is a problem that a stand-alone streamer like Netflix does not have to worry about. Apple's philosophy also opposes Netflix's approach for original content, which has gained talent like the creator Shonda Rhimes from Grays Anatomy and the creator of Ryan Murphy from Glee . Netflix was also ready to fail, knowing that some shows were not getting out of hand, and CEO Reed Hastings even encouraged his content department to take more risks as not enough shows failed.

Dollar and Sense

The other challenge for Apple in its original content is that the streaming industry has not proven to be extremely lucrative so far. It took Netflix nearly a decade to make significant profits with streaming. Meanwhile, Hulu is still in loss, and Amazon (NASDAQ: AMZN) sees the video as a free giveaway to lure Prime members. Disney (NYSE: DIS) which will launch its own Disney + streaming service, which includes a healthy library of content from Marvel, Pixar and LucasFilm, has confirmed this. It will be streaming first Lose money as it builds an audience.

For Apple then, who provided around $ 1 billion for his current programming round to truly compete in a low-margin industry. His huge cash hoard can only throw bad money at bad money.

Leveraging its user base and device network may be the best way for the company to join the streaming lead, but it will not shake the industry, as some have expected. We learn more when Apple finally picks up the curtain on Monday.

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