Report: Apple bankrolls video programming aspirations with $1B investment

Dive Brief:

Apple is getting serious about its video strategy and taking on Netflix and Amazon Prime Video with a $1 billion investment in both original video content and buying the rights to existing content, according to a report by The Wall Street Journal citing sources familiar with the situation.
To put the budget into perspective, it is around half of what Time Warner’s cable network HBO spent on content last year with its most significant original programming investments in “Game of Thrones” and “Westworld,” and it’s similar to what Amazon spent in 2013 when it entered the original programming video marketplace. Netflix entered original video content with an initial investment of $2 billion.
The initial plan is for Apple to acquire and produce up to 10 shows, according to people familiar with the plan cited by the Journal.

Dive Insight:

Premium video content has become a valuable commodity, but one question is whether Apple is too late to the game and coming in with too small a budget, even at the $1 billion level. That investment trails what would seem to be its two closest competitors in Netflix and Amazon Prime Video. There's also HBO, which isn’t alone among cable networks in offering original programming, and even Facebook is making a major push into premium video content with its new Watch service. Snapchat and YouTube have also thrown their hat into the ring.

By creating its own video service, Apple also risks cannibalizing its 15% slice of App Store subscriptions for Netflix and HBO Go. The tech company has a checkered past when it comes to media creation and distribution. Its successes include iTunes and the App Store. However iAd was a failure and the verdict is still out on Apple News and Apple Music. On the plus side, Apple has a large customer base it can market programming to and a stable of hardware to push it out across, including the iPhone, iPad and Apple TV.

All the action in the premium subscription video services space puts the challenges facing traditional TV into even higher relief with falling ratings and advertisers looking for lowered rates for linear TV ad spots. As an example of how volatile that space has become, Disney recently announced it is pulling its movies from Netflix and will form its own streaming service with an expected 2019 launch date. Soon after, Netflix announced it had lured away Disney-owned ABC's super-producer Shonda Rhimes to begin developing programming for the platform.