Apple TV+ Ambitions Meet Fiscal Prudence
The really interesting thing about Apple TV+ is that it is not so unsuccessful that it can be called a failure, and yet is also not so successful that it can be heralded as a home run win. It sits in a murky grey area, where no one is quite sure whether Apple is happy with its progress. Some days, I wonder if even Apple themselves can define what the success metrics for TV+ are meant to be.
Apple TV+ programming does not define culture or conversation on a regular basis, but it has had some sporadically popular moments, with Ted Lasso being its biggest high; Ted Lasso was the number one streaming original on the Nielsen chart in 2023, and was an undeniable breakout hit. None of its original films are iconic, and its attempt to start a franchise with Argylle was an almighty flop, but they have secured an Oscar Best Picture award for CODA, an achievement that every other streamer has so far failed to do. Five years in, viewership of content on the service remains low, but is seemingly continually growing each and every month. It is in a steady state of existence that is neither stagnant, nor especially vibrant.
Apple disputes the accuracy of Nielsen streaming ratings, but also refuses to share numbers itself, so it’s what we have to go on. Apple TV+ ranks last of all streamers, bar Paramount+, with 0.2% monthly share of US viewership. Naturally, Netflix is doing laps around everyone with an unassailable lead in first place. Of the rest, Apple is behind but not hugely so. You also have to account for the fact that its rivals have much deeper content catalogues on their services for people to rack up viewing hours against. There’s simply more stuff for people to watch elsewhere, which skews aggregate viewing figures. For a platform that only has about 200 shows in total, Apple having 0.2% share of overall streaming viewership doesn’t seem that bad.
That being said, it’s still very much an unprofitable venture for the company, on raw financials. Apple is spending about $5 billion annually on content, and is definitely not taking in that amount in direct subscriptions. It gets complicated when you try to consider the contribution of things like the Apple One bundle, but I still think it surely boils down to a negative bank account overall. Eventually, I think Apple wants TV+ to stand on its own, matching expenditure with revenue, but it isn’t there today.
Obviously, Apple has the money to subsidise the service for eternity. The question, then, is what is the appetite at the management level to persevere. Even for Apple, a billion dollar loss per quarter is a significant line item. The Bloomberg report published last week certainly suggests that the company is a little bit more hesitant with the chequebook as of late, and wants to be slightly more prudent with spend on the budgets of individual projects. Apple doesn’t want to be seen as the chump that forks out millions just because it can afford to do so. In the same way that they continuously negotiate with suppliers for the cheapest price on hardware components, they will try to get the best prices on content.
I think some people interpreted the Bloomberg story as meaning Apple is slamming on the brakes, and conceding defeat. Personally, I don’t get the impression that they will give up on the TV+ endeavour anytime soon. Cue and Cook certainly seem committed to it, and human willpower is really the only limiting factor right now. Based on extrapolations from the limited data we have as outside observers, I think they are on track to have a sizeable slate for 2024 and 2025, roughly in line with their 2022/2023 output. They haven’t stopped ordering new projects. In fact, they have actually been one of the most prolific streamers this year in terms of new original debuts. They have even branched out further internationally, announcing more new foreign language originals than ever before.
Looking forward, I expect they will spend just about as much as they have been per annum, perhaps spread over a larger number of slightly less expensive titles. Strategy shifts, such as an ad-supported tier and licensing third-party content to make the subscription more attractive to a broader audience, are definitely in play though.