Apple Inc. (NASDAQ:AAPLC) isn’t the only company with falling hardware product sales. Global personal computer sales fell 6.2% to 269.7 million units from a year ago. This represents the fifth straight year of declining hardware sales according to Gartner, Inc.
As for Apple, investors have maintained their optimism despite the flat/depressed sales. Consumers have been turning away from computers to tablets and smartphones and it shows.
It’s not surprising that companies like Apple are turning to other areas to beef up revenue.
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One of those areas is “services,” including Apple Music. Apple Music has done very well over the past few quarters. Apple executives noticed and have been trying to come up with ways to capitalize on the popularity of the service side of the company.
One solution is the creation and acquisition of original television programming and even movies. This could eventually put Apple in the same league with Netflix Inc. (NASDAQ:NFLXC), Amazon.com Inc. (NASDAQ:AMZNC) and others.
TV First – Movies Later
According to sources who spoke with The Wall Street Journal, Apple “has been in talks with veteran producers in recent months about buying rights to scripted television programs. It also has approached experienced marketing executives at studios and networks to discuss hiring them to promote its content.”
Programming would be part of the Apple Music subscription with television and other content at first. Original movies have been mentioned, but according to the WSJ that part is less defined and apparently something that will likely come down the road.
Although Apple has apparently told people in Hollywood it hopes to start offering original content by the end of 2017, the rollout will be measured. Shows similar in content and style to Time Warner Inc.’s (:TWXN/A) HBO series, Westworld,” and “Stranger Things” on Netflix are expensive to produce and Apple isn’t prepared to spend the hundreds of millions of dollars a massive launch would cost.
The idea seems to be to compete, at first at least, with Spotify which offers music but no video. This would distinguish Apple Music and give it something to offer in addition to same playlist of songs.
As Apple negotiates with content providers it has suggested it might offer to share data on subscribers including how many watch a specific program and selected demographic data on subscribers.
This would be a contrast with Netflix which does not share subscriber information – something that has been a source of contention for those who create the content seen on the service.
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In addition to the potential for an immediate and growing revenue stream there has also been speculation that Apple may be thinking long-term about adding original video content to Apple Music.
Some have even suggested that perhaps the company might be able to create enough content to feed it’s long-rumored Apple TV streaming service. Hints of this strategy go back to Apple’s attempts to strike up a merger with Time Warner Inc. before Time Warner agreed to be acquired by AT&T Inc. (NYSE:TB)