Last week, Apple’s intention to enter the original content race was widely reported (Variety, Fortune, …) and it was said the company bid for the rights to the stars of “Top Gear”. Following this news, it is interesting to wonder what this actually means for the increasingly large ecosystem in which the Company operates.
Apple is not in the situation of Netflix (having to be in a stronger position for the negotiations with the studio) or Amazon (exploring new ways to be viable in a crowded ecosystem) and it does not require a content play to move forward. This is because iTunes is one of the most important content distribution platforms that ever was, while keeping (almost) entirely agnostic to the underlying content.
Of course, with c. $200bn of cash on the balance sheet, Apple can try pretty much anything and can pay its way to become the biggest content producer if it wishes. The question is, whether a company with revenue for the last quarter of close to $50bn should branch into a whole new area, where there have been numerous failures over the past centuries, when its business model does not require it.
On September 9th, Apple will have its newest update. It is widely rumoured that Apple TV will feature prominently in this announcement, as the freshness of the product wanes and fails to attract the scale of the iPhone or the iPad. A gaming console is likely to be there, but it is doubtful it will make a dent with the hardcore gamer population that makes up most of the industry.
To reach out to the target client demographic, exclusive content could be an intelligent play to finally make Apple TV a staple of the average household. Apple has enough resources to acquire all the key rights, over a period of time (including sports). Launching an original content team could then be the first step towards a more global domination strategy of the entire content ecosystem, with Apple sitting on the ability to spend more than the competition will ever be able to.
However, Apple is fundamentally a brand-based business whose profits are made on the sale of hardware. The acquisition of Beats played in the exact same field. Branching in the creation of content, competing with the ecosystem that makes the hardware so valuable to the general public, will be either the work of a genius or the most abject failure of the company’s last 10 years.
That said, with its available cash, Apple could acquire Disney ($170bn) and Activision Blizzard ($20bn), two of the best portfolios of content available across platforms. Not a bad fall-back solution…