Apple Is Spending Billions on Its Upcoming TV Service. It Could Be a Costly Mistake

We already knew Apple is joining the crowded TV streaming business, but thanks to a report from Bloomberg we now know the company is preparing to launch it’s Apple TV+ service in November. That coincides with Disney’s upcoming streaming service
launch announced to appear on November 12.

Certainly, Apple can afford to spend the money. With more than $100 billion in cash on hand, the company has plenty of resources to pour into building out a content library. The bigger question is, however, is it worth it?

The Financial Times reported on Monday that Apple is spending $6 billion on original content, including The Morning Show, a drama produced by Jennifer Aniston and Reese Whitherspoon, which reportedly costs more to produce per episode than Game of Thrones.

Apple is entering tricky waters. Netflix became the dominant leader in video streaming mostly because it had a robust library of familiar shows and films that viewers cared enough about to pay $10 a month for. That lead has eroded as content creators like HBO, Disney, and NBC Universal enter the game with their own services in order to monetize their content by cutting out the proverbial middle man.

For example, Netflix is losing its top two shows — The Office and Friends — in the next year, which has forced it to double-down on creating original content. Despite those efforts, and the fact that it still has a huge collection of popular shows and movies, the company saw it’s U.S. subscribers decrease for the first time last quarter.

Which brings us back to Apple. The company has remained tight-lipped about what specific content users can expect but has indicated that The Morning Show will be a launch feature.

Of course, if the primary library will be original content, that could be a hard sell for users, especially as they become tapped out by the number of subscriptions available to different video services.

Apple has bet big on its services division to drive a large part of its future growth. In addition to Apple TV+, the company is counting on its paid News+, App Store, Music, and Arcade game subscription services. Those drive recurring revenue each month, and it’s conceivable that it won’t be long before the company offers a subscription bundle that includes all of these services.

Still, in order for any of them to succeed, users have to care enough about the content to plunk down money every month. Apple Music benefits from the largest library of music, as well as many exclusive releases. iOS is one of the largest gaming platforms in the world, so it’s not hard to see why it will attract subscribers.

But, with the TV+ service, the bottom-line question is this: will customers pay $9.99 a month for largely unknown shows? If so, Apple could easily become a leader in both content creation and delivery. If not, the company could be looking at a very expensive lesson in the economics of media production.

I suspect that because it’s Apple, the content will be top-notch enough for people to sign up. I also suspect that because it’s Apple, people will sign up. But the challenge Apple faces isn’t that different from those you do — though it’s probably on a slightly larger scale.

That challenge is that every time you leverage your brand to launch something new, there’s not only a risk, but a cost. For Apple that cost is $6 billion. The company can’t afford to get this wrong at that — or any price.

Neither can you.