Apple, The Culver Studios And The Importance Of Content

The Financial Times has reported that Apple is planning to acquire The Culver Studios, a complex of film-making buildings in LA next to where Sony Pictures is based. The Culver Studios has a long history in Hollywood, with the likes of Howard Hughes and Cecil B. DeMille both basing their film-making activities there. More recently, The Matrix was filmed there. With 13 sound stages, the complex has capacity for TV show shoots and feature film work, alongside substantial office space for Apple’s original content team. This development builds upon on the August announcement of a $1 billion annual budget for content, and the June announcement that Sony Pictures executives, Jamie Erlicht and Zach Van Amburg (who built the creative teams behind scripted drama hits Breaking Bad and Outlander), had joined Apple to lead their original content push.

Cutting through the content noise

Star production talent, billion dollar budgets and iconic film locations all highlight the public relations drive behind recent Apple’s focus on services. In 2016, the services operating segment accounted for $24.3 billion in revenue, an 18.2% growth on the $19.9 billion in 2015. Apple’s goal is to more than double service revenues to $50 billion by 2021. Services was the catalyst behind Apple’s explosive growth in the first decade of the 21st century, which led to to the company becoming the most valuable in the world by stock market capitalization. Compelling content was essential to showcase the hardware and the operating systems that made Apple consumer devices best in class. The launch of iTunes enabled Apple to build a compelling content proposition around its totemic iPod product, and then the transformational iPhone, which has had a significant impact on both the digital landscape and consumer society in general. The result was an explosion in device sales and a consolidation of the perception of Apple first and foremost as a hardware company.

The refocus on services is a recognition that compelling content will be key to the future growth trajectory of Apple. And in 2017, content consumption is being driven by streaming. While Apple has a strong streaming proposition in music with Apple Music, its video offerings are reduced to a handful of originals on Apple Music, such as the recent Planet of the Apps, which have failed to make a meaningful impact on audiences or the wider video space. Apple needs to press the reboot on video, and to be clearly seen doing that. The two audiences it needs to impress are the general public and the film and TV industry. Consumers are more likely to stay within the Apple ecosystem if exclusive content is to be found there, and, video talent needs to know that Apple is as serious about reshaping the TV industry as it was with music, which the launch of iTunes demonstrated.

The challenge for Apple now is in the timing. When iTunes launched in 2003 there was no viable alternative consumer facing download proposition. When Apple music launched in 2015 there was only one major consumer streaming music service, and it was not yet fully global—Spotify only had 21.5 million subscribers in H1 2015 and was loss-making. In 2017, streaming video subscriptions are dominated by two profitable players available in all major territories, with near mainstream penetration rates in the US and with significant budgets at their disposal. Effectively, Apple is looking to make a dent in a maturing market. With Netflix and Amazon both spending over twice Apple’s $1billion on original content in 2017, Apple will have to work hard to establish credibility in original video content production, and possible addition of The Culver Studios complex  is another step closer towards achieving that.