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Tim Cook doesn’t often talk about Apple TV+ on earnings calls.
Which makes sense because in the grand scheme of his massive company, a streaming service is a droplet in the ocean. Apple’s first-quarter results last week were so eye-popping, hauling its highest revenue ever for a single quarter, that Cook’s entertainment strategy really doesn’t matter much to a company with a $2.8 trillion market cap.
But as meaningless as Apple TV+ is right now to Apple’s bottom line, my ears couldn’t help but perk up when he addressed the streaming service in his quarterly exchange with analysts.
In his remarks, Cook was clearly complimentary toward Apple TV+ and the progress it has made in market since its fall 2019 launch. But there was one statement he made that has stuck in my mind in the days since he uttered it.
“We don’t make purely financial decisions about the content,” said Cook. “We try to find great content that has a reason for being.”
Suggesting the billions of dollars Apple spends on original programming each year is somehow not entirely driven by commercial calculations is an interesting choice of words for Cook.
I’m not even sure what he means by “reason for being” — do Netflix shows lack, you know, justification to exist?
As far as “financial decisions,” maybe he means what he’s saying. Or maybe he knows full well that’s a total crock.
But what he’s essentially saying is that the performance of Apple TV+ can’t be assessed in the same way we might size up, say, sales of the iPhone.
The problem is we have nothing to go on beyond Cook’s compliments in terms of getting a sense of how Apple TV+ is doing; its financial performance has never been broken out from everything else in the company’s high-flying services unit. Unlike many of its rivals in the streaming space, the company has never shared any sense of how many subscribers Apple TV+ has. (A report last September indicated Apple told IATSE in July that fewer than 20 million subscribers had been signed up.)
Whatever we know about the performance of the streamer's many shows comes from third-party measurement services or Apple’s own occasional cherry-picked “datecdote” that, as many of its competitors also indulge in, are vague to the point of meaninglessness.
All this why it’s hard to not see Cook’s comment as something of a smokescreen, one that could be hiding the possibility that the reason no hard numbers are offered regarding Apple TV+ is the company is not happy with its performance.
To be clear: I’m not saying Apple TV+ is struggling; perhaps it’s going gangbusters.
Still, if all was going swimmingly, wouldn’t Apple offer even a few key data morsels to make that clear? And in the absence of the disclosure, can you blame some skepticism?
Regardless, the financial reality may in fact be that Apple TV+’s performance is of zero concern to Cook; so many other things are working so well for a company so gargantuan that if the streaming service is indeed struggling, it's a non-issue.
The market reality is that even if Apple TV+ isn't doing well enough for Apple to share data confirming that, the streaming service's rivals must remain on high alert. While it's highly unlikely Apple TV+ is near achieving an audience that puts it on the same competitive tier as streaming’s top performers (Netflix, Disney+, Prime Video), Cook has the means to change that overnight with an acquisition Apple is well within its financial means to pull off.
The prospect of Apple-driven M&A has placed a long shadow over Hollywood that can’t be ignored. Cook has no shortage of options big and small that he can scoop up to lock up the competition.
That said, the regulatory environment now is likely not conducive to Apple acquiring anything of any real scale. While the Biden administration's strategy still isn't 100% clear here, there's enough indication that no one is going to rubber-stamp any M&A for a company already squarely in congressional crosshairs on a number of other delicate fronts.
Microsoft clearly doesn't see itself as being a regulatory target the way Apple might, which explains its $68.7 billion bid for Activision, which certainly isn't guaranteed smooth passage, either.
But Cook could have a long game in mind here. At some point down the road, when the regulatory smoke has cleared, Apple can scoop up a studio (Lionsgate?) or a streaming rival (Netflix?) and improve its standing in the streaming race overnight.
Apple may be loath to be transparent about Apple TV+'s performance because in this long-term scenario, Apple TV+ is now essentially just a placeholder, a prelude of what's to come.
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