Gene Munster: Apple is 5 years behind Netflix

But, he adds, Apple’s original video content is further along than you think.

From a note to Loup Ventures subscribers posted Friday, before the Oprah announcement.

At first glance, it appears Netflix’s lead in original content is insurmountable. Netflix will end 2018 with close to 1,000 original titles and spend an estimated $3.5 billion on new titles this year. Keep in mind that almost half of that content is outside of the U.S. That compares to Apple, which has 2 titles out today and another 16 in the works (to be released in 2019 at the earliest), expecting to spend about $900 million this year. However, history is on Apple’s side, given that just five years ago Netflix had 13 original titles including the debut season of House of Cards. In other words, with the right resources, which Apple has, Apple’s original content titles can ramp from just under two dozen to potentially over one hundred, We note that Apple has stated they are focused on quality vs. quantity…

It’s no secret that original content will be an emerging area of investment for Apple in order to boost the increasingly important Services revenue line. The good news is that cord cutting is undeniable and consumers are now paying for multiple monthly streaming services. Multiple streaming services means there will be a handful of content provider winners. We think that over the next 5 years Apple will ramp its original content investment from an estimated $900m this year to an estimated $4.2B in 2022.

Below: Apple’s content pipeline, according to Munster.

  • Amazing Stories – Apple plans to spend ~$5M per episode on a 10 part sci-fi/horror series originally created by Steven Spielberg in 1985. Source
  • Are you Sleeping – A thriller drama series based on true crime novel by Kathleen Barber. Source
  • Central Park – Comedy that tells the story of how a family of caretakers living in Central Park ends up saving the park & the world. Source
  • Dickenson – Documentary about the early life of poet Emily Dickenson starring Hailee Steinfeld. Source
  • Home – Will offer viewers a “never-before-seen look inside the world’s most extraordinary homes” and the minds of the people who created them. Source
  • See – Straight-to-series epic world-building drama set in the future. Source
  • Untitled Damien Chazelle Project – Details of the series’ plot are under wraps. This project will be the first time Chazelle has written and directed every episode of a series. Source
  • Untitled Kristen Wiig Project – Comedy series produced by Reese Witherspoon, inspired by Curtis Sittenfeld’s upcoming short story collection “You Think It, I’ll Say It.” Source 
  • Untitled M. Night Shyamalan Project – Straight-to-series psychological thriller. Source
  • Untitled Morning Show – Morning show drama starring Jennifer Aniston and Reese Witherspoon. Source
  • Untitled Ronald D. Moore Project – Ronald D. Moore, developer of Battlestar Galactica explores what would have happened if the global space race had never ended. Source
  • Swagger – Profile on the early life and career of NBA star Kevin Durant.  Source
  • Little America – Based on a series of true stories featured in Epic Magazine that paint a portrait of America’s immigrants. Source 
  • Foundation – Based on Isaac Asimov’s iconic science fiction novels published between 1942-1993. Source
  • Shantaram – Drama series based on “Shantaram,” a 2003 novel about a man who escaped an Australian prison only to hide out in the slums of Bombay. Source
  • Little Voices – Tells the story of finding authenticity in the crowded and diverse New York musical landscape. Source

My question: Will any of these projects ever see the light of day outside Apple’s walled garden?

11 Comments

  1. Richard Wanderman said:

    An interesting question might be, what did Netflix’ pipeline look like at a similar time in their streaming evolution?

    I’m not a fan of Apple getting into this but there’s no doubt to succeed they have to throw a lot of stuff at the wall to see what sticks.

    1
    June 15, 2018
    • About needing to throw a lot of stuff at the wall to see what sticks: That’s not how Pixar works. For that matter, that’s not how Apple works, either.

      2
      June 15, 2018
      • Richard Wanderman said:

        Pixar is very narrowly focused. In a sense Apple should be as well and getting into content like this doesn’t seem to build on their strengths.

        0
        June 16, 2018
  2. John Kirk said:

    Once again, we’re comparing two different business models. This is one of the biggest mistakes one can make when analyzing companies.

    Netflix is selling a subscription video service. The key for them is for their service to be so desirable that customers are willing to pay a monthly fee to access their catalog. Original content has become a big part of their strategy. By having shows that are exclusive to their service, they both attract and keep customers.

    Apple’s secret sauce it’s it’s user-friendly software, but it monetizes through hardware. Apple does sell subscriptions, but that is not the core of their business.

    Disney owns some 5-star restaurants and they have some of the finest hotels in the world. But Disney is not in the restaurant business. And they are not in the hotel business. They’re in the Disney World Theme Park Business (and some other things too.) Similarly, Apple may sell music, movies, television, etc, but they are not in the music, movie, television business. They are in the smart device platform business. Don’t let the money being made from services make you think that Apple is a built around services. It’s the other way around. Services are built around their platform.

    I think the best comparison for Apple’s original movie content is Apple music. Apple Music is not Spotify. Apple’s original content aspirations are not Netflix. Spotify must get people to subscribe to its services. Netflix must get people to subscribe to its services. For Apple, music and television and movies serve a different purpose. Apple music and any original content Apple creates is not the product, it is designed to SUPPORT the project. Apple pulls you in with its user-friendly platform. Apple music and Apple’s original content is designed to keep you from leaving the platform.

    Apple is not “five years behind Netflix” because Apple is not trying to be Netflix and Apple is not trying to go where Netflix is going. You can’t be five years behind something you’re not chasing.

    9
    June 15, 2018
  3. Gianfranco Pedron said:

    “Gene Munster: Apple is 5 years behind Netflix”

    Netflix’s core and only business is just one of Apple’s many hobbies for the moment.

    Mind you, with pockets as deep as Apple’s it can afford to pursue its “hobby” at a level even many professionals cannot afford. It remains to be seen whether Apple can turn out professional results worthy of its investment.

    2
    June 15, 2018
  4. Fred Stein said:

    A decade ago I thought Apple should get into music and video content ownership. Wrong. Why is this still a hobby? One of many great things about Apple is its ability to leverage the massive assets of other ecosystems. This ranges from silicon foundries to the global wireless infrastructure to the payment processors behind Apple Pay to the App business and its 2 million App developers, etc. As John Kirk points out, Apple’s superior UX gives Apple leverage.

    Apple TV seems stuck in limbo with no compelling leverage. Hopefully Apple has some big reveal coming.

    2
    June 15, 2018

Leave a Reply