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We Now Know How Apple Plans to Challenge Netflix and Amazon


There's been a lot of speculation about how Apple (NASDAQ: AAPL)  would eventually enter the streaming market in a challenge to market leaders Netflix (NASDAQ: NFLX)  and Amazon (NASDAQ: AMZN) . Until now, Apple's programming efforts have been modest, but reports suggest that the company plans to spend $1 billion this year  developing original content, though how it would eventually offer that programming to consumers has been unclear.

The few shows that have debuted thus far have been free to Apple Music subscribers. These early efforts have been unremarkable, with widely panned unscripted series Carpool Karaoke: The Series and Planet of the Apps the only releases to date. The company ramped up its efforts when it poached former Sony  Pictures Television executives Zack Van Amburg and Jamie Erlicht in mid-2017 to head its production team. Apple has inked deals with some of Hollywood's elite to helm and star in its original programming, but has yet to officially announce how that content will be distributed.

It seems we might now have an answer.

A television screen showing various viewing options from Apple TV.

Image source: Apple.

Everything in one place

There are numerous reports that Apple initially plans to provide its original programming for free to Apple device owners via the TV app that comes pre-installed on the iPhone, iPad, and Apple TV. In addition to its own content, the company plans to sell a variety of subscriptions from other providers -- similar to a strategy employed by Amazon Prime.

Along with the multitude of movies and television series included with their Prime membership, users have the option to sign up for Prime Video Channels, which allows them to subscribe to and watch a number of other streaming services like HBO, Showtime, and Starz -- without ever leaving the app.

Currently, Apple TV compiles content from linear TV sources like ABC and NBC, while also allowing users to access existing subscription channels like HBO Go, Hulu, and Netflix. As things stand now, users must leave Apple TV to subscribe to these services, but the revamped app will allow consumers to sign up and view these subscription services without leaving Apple TV.

A family-friendly approach?

Apple plans to provide high-quality, family-friendly content with broad appeal, and is avoiding topics such as politics and religion, while shying away from gratuitous sex, profanity, or violence, according a report in The Wall Street Journal . This move is designed to protect Apple's image and avoid controversy that might adversely affect sales of its flagship products.

The company has penned a number of high-profile deals that give insight into its plans. Apple signed Jennifer Aniston and Reese Witherspoon to secure its highly anticipated drama about a morning news show. Renowned director M. Night Shyamalan was tapped for a 10-episode psychological thriller, and Apple plans to reboot '80's anthology hit Amazing Stories , a program that won Steven Spielberg numerous Emmys. The new take on this iconic show is said to have attracted a number of Hollywood heavy-hitters such as Clint Eastwood, Martin Scorsese, and Kevin Costner. Apple also signed a multi-year agreement with Oprah Winfrey to generate programming, though specifics have yet to be released.

Apple is spending big on these initial bets, hoping to find several hit franchises that will form the foundation for a streaming subscription service that will debut at some point in the future.

A scene from an episode of "Carpool Karaoke" featuring John Legend and Alicia Keys singing in a car.

John Legend and Alicia Keys in a episode of Carpool Karaoke. Image source: Apple.

A different path

With the more cautious approach being taken by Apple and its late arrival to the streaming party, it doesn't appear that it will represent serious competition for Netflix anytime soon. With 130 million subscribers worldwide and counting, Netflix isn't taking its foot off the gas, with plans to release 700 original series and 80 original films this year. The company's approach is designed to have something for everyone, not favoring any particular genre.

There are those that believe that Apple's more measured approach, while not a threat to Netflix, could be big business for the iPhone maker. Morgan Stanley analyst Katy Huberty recently made the case that Apple's foray in video could bring in as much as $37 billion over several years.

It's all rumors at this point since Apple hasn't made an official announcement, but one thing's for sure -- you can't discount Apple.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon, Apple, and Netflix. The Motley Fool owns shares of and recommends Amazon, Apple, and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: AAPL , AMZN , MS , SNE , NFLX



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