This summer, I wrote old media companies were, "going to need a bigger boat, " due to all the FANG stocks getting serious about their media ambitions . Well, it turns out Apple (NASDAQ: AAPL) just inked a deal with Steven Spielberg's Amblin Entertainment and NBC Universal to remake 10 episodes of Spielberg's 1980s cult sci-fi series Amazing Stories . Here's what it means to investors.
Apple goes big
Apple has authorized $1 billion to spend on dramatic content as part of its new media ambitions, which it hopes will one-day rival streaming giants Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) . The company has hired Sony executives Zack Van Amburg and Jamie Erlicht to head the unit, which will be part of Apple's growing services business .
The company certainly has its work cut out for it -- Netflix just topped 100 million worldwide subscribers and raised its prices, which you can bet it will plow back into more content. Amazon, for its part, is also stepping on the gas with an estimated $4.5 billion in content spending this year. Then there's Disney , which will roll out its own streaming service in the coming years. Rounding out the megacap company media spend is Alphabet's Youtube Red, Facebook , and, oh, by the way, the traditional cable companies who aren't taking the competition lying down.
Given all this crowding, it appears Apple is going after the biggest fish it can (that's a Jaws pun), and will definitely be putting significant dollars behind him. The Wall Street Journal reports Apple will spend "significantly more" than $5 million per episode, which is at the high end of premium cable TV (for reference, Game of Thrones costs about $10 million per episode). Bryan Fuller, who directed The Usual Suspects as well as the creepy TV version of Hannibal will also be the day-to-day showrunner. This definitely fits in with Apple's premium brand -- but of course, there's already ultra-premium content from the likes of HBO, Showtime, Netflix, and Amazon, too.
There's probably no bigger name in entertainment than Steven Spielberg, but that doesn't necessarily mean the revamped Amazing Stories will be successful. Spielberg's last movie The BFG wasn't exactly a hit, and most millennials have probably never heard of the original Amazing Stories . Moreover, Apple's first forays into original content such as Carpool Karaoke (which it licensed from CBS ) and Planet of the Apps aren't exactly the stuff of water-cooler talk.
Of course, those first efforts were relatively low-dollar and also functioned mostly to supplement Apple Music, which just passed 30 million subscribers. Rival Spotify currently outdoes Apple with 60 million paying subscribers, so Apple's initial content was likely geared toward Spotify users as a "sweetener" to switch over.
The new series will be Apple's first serious content effort that is not at least loosely affiliated with its music service or app store. Thus, Apple needs an attention-getting name to get people interested. Remember, Netflix's first big shows were House of Cards and the remake of cult comedy Arrested Development . House of Cards itself was a remake of a successful British series and boasted a starred cast. Apple seems to be taking a page out of that "can't-miss" playbook.
But the reason Netflix has been successful isn't just because it has big stars, but mostly it executed high-quality shows, which is not easy or a foregone conclusion. House of Cards , Orange is the New Black , and Stranger Things are great shows, and that's why people remain loyal to Netflix. Stranger Things was created by brothers Matt and Ross Duffer, who were not exactly household names. The success of Amazing Stories and Apple's new media offering will, therefore, be dependent on how good the shows are -- no more, no less.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Billy Duberstein owns shares of Alphabet (C shares), Amazon, Apple, Facebook, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Netflix, and Walt Disney. 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 .
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