The contours of Apple’s much-anticipated Hollywood plans took shape on Monday as the company announced it was entering the competitive streaming arena with a service that will feature original series from such luminaries as Steven Spielberg and Oprah Winfrey.
At a presentation at Apple’s headquarters in Cupertino, Chief Executive Tim Cook also unveiled new subscription services for news and video games. The Netflix-style news service, dubbed Apple News+, will cost $9.99 a month and include journalism from the Los Angeles Times, the Wall Street Journal and hundreds of magazines.
The push is part of the tech giant’s broader efforts to grow revenue from its services business as sales of its flagship product, the iPhone, slow down.
“We believe in the power of journalism and the impact it can have on our lives,” Cook said. “We want to make a valuable contribution to the industry and society as a whole.”
With more than a billion active Apple devices worldwide, and more than 200 million in the United States and Canada combined, news organizations hope the partnership will expose their work to a vast new audience.
“Apple News+ provides a perfect platform for our expanded coverage of news, analysis, and opinion,” Los Angeles Times Executive Editor Norman Pearlstine said in a statement. “We share a world vision that is informed by our California roots and by our common commitment to innovation and excellence.”
The ad-free streaming service, called Apple TV+, will launch in the fall and be available in more than 100 countries, the company said at the star-studded event in Cupertino.
“Great stories can move us and inspire us. They can surprise us and challenge our assumptions,” Cook said. “So we partnered with the most thoughtful, accomplished and award-winning group of creative visionaries who have ever come together in one place, to create a new service unlike anything that's been done before.”
In a further revamp of its TV strategy, Apple announced a new version of its Apple TV app debuting in May that will make it easier for users to sort through the shows and movies they want to watch, and get recommendations based on their viewing habits. The app will also allow users to pay for a la carte channels including HBO, Showtime, Starz and CBS All Access.
The company has a long history of making hardware — iPhones, iPads and Macs. But it is a relatively new player in the world of original productions.
Apple is expected to spend $1 billion to $2 billion a year on its original content. The company has roughly two dozen shows in production or development, many of which were touted during Monday’s event with a roster of stars making appearances.
Spielberg, Reese Witherspoon, Jennifer Aniston, Jason Momoa and even Big Bird took to the stage. A black-and-white promotional video featured interviews with J.J. Abrams and Octavia Spencer. The company had Sara Bareilles sing the theme song from her show “Little Voice.”
Spielberg received a standing ovation. He encouraged people to check out his show, a reboot of the 1980s broadcast anthology series “Amazing Stories.” “We want to transport the audience with every episode,” Spielberg said.
Winfrey, who is working with Apple on two documentaries, including one called “Toxic Labor” on sexual harassment and assault in the workplace, also touted her partnership. She also said she would use the new service to amplify her book club efforts.
"I am proud and honored to be a part of this new platform where I can connect with people around the world to share meaningful ways to create positive change," Winfrey said.
But Apple declined to reveal pricing for the service and offered little footage of its upcoming shows.
“There are still a lot of unanswered questions,” said Gene Munster, a managing partner with venture capital firm Loup Ventures.
Some in Hollywood are skeptical whether Apple will succeed, citing the company’s cautious approach to content and heavy competition from the likes of Netflix, which has roughly 140 million paid subscribers and is expected to spend $15 billion on content this year. Apple shares on Monday declined $2.31, or 1%, to $188.74.
Apple is pouring its money into a select number of high-quality shows rather than trying to match Netflix's massive quantity.
Some analysts said they believe there will be demand for uplifting, inspiring content as Apple tries to brand itself with family-friendly shows, unlike other pay channels that offer edgier content. Apple devices are not just in the hands of adults, but are widely used by older children and teens, said Kris Hull, a senior vice president at market research firm Kantar.
"It gives parents a little bit more of a sense of safety that their kids aren’t going to be ultimately exposed to content they don’t want them to see," Hull said.
Apple’s new streaming platform won’t dethrone Netflix, but it should grow the services business, said Tim Bajarin, president of advisory services firm Creative Strategies.
“I don’t see this as a Netflix killer,” he said. “This is an economics story.”
In a tactical shift, Apple also said its revamped TV app will work with other TV manufacturers such as Sony and across other platforms such as Roku. Apple previously made its Apple TV app available only on the company’s own devices.
In addition to unveiling a new credit card, the company also launched Apple Arcade, a subscription service available this fall that will provide access to more than 100 new and exclusive games that can be playable offline. Pricing was not announced.
Many analysts are bullish on Apple, saying it already has a loyal fan base with more than 900 million active iPhones worldwide, providing a potentially vast distribution network for content.
After its launch in 2015, Apple Music, the company’s streaming music service, accumulated more than 50 million paid subscribers. While that number is smaller than rival Spotify’s 96 million subscribers, Apple Music’s growth shows how quickly Apple can amass a significant business.
“You’ve got to strike when the iron is hot and monetize your install base,” said Daniel Ives, a managing director of equity research for Wedbush Securities.
Services, a business category that includes Apple Music and mobile payment option Apple Pay, generated $37 billion in revenue the last fiscal year, up 24% from the prior year.
Apple’s launch of a paid news service comes at a time when many newspapers and magazines are coming to embrace a digital subscription-based business model after years spent struggling to squeeze revenue out of online ads as print subscriptions dwindle.
The company will split revenues with publishers, with Apple taking half the subscription fee and the remainder going to publishers based on their share of total readership on the new product, according to sources familiar with the deal.
Apple’s 50% cut is higher than the 30% the company typically takes out of app purchases and subscription fees through its App Store. According to the New York Times, those terms have turned off some leading national newspapers — the New York Times and the Washington Post reportedly have chosen not to participate.
“Apple’s choice of The Times as a revenue-sharing partner validates our commitment to high-quality journalism,” said Los Angeles Times owner and Executive Chairman Dr. Patrick Soon-Shiong.
Soon-Shiong has ambitions of building The Times’ digital subscriber base from its current size of 150,000 up to 5 million. He said that the shift to a subscriber model has been made necessary by the “unfair usurpation” of ad revenue by companies like Facebook and Google, which together control close to 60% of the U.S. digital advertising market.
“We have every confidence the Apple affiliation will spur the growth of our digital subscriptions,” Soon-Shiong said in a statement Monday.