Thesis

Apple’s message is it has an exciting line-up of content for consumers, but none of the messaging suggests why consumers should be excited. 

Research

In last week’s Monday AM Briefing, I highlighted Kara Swisher’s interview with Apple CEO Tim Cook on the Sway podcast as one of three “must-listen” podcast interviews.1

I have been watching an unusual amount of Apple TV+ lately, which started with a second viewing of The Morning Show, and I just started the second season of For All Mankind. I loved Ted Lasso, and I am excited for the special episode of Mythic Quest, a show I enjoyed and wrote about last year.

I enjoyed The Morning Show more the second time. Oddly. I found it to be a better show because I understood the characters better from having watched it the first time.2

I am enjoying For All Mankind as a special, once-in-a-generation show. Its imagination is extraordinary, and the History major in me is fascinated by the decisions the writers made when creating an alternate history of the U.S. with “what if” scenarios had the Soviets indeed beat the U.S. to land astronauts on the moon.

Recently, I have been trying to reconcile my enjoyment of these shows with my Curse of the Mogul take on Apple TV+. If $6B in annual spend is resulting in objectively great shows and movies (75+ as of this month) with Hollywood stars like Reese Witherspoon (The Morning Show), Jason Momoa (See), Tom Hanks (Greyhound), and Tom Holland (Cherry), then why are they not disclosing either TV+ subscribers/Monthly Active Users? Why are they not breaking out TV+ revenues in Services Revenues ($15.8B in Q4 2020)?

Apple’s story for TV+ does not involve any traditional strategic, financial or management appraisals. Instead, it repeatedly highlights the intangibles of its star-studded, award-winning content library.

They recently extended one-year free trials given out with hardware purchases through July, after those trials were set to expire between February and June. The service is effectively free now, and likely for the foreseeable future.

On this point it is worth revisiting what Cook told Swisher about TV+:

Kara Swisher

Right, how do you compete, though, against a Netflix? And you’ve got all these streamers, while HBO Max is making all this content. You have money. That’s what you have the most of, I think, compared to all of them.

Tim Cook

Well, hopefully, we have good ideas. But Kara, I don’t see it as a zero sum game. I don’t see that if a given user buys Netflix, that they can’t also buy Apple.

Kara Swisher

And you think content is critical as an area of focus for Apple.

Tim Cook

Yes, and we’re putting all of ourselves into it. It is not a hobby. It is not a dip your toe in. Because it’s an original focus, we don’t instantly have a catalog with 500 things in it. We’re going to build over time. We’ve gotten over 300 nominations now for awards and have won 80.

I think this sounds and reads like a reasonable answer to critiques of TV+: Apple is taking their time building out a library of original content (they just hired Jessie Henderson, former executive vice president of feature films for WarnerMedia’s HBO Max, to “ramp up” these efforts), and they can point to success with awards nominations and wins.

But, I still can’t reconcile these answers with the marketing of Apple TV+. Its best marketing message to date is that it is free, and that it will continue to be effectively free for the foreseeable future (NOTE: I imagine they will extend the trial after July, too, simply because they don’t have the catalog, yet.)

The catalog is already quite good on its own - and in the cases of Ted Lasso and For All Mankind exceptionally good - even if currently at 15% of its stated objective of 500 titles. With former HBO CEO Richard Plepler signed to a five-year deal with Apple, and an exceptional lineup of content on the way, odds are the catalog will only get bigger and better and users like me will be chatting more about the service.

There is a red flag, though: as much as Apple understands how to market hardware to consumers unusually well, it does not seem to understand how to market content to consumers. The open question is, will Apple ever figure out content marketing for TV+?

I am skeptical because of something Netflix Co-CEO Ted Sarandos said in his interview with the SmartLess podcast when comparing network TV production business logic to Netflix’s production business logic [00:32:23]:

And sometimes, you know, relative to what it costs to make a TV show or movie, sometimes you don't get enough people to watch it. And eventually, if you do that too often, you don't have enough money to make new shows. So the balance of this is just relative to what it costs. Can we get people to show up? Maybe what's unique about this relative to TV is, you know, it costs X amount of money to make a half hour of network television, and everyone has to like it.

And this has got to be like, you know, we can make a show for a couple hundred thousand people if it's economically sensible. We can make a show for one hundred million people if it's economically sensible. One thing that we get to look at sometimes it's super helpful is among the people who push play. There's a million reasons that sometimes the show does doesn't connect with the public. And everybody, everyone missed a great show. But among the people who push play, did they like it?

And then they like it enough to watch the whole thing that they watched four episodes of one night because they couldn't go to sleep. They loved it so much. Those are really positive signals, even if the big audience didn't show up in the first season that we used to make that second season.

And compare it to this lone mention of Apple TV+ from Apple CFO Luca Maestri in its Q1 2021 earnings call:

Our new service offerings, Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+, as well as the Apple One bundle are also contributing to overall services growth and continue to add users, content, and features.

From a consumer perspective, even if Apple and Netflix are not competitors, only Netflix communicates a business logic that reflects how much it cares for content that audiences love. Even if Apple’s content ambitions are promising and exciting, filled with and fueled by Hollywood star talent, both the Tim Cook interview and the Q1 earnings call don’t have a powerful message about why audiences should care.

Instead, it all suggests corporate hubris from Apple. The Curse of the Mogul framework is about the hubris of a company believing that the media industry is not subject to traditional strategic, financial or management appraisals, and therefore the market will respond more favorably to disclosures involving intangibles like creative talent and artistic product. Apple’s story for TV+ has been only about the intangibles of its star-studded, award-winning content library, and how these intangibles contribute to “overall services growth”.

But the popular and critical successes of recent shows like Ted Lasso, Mythic Quest, and For All Mankind suggest they understand something tangible about their streaming audiences. Netflix, and even Disney, continue to communicate by both word and deed that the best streaming model focuses on understanding and empathizing with target audiences thoroughly, and producing and distributing the content that audiences will love.

Apple’s message is it has an exciting line-up of content for consumers, but none of the messaging suggests why consumers should be excited. 1.6B device users in 100+ countries worldwide saying little to nothing about Apple TV+ shows when the service costs them $0/month at least and $4.99/month at most reflects an ongoing disconnect.

The longer this disconnect between Apple and its consumers continues, the real loss will be for consumers who continue to miss out on the library of content Apple is building at TV+.

Why doesn’t Apple understand which content its audiences love?