Apple already has a massive content business, despite barely dipping its toe into the lucrative world of TV programming.
The company, which announced its second-quarter earnings yesterday (May 1), lumps together its sales of music from iTunes, apps, games, and movies on the App Store, and Apple Music and iCloud subscriptions, into a business line it calls Services. This quarter, Services generated $9.2 billion, more than double the $3.7 billion in sales Netflix posted in the same period.
Apple’s content business has become a surprise success for the company, managing to break out of the generally cyclical nature of Apple’s earnings, and chalking up five consecutive quarters of growth. It’s now the company’s second-largest business, behind the iPhone. Over the past year, Services has generated nearly $33.5 billion in revenue for Apple, which would put it 87th on the list of Fortune 500 companies, just below American Express. Netflix has generated roughly $12.8 billion in that same period.
Three years ago, Apple said it wasn’t going to get into original programming. It has since released Planet of the Apps, a rather tone-deaf show that was a cross between The Voice and Shark Tank, and Carpool Karaoke, a serialized version of the celebrity singing section on James Corden’s The Late Late Show. Both are exclusive to Apple Music subscribers, and neither has set the world alight. But Apple has since hired actual TV executives to produce programming people might be interested in watching, including the team behind popular shows like Breaking Bad and The Crown. It also recently got into a bidding war with HBO for Star Wars and Star Trek director J.J. Abrams’ new TV show.
The vast majority of Apple’s revenue comes from the iPhone, but recent releases have been less compelling than in the past. To keep consumers locked into its ecosystem, Apple is looking for other ways to entice them to spend money. Sometimes, that might mean buying new accessories, but more often it’ll likely mean spending on a new app, game, or TV show. If Apple can produce compelling content that consumers can’t get anywhere else, its already-massive Services business could one day bolster the whole company, as the iPhone does today.