What’s Apple doing with all that video it’s getting from Oprah, Spielberg, and others?

Or app.
Or app.
Image: Reuters/Beck Diefenbach
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Apple is arriving late to the streaming video party and has been sparing no expense to make a fashionable entrance. It’s signed deals with A-listers like Oprah Winfrey, Steven Spielberg, Jennifer Aniston, and Reese Witherspoon, along with the people behind Sesame Street, to create original shows. And it’s reportedly dropping more than $1 billion on original video content this year.

But what’s it going to do with all of it? It could give it all away for free.

Apple may not concern itself with the subscription revenue competitors like Netflix have built their businesses around. The real value for Apple in amassing a content arsenal is to draw audiences to its “TV” app, BTIG Research analyst Rich Greenfield wrote in a blog post (login required) Sept. 4. The TV app, introduced in 2016, currently aggregates content from other video providers and allows people to locate shows and movies across apps. It could become a larger hub for streaming video if Apple can entice viewers to spend more time within the app.

“We believe all a consumer will need to do is already own or buy an Apple device (iPhone, iPad or Apple TV) to have free access to all of the content Apple’s video team is creating,” Greenfield wrote, adding he suspects the TV app will eventually hit other Apple devices like the Mac, as well. “Similar to Amazon Prime, the initial Apple content offering is just the beginning. Apple is hoping that consumers that come in for one of their original series will have interest in Game of Thrones on HBO, Power on Starz, or Homeland on Showtime with one-click to sign up and start watching those shows within the TV app.”

Bloomberg previously reported that Apple plans to sell video subscriptions to other services such as HBO and NBA League Pass within its TV app, and could move the streaming of that content into its own app in the future. Apple’s TV app currently sends users to third-party apps to subscribe to and watch the TV shows and movies they locate within the app.

The new strategy would be comparable to Amazon’s Prime Video Channels program. It allows subscribers of Prime Video—which is included with a Prime subscription in the US and is also available separately—to pay for and watch content from providers like CBS, HBO, and Showtime from within the Prime Video app. In this case, anyone with an Apple device would be able to watch Apple’s video content for free, which might inspire them to subscribe to HBO or Hulu from within the TV app as well. Apple wasn’t immediately available to comment on its plans for its content.

It would, in essence, make the content a loss-leader for Apple’s services business, which is the fastest growing revenue segment in the company. Apple services include transactions via the App Store, Apple News, and Apple Pay, as well as Apple Music subscriptions and iTunes sales. (It’s still small potatoes compared to iPhone revenue, though.)

It could also boost sales of Apple’s hardware. Good, exclusive content could give the Apple TV an edge over other media players, like Roku devices, or offer Apple customers more reasons to stick with their iPhones instead of switching to other smartphone makers. Apple has been giving its operating system away since 2013, presumably to help sell computers. Why not do the same with video?

Apple has also left the door open to promote other programming within its original content. Some of its deals with video creators offer a share of the revenue if a promotion for a different program airs in their show and a viewer clicks through to pay for the content that’s being promoted, a person familiar with the deals Apple has made told Quartz. It’s unclear what those promotions might look like, but it’s one more incentive for creatives and video providers to work with Apple, even as it starts producing its own content.

There are other potential options. Morgan Stanley wrote in a research note Sept. 5 that Apple could package the video content it’s been stockpiling into a subscription-video service priced at the lower-end of its competition, at $8 per month, to make a splash. The firm says Apple could build video into a $4.4 billion business with 50 million subscribers, compared to Netflix’s current 124 million members, by 2025. Apple sells its music streaming service, Apple Music, which also includes some exclusive content and original video series like Carpool Karaoke and Planet of the Apps, for $10 per month.

Whatever is next for Apple’s video platform, the company’s press event on Sept. 12 at 10am US Pacific time should shed some light.