Is Apple Too Late to Win at the Content Game?

They’re already way behind, insiders tell WaxWord

All over Hollywood, people are talking about Apple’s decision to pour $1 billion into making original content.

This is the company that wins at everything it does. The biggest company in the world and the most successful company ever built.

But it has never done this particular thing before: make entertainment.

Is it fair to presume that once Apple trains its sights on making movies and films that it will win at that too?

Not everybody thinks so.

“They’re not a leader in the media space and they can’t hope to be a leader with that kind of budget,” said one veteran executive, formerly with a rival tech company.

With Netflix playing for big stakes in the production sandbox, spending $6 billion a year, Apple’s so-far-unconfirmed $1 billion is low for a newcomer seeking to make a splash. Amazon is spending billions on production and marketing, and those are just two examples.

Unlike when Netflix started making original content, this is now a massively crowded space. In the past four years, Netflix, Amazon, Hulu and Facebook — all of which have deep pockets — have jumped into the deep end of creating content. They come in addition to all the studios and networks, HBO, Starz, FX, AMC, Showtime, you get the idea.

Enter Apple. Late.

“It’s okay to wait and build up your library, but you’re already behind — way behind,” said the executive.

Apple’s philosophy has always been to focus on a few things and make them fantastic. Steve Jobs showed everybody how to sell a few, incredible products and change the world by so doing. This is the dogma of Jobs — whose office still stands empty, a symbol and in-house shrine — and it still guides Apple today.

But entertainment content isn’t like that. My inside sources tell me that Apple intends to make a handful of incredible entertainment programs and place them on its own devices, so you have to be in the Apple ecosystem to watch. From what I’m being told, they don’t want a library, aren’t intending to license old movies and will do it their way: create a few, must-watch projects.

If only. Making hit movies and television is not like dreaming up the iPod. Of course everyone sets out to make “Seinfeld” or “Star Wars.” Who doesn’t plan in the greenlight process to end up with “Sopranos” and “Game of Thrones?”

Unfortunately, down here in the shallow part of California, we all know it doesn’t work that way. You have to try and fail a lot to end up with one “Spider-Man.” (The good one. No, not that one. The other one. See what I mean?)

One other thing. Steve Jobs knew about content in his lifetime, and he stayed away. Remember, the guy helped start Pixar and was on the board of Disney for years. Even as Apple started a music streaming service ahead of the curve, it stayed away from entertainment content.

What did he know, and why did Tim Cook turn in a different direction?

“For a long time Apple wanted to work with the legacy ecosystem and partner with cable companies,” said Rich Greenfield, the media analyst at BTIG. “And they found the legacy ecosystem so fraught with problems and restrictions that it became too painful for that ecosystem to shift. And they’re moving ahead.”

Apple did not immediately respond to requests for comment. But another knowledgeable player said the company has a shot.

“I don’t think they are late at all. We are in the middle of a revolution, and they have more than enough time to get in the game. They just need to make hits,” he said.

“They have more than enough money,” he added. “If they want to compete with Netflix in terms of output, they can. They just need to build the machine to develop, market, etc. Right now the team is still super lean, and miniscule compared to Netflix’s originals operation.”

Personally, I believe that experience has showed that “building the machine” is a lot harder than it looks. After 100 years no single Hollywood studio gets it right all the time. Even Disney, now the golden child, had its dark periods. As the naysayer I spoke to suggested, it might be better for Apple to go out and overspend to buy a finished, guaranteed hit — how about the next “Avatar”? — and keep it for its customers for a month before it ever goes to theaters.

Greenfield believes it’s just over for legacy entertainment, and Apple sees that — even as it realizes that it needs something to induce customers to keep buying iPhones.

“Now it’s just time to replace them,” he said, referring to the dinosaurs. “This is the acknowledgement that the legacy ecosystem is in secular decline, whether they realize it or not. It’s over for the TV industry. And Apple is moving ahead.”