Apple has poured billions into Apple TV+ original programming, but now there's growing pressure to be more strategic with these massive budgets. As with other major streaming services, Apple wants to ensure its expenditures on video content are more thoughtful and effective.
According to Bloomberg, Apple’s Senior Vice President of Services, Eddy Cue, has been conducting budget meetings with studio heads Zack Van Amburg and Jamie Erlicht. Despite spending over $20 billion on productions, Cue is reportedly looking to refine this expenditure.
Apple is known as the "biggest spender in town," but this is expected to change. Van Amburg and Erlicht have allegedly informed creative partners of a shift towards more controlled spending.
High Spend, Little Return
Apple TV+ has a reputation for high spending on content. This includes $500 million on movies from renowned directors like Martin Scorsese, Ridley Scott, and Matthew Vaughn. High-budget TV shows are also part of this trend, with "Masters of the Air" reportedly costing $250 million and "Foundation" $5 million per episode.
"The Morning Show" originally paid stars Reese Witherspoon and Jennifer Aniston over $1 million per episode in its first season. For the fourth season, their salaries are expected to double, with over $50 million spent on the cast alone.
However, this spending spree hasn't translated into significant revenue. At the box office, Apple's movies have struggled, with "Killers of the Flower Moon" being a rare success. High-budget series like "Masters of the Air" have also failed to attract large audiences, as evidenced by Nielsen's rankings showing it lagging behind other shows.
Apple TV+ currently holds just 0.2% of overall U.S. TV viewing, with its monthly viewership reportedly less than Netflix’s daily viewership.
A Plan in Action
To address this issue, Apple TV+ leadership is changing how projects are funded. One strategy is to reduce upfront payments for commissioned shows, placing more financial responsibility on third-party production companies for over-budget projects.
Apple has also become more selective in its content acquisitions, opting against buying shows it might have agreed to a few years ago and ordering fewer straight-to-series projects. Additionally, it has been quicker to cancel underperforming shows, with only 22% reaching a third season in 2021 compared to 43% in 2020.
There is also talk of Apple licensing more content for its service, indicating a potential shift in strategy.
An Absorbable Issue
While Apple’s call for cost-cutting is necessary, it doesn’t impact the company as severely as it might for others. Unlike other streaming services that have had to cut costs drastically, Apple can afford to be more lenient. With a market cap of $3 trillion, the outlay on Apple TV+ is relatively small.
Despite not seeing big returns at the box office or in viewership numbers, Apple TV+ has consistently received awards and critical acclaim. This has allowed Apple to maintain a reputation for quality, even if it hasn’t yet achieved substantial financial success.
Apple’s strategic shift in spending on Apple TV+ productions aims to balance maintaining high-quality content with more controlled and effective budgeting, setting the stage for a more sustainable future in the streaming market.