In March 2019, Apple CEO Tim Cook took the stage at the Steve Jobs Theater, located on the tech giant’s sprawling, spaceship-like campus in Cupertino, California, and pushed Apple aggressively into the entertainment business.
It was a niche. After all, Jobs spent much of his career at the technology and entertainment hub, helping launch Pixar and eventually becoming its president and majority shareholder before it was sold to Disney.
Cook, Jobs’s student, was ready to bring Apple into this world as well.
“Great stories can move us and inspire us. They can surprise us and challenge our assumptions,” Cook told the crowd. “We feel we can contribute something important to our culture and society through great storytelling, so we partnered with a group of the most thoughtful, accomplished, award-winning creative visionaries who have come together in one place to create a new service unlike anything done before.”
What followed, of course, was not just a brand-new streaming service, Apple TV+ (now just called Apple TV), but also a new studio, where Apple would produce its own movies and TV shows, quickly becoming a favorite among creators thanks to its aggressive bidding for high-profile projects, and the creative freedom the platform gave them.
But Apple will appoint a new CEO next September, hardware engineer John Ternos, and his view on entertainment remains vague, leading to unease in the halls of agencies that have successfully sold ambitious projects to Apple over the past few years.
This inaugural Apple TV event featured a wide range of directors and actors, from Steven Spielberg, JJ Abrams, and Sofia Coppola to Jennifer Aniston, Steve Carell, and Sara Bareilles. It concluded with an appearance by Oprah Winfrey, who announced her own content deal with Apple.
“Because they’re in a billion pockets, a billion pockets,” Winfrey said. “The whole world has them in their hands, and this represents a huge opportunity to make a real impact.”
“Thank you, Oprah. Thank you. I will never forget this,” Cook said upon returning to the stage.
In 2019, Apple’s services business, which includes Apple TV, cloud storage and digital advertising, generated revenue of $46.3 billion. Last year it surpassed $109 billion, a testament to the desire of Cook and Chief Services Officer Eddy Cue to expand its business beyond hardware and software.
When books are written about Cook’s tenure as CEO, services will be at its heart, and Apple TV will be at its core.
Of course, it’s no secret in Hollywood that Apple TV is still smaller than many of its competitors, although Apple remains hesitant about how many users it has. But the company has been taking steps to grow it, cutting off partnerships with Amazon and Peacock in an effort to expand.
Cue said THR Last month, Apple’s first Formula 1 race had more viewers than ESPN’s coverage of the same race a year ago, though he declined to give further details.
Of course, Cue isn’t going anywhere, suggesting a degree of continuity in the Apple TV, but Ternus simply hasn’t had a chance to comment on that aspect of the business from his hardware position.
The big question in Hollywood: Will he maintain the status quo, with Apple willing to spend on the projects it wants (even as its theatrical ambitions remain in flux), or will he cut the fat and focus Apple’s efforts on more profitable service products? That may depend on how important Apple TV is to the overall Apple One ecosystem that Cook and Cue have created.
But while he may not come from a service background, Ternos is still one of Cook’s apprentices, and the high-margin, fast-growing service business may be too tempting to ignore.
Several analysts noted that there are growth levers he could pull, if he so chooses, including advertising on Apple TV, something the company has avoided outside of live sports.
A source familiar with the matter says that Apple has no plans to offer an advertising level for Apple TV+ in the short term, though company executives have not ruled out the possibility on a longer time frame.
“Changes in leadership can enable shifts in strategy, even for large, well-established industry mainstays,” Madison & Wall analyst Brian Weiser wrote on Tuesday. “However, in Apple’s case, the company’s approach to advertising appears to be tied to its product philosophy and not just its CEO. Unless this philosophy changes, advertising growth will likely be flat rather than rising.”
But Ternus could just as easily decide to double down on the entertainment.
Needham Research analyst Laura Martin suggested the announcements could be much higher if Apple chose to go that route, but Ternus could also use Apple’s $67 billion or so in cash for other, more ambitious use cases.
“We believe AAPL should partner with or acquire Disney, in order to increase engagement periods and give it differentiated assets (i.e. films and TV series) with strong pricing power and moats,” Martin wrote. “We believe AAPL should also use mergers, acquisitions, partnerships and industry leadership to accelerate value creation.”
She’s not crazy. Former Apple COO Jeff Williams now sits on Disney’s board Former Disney CEO Bob Iger not only served on Apple’s board (he left once Apple TV+ launched), but he was a friend of Steve Jobs.
“I believe that if Steve were still alive, we would have merged our two companies, or at least discussed the possibility very seriously,” Iger wrote in his 2019 autobiography. Trip of a lifetime.
Cook has avoided that temptation, but a new CEO could bring a fresh perspective. The only question for Hollywood is how far he plans to go.
