Showing that it is indeed serious about making a push in Hollywood, Apple Inc. (NASDAQ:AAPL) reportedly plans to earmark about $1 billion on original programming over the next year.
Sources told The Wall Street Journal that the company will use the money to acquire and produce up to 10 TV shows, which could be offered on its current music streaming service or a new video-focused service.
A Los Angeles-based duo , Jamie Erlicht and Zack Van Amburg, who were poached by Apple from Sony Corp. (ADR) (NYSE:SNE) in June, will be in charge of the budget. Both are taking over programming responsibilities from the Apple Music team.
Erlicht and Van Amburg have also started discussions about what shows the company could acquire and have approached several Hollywood agents.
Can It Compete?
The tech giant is no stranger to video and has sped up its push into the industry over the past year as part of efforts to significantly raise revenue from its services unit by 2020. This unit includes products like Apple Music and the App Store.
Apple, however, needs at least one hit for this initiative to gain traction. The company recently launched Carpool Karaoke and Planet of the Apps, but reviewers criticized both offerings.
Apple will also be competing with the likes of Amazon.com Inc. (NASDAQ:AMZN) and Netflix Inc. (NASDAQ:NFLX), which already have considerable head starts in the industry and have larger programming budgets.
Netflix earlier noted that it is prepared to spend $6 billion on programming this year, while JPMorgan Chase & Co. projects Amazon’s costs to run approximately $4.5 billion.
Programming costs are no joke and may range between $2 million per episode to more than $10 million. High-end shows like HBO’s Game of Thrones cost over $10 million per episode to produce.
Gaining a substantial subscriber base could also come to play. Netflix added 5.2 million subscribers in the second quarter and the figure now stands at 104 million subscribers.
Meanwhile, Amazon’s Prime subscribers hit the 80 million mark at the end of the first quarter, and this service is expected to cover 50 percent of American households by the end of the year.
Apple, however, could quickly ramp up spending on content, as the company generated $215.64 billion in revenue last fiscal year and has over $261 billion in cash on its balance sheet. Maybe it could also use its cash to buy Netflix (NASDAQ:NFLX), which is worth about $80 billion.
Apple ended the day trading at $160.95 per share, down 0.40%.