Apple Wants To Get Into Content: Should It Build Or Buy?

To buy or to build is the big question Apple Inc. AAPL is looking to answer as the company expresses interest in generating its own content.

UBS analyst Steven Milunovich took a closer look at this question and believes Apple intends on building its content.

Why Apple Seems Destined To Build

Apple recently hired Sony Pictures Television executives to run its video programming sector; this is a move that points to them looking to the build direction.

Also, Stratechery's Ben Thompson noted businesses typically buy over build if there are networking effects, and Thompson sees no networking effects for Apple. To refute this argument, Milunovich said, "While that may be true, we argue that Apple is an innovation platform like Windows with supporting services, such as content, acting as mini-platforms."

Looking at Amazon.com, Inc.’s AMZN recent acquisition of Whole Foods Market, Inc. WFM and Alphabet Inc's GOOGL acquisition of YouTube, Milunovich noted these were both difficult businesses for Amazon and Google to build from scratch. Apple's management team may not feel this way about content.

Are Platforms Replacing Conglomerates?

Apple and Amazon are looking to create major platforms in order to dominate multiple industries. Milunovich isn't sure how well this will work, as he stated, “In traditional pipeline businesses, we think focus wins. Are platforms different? Perhaps, but given the importance of positioning in consumers' minds, it is hard to stand for multiple things.” 

Time will tell, but signs are pointing towards Apple looking to build in the content industry.

Milunovich maintained his Buy Rating and $170 price target on Apple.

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