Tech Companies Know To Make Money In Hollywood, But Here's Why Apple Has An Advantage

Zinger Key Points
  • Streaming has emerged a profitable ancillary business for tech companies, Gene Munster says.
  • Apple has deep pockets that supports is planned massive content spend and is therefore at an advantage.
Tech Companies Know To Make Money In Hollywood, But Here's Why Apple Has An Advantage

Notwithstanding the recent surge in box-office revenue in 2022, there is more money to be made selling content for home/mobile, Loup Funds co-founder Gene Munster said in a note. Tech companies such as Apple, Inc. AAPL and Amazon, Inc. AMZN, with near free distribution models, know how to make money in Hollywood, he said.

Munster noted that making money in Hollywood is simple for Walt Disney Company DIS, Paramount Global PARA and Warner Bros. Discovery, Inc. WBD. These companies take a pre-loved action series, add A-list talent and spend over $100 million in marketing and come out with successful movies, he noted.

Apple At Advantage: Apple is best positioned to grow its streaming revenue share from the current 2%, Munster said. The company can splurge on content with its annual operating profit of over $100 billion, he said.

“This gives them an advantage in Hollywood development deals and attracting top-tier talent,” the venture capitalist said.

Going by the user interface, Cupertino may be the only streaming service that can run ad-free in the long term, Munster pointed out. With other streaming services either already offering or contemplating ad-supported options, this can become a selling point for Apple TV+, he added.

Munster also noted that Apple’s content spend supported its growing list of talent. The company is also developing its sports broadcasting capabilities, the fund manager said.

See also: The State Of Streaming In 2022: The Search For New Content, New Revenue On Netflix, Disney+ And More

The only downside Munster sees for Apple TV+ is that its library isn’t filled enough to compete with the likes of Netflix, Inc. NFLX, Disney’s Hulu and Warner Bros.’s HBO Max.

“In the end, we believe quality will win over quantity,” Munster said.

Competition Heating Up But Only Slightly: Despite streaming services cribbing about increased competition, Netflix, which has been the biggest underperformer, has lost only two points of market share in 2022, Munster noted. Apple TV+, HBO Max, Disney+ and Amazon Prime have each gained a 1% market share, he said.

At the end of the June quarter, the market share for Netflix stood at 21% compared to 20% for Prime Video, 15% for HBO Max, 14% for Disney+ and about 2% for Apple, Munster noted.

“Streaming is a profitable ancillary business alongside the revenue of Amazon’s retail store, Disney’s parks and merchandise, and Apple’s iPhone,” Munster said.

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