Apple TV+ is re-evaluating its spending strategy on original TV shows and movies as it aims to manage costs more effectively. Following an extensive investment in original programming, Apple's SVP of Services Eddy Cue is reportedly holding budgetary meetings with studio heads Zack Van Amburg and Jamie Erlicht to scrutinize expenditures.
Having spent over $20 billion on content, Apple is known for its reputation as a lavish spender. However, Cue's recent moves suggest a shift towards more judicious financial management. Van Amburg and Erlicht have communicated to creative partners that this era of high spending will see significant changes.
High Spend, Little Return
Apple's financial commitment to Apple TV+ includes substantial investments in both movies and TV series. The company has allocated $500 million to movies by prominent directors like Martin Scorsese, Ridley Scott, and Matthew Vaughn. On the television side, productions such as "Masters of the Air" have reportedly cost $250 million.
The expense is not limited to production alone. "The Morning Show" initially paid stars Reese Witherspoon and Jennifer Aniston over $1 million per episode. For the upcoming fourth season, their earnings are set to double, resulting in Apple spending more than $50 million on the cast alone.
Despite these significant outlays, Apple TV+ has struggled to see proportional returns. Box office successes have been scarce, with "Killers of the Flower Moon" being a notable exception. High-budget shows like "Masters of the Air" have not performed well in Nielsen's rankings, and Apple TV+ holds only a 0.2% share of the overall U.S. TV viewing market. Comparatively, Apple's monthly viewership is less than Netflix's daily audience.
A Plan in Action
To mitigate these issues, Apple TV+'s leadership is implementing changes in its funding strategy. The company plans to pay less upfront for commissioned shows, requiring third-party production companies to shoulder more of the budget overruns. Apple is also more selective about acquiring new shows and has reduced the number of straight-to-series projects it orders.
Moreover, Apple has become quicker to cancel underperforming shows. In 2021, only 22% of shows reached a third season, down from 43% in 2020. Licensing content for its service is another strategy under consideration. Apple has previously licensed classic movies and is exploring this option further as part of a broader strategy.
An Absorbable Issue
While Apple's cost-cutting measures align with industry expectations, the company's immense financial reserves provide a cushion that many competitors lack. Unlike other streaming services that have resorted to staff layoffs and severe budget cuts, Apple's adjustments are relatively lenient. The company's $3 trillion market cap allows it to absorb these expenditures without significant harm to its overall financial health.
Despite limited box office success and modest viewership numbers, Apple TV+ has garnered numerous awards and nominations, helping to cultivate a reputation for quality programming. The challenge now lies in balancing this prestige with more sustainable financial practices.
