The biggest knock on Apple (AAPL), and perhaps the biggest drag on AAPL stock of late, is that the brand has become a bit stale. Consumers, and to a greater degree investors, have grown weary of the endless churn of iPhones and iPads, which lost their “wow” factor years ago. People want to see something from Apple that’s truly new.
To find it, Apple is turning to Hollywood.
According to reports, Apple is planning to launch its own original TV and movie producing studio to compete with the likes of Netflix (NFLX), Amazon (AMZN) and Hulu. The original programming would be made available to Apple Music subscribers, who currently pay $10 a month for the streaming music service. A streaming video service with original content would open up a whole new revenue “stream” for Apple and make its streaming music service much more competitive with rival Spotify.
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Apple has apparently spoken with Hollywood producers in recent months about buying rights to scripted TV programs, as well as marketing executives with major film studios about hiring them to promote their content, which could include movies of their own. The company hopes to start offering original video content by the end of this year, though it’s likely to start with just a few programs in an effort to go for quality over quantity.
It’s too early to know how much a new streaming video service will impact Apple’s sales, which could use a boost after declining for three consecutive quarters. But that’s almost beside the point, at least initially. On Wall Street, what matters more is Apple’s image. Lately, the image of Apple among investors is that of a stagnating company that has already peaked.
Granted, the last year has actually been good to AAPL stock, with shares rising more than 12% since the beginning of 2016. But those gains were roughly in line with the Nasdaq’s over the same span, and immediately followed the stock’s decline from 132 to as low as 90 in the second half of 2015 and early 2016, so the rebound (especially in the past six to seven months) was driven mostly by market strength and value stock buying.
Now that those buyers are back on board and the stock is touching 52-week highs, it will take more than just the market to move AAPL again in 2017. AAPL stock needs tangible catalysts to recapture investors’ imaginations. And producing its own original content is enough of a departure to perhaps peak investors’ interests.
Of course, if the content is good, it could serve as more of a long-term catalyst the way award-winning original programs like House of Cards and Orange is the New Black has been for Netflix and Mozart in the Jungle has been for Amazon. We won’t know if that’s the case, however, until later this year at the earliest.
In the meantime, I wouldn’t necessarily advise buying AAPL stock based purely on the promise of original content. I’ve been quite skeptical of AAPL’s long-term prospects. But new innovations beyond the latest iPhone or iPad could extend its shelf life a bit, which is why it’s worth paying attention to how investors respond to AAPL stock as more information about its original content plan trickles out.
As they say in television … stay tuned!
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