Apple and the streaming mirage

New York

A FILM from Apple, CODA, this week became the first movie from a streaming service to win the Oscar for best picture. The milestone means that the Hollywood establishment is finally accepting movies and TV series that we watch over Internet connections as legitimate entertainment.

But wait: Why does Apple have a streaming video service at all? And what are the effects on us when oodles of corporate money warp the market for conveniences that we love? An Oscar is lovely, but success for Apple is largely defined by making more profits each year. Sorry, those are the rules of capitalism. It's difficult to say if streaming video contributes to that goal, or if it's an expensive distraction for Apple.

Spending gobs of money in sometimes reckless ways in pursuit of potential future profits is an age-old business strategy. Sometimes it works. Other times it leads to MoviePass, which burned through billions of dollars selling nearly unlimited movie theatre passes for US$10 a month, and then went bust.

Either way, companies throwing money around can be awesome for us, at least for a while. It has most likely brought us cheaper and better streaming video services than we might have otherwise, low-cost Uber rides, and cheap petrol. Yes, I will make a connection between cheap petrol and streaming video. Stick with me.

Products that result from sometimes irrational spending in the short term can be both glorious for us, and a dangerous mirage if and when the money dries up.

Apple in 2019 started a streaming video service called Apple TV+. Some people who buy a new Apple device get the service free for 3 months; otherwise Apple charges a US$4.99 monthly fee in the US. That's about one-third of the cost of streaming subscriptions from Netflix and HBO Max, which have more content to watch.

Apple rarely explains why it does anything, and the company hasn't been clear about its goals for TV+. But the conventional wisdom is that streaming video is part of its strategy to keep Apple device owners loyal and entice them to spend a bit more money.

Has this justified the expense and energy that Apple devotes to streaming video? Shrug. It's also unclear if Amazon's own streaming video service has been a successful way to lure and keep Prime members.

Maybe running a Hollywood entertainment empire is just fun. Apple and Amazon are so successful that they can squander some money to figure out if they'll become even richer someday by offering streaming video. But it's worth keeping in mind the potential disruption to products and services that we like when companies decide their lavish spending is no longer a smart bet.

Uber rides were mostly cheap until about 2020, because the company had investor money to go after lots of riders even if trips didn't turn a profit. Similar financial recklessness is now subsidising city dwellers who order Doritos and milk delivered to their doors within 15 minutes. In the 2010s, streams of investor cash enabled US energy companies to use new fracking methods to dig oil and gas out of the ground.

In all those cases, money that didn't need to be spent entirely sensibly reshaped our world. We got cheaper petrol and Uber rides and convenience services that couldn't have existed without investors throwing money around and hoping it would pay off in the future. Irrational money also built Netflix into an entertainment titan, and now Amazon and Apple are throwing their cash around, too.

We probably get better and less expensive streaming services than we would if there were fewer companies selling entertainment subscriptions. People involved in making entertainment have more potential buyers for their work. But what happens if the money must suddenly be tied more directly to earning profits? Netflix needed investors to subsidise its service for a long time, and now the company is on healthy financial footing. But Uber remains unprofitable and rides aren't cheap anymore. Frackers burned so much of their investors' money recklessly that they're now wary of digging even in an energy crisis, because their investors don't trust them anymore.

Maybe Apple and Amazon make it big in streaming. But what if one of them decides it's no longer willing to drop billions of dollars on entertainment that doesn't help its bottom line? Would Netflix cost US$40 a month because there's less competition?

We could simply enjoy the money being spent to entertain us while it lasts. But know that it's possible the oodles of money will end, and it might be painful for the people who make entertainment and those of us who watch it. NYTIMES

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