The Media Industry Is Handing Apple and Amazon a Big Opportunity – The Motley Fool

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, […]



Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
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Television producers are finding it harder to sell their series to almost everyone in the media industry.
Just two companies ordered more scripted series in the second half of 2022: Apple (AAPL -1.28%) and Amazon (AMZN -2.03%). As the pressure grows for traditional media companies to start generating profits from their streaming services and old hats like Netflix (NFLX -3.24%) look to reinvigorate subscriber growth, the demand for new series has fallen considerably.
Overall, new scripted series orders aimed at U.S. audiences fell 24% year over year, according to Ampere Analysis. That may be a huge opportunity for Apple and Amazon to snatch up new series at better prices.
Apple and Amazon probably aren’t the first companies you think of when you think about new TV series and the media industry.
Both companies have sizable businesses outside their streaming video endeavors. Those businesses produce billions of dollars in free cash flow and operating income, or at least have the capability to do so. So, producing a loss on video streaming isn’t going to have a massive impact on either company’s bottom line. What’s more, if the companies can show a positive impact on other parts of the business, it can be well worth losing a bit of money on streaming.
Meanwhile, Netflix and other media companies pushing into streaming make money primarily by selling video content. It’s extremely important that they show a path toward growing profits directly from streaming to appease investors. That’s why Walt Disney (DIS -1.35%) investors punished the stock when it showed a massive loss on the streaming business and put pressure on it to turn a profit on Disney+ by the end of 2024, as management promised.
The media industry is facing a challenging environment right now. Advertising spend growth is slow, and it’s actually declining on legacy linear television networks. The industry is also facing cord-cutting, and theatrical releases still aren’t generating the box-office sales many have expected. Even big blockbusters like Disney’s Avatar sequel failed to meet expectations.
Meanwhile, streaming competition and economic uncertainty has made the fight for direct-to-consumer subscribers more difficult. As companies attempt to raise prices, they may find significant price sensitivity among their subscriber bases.
The ability of Apple and Amazon to continue spending amid a downturn in the media industry is a significant advantage, but investors may have to wait a while to see the impact.
Greenlighting a series today means consumers won’t see its premiere for months, sometimes more than a year.
In other words, the advantageous positions of Amazon and Apple won’t make themselves clear until sometime next year, likely in the second half. That’s when all the series the two companies approved for development over the last few months will start showing up on their streaming services. Meanwhile, the competition won’t see very many new series premieres at all.
One of the top reasons consumers subscribe to a new streaming service is if they have a specific title they want to watch. As Amazon and Apple see more premieres, they get more shots at grabbing viewers’ attention. That could lead to them gaining an outsized share of signups next year as consumers continue to switch between streaming services.
For Amazon, more Prime Video viewers likely means more Prime subscribers. The company’s membership program is a boon to its retail business. Prime members are more likely to search Amazon for a product first, which also benefits the company’s advertising business.
For Apple, success with streaming video offers yet another pathway to bring consumers into its ecosystem. What’s more, the opportunity to be more efficient with content spending amid lower competition for new scripted series could help push its streaming service into profitability in and of itself. And since Apple TV+ consists primarily of original series without ongoing licensing deals, there’s a lot of potential for operating leverage in the business as Apple scales.
Both are set up for success thanks to their positions as outsiders in the media industry.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Amazon.com, Apple, Netflix, and Walt Disney. The Motley Fool has positions in and recommends Amazon.com, Apple, Netflix, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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