Apple Sets Its Sights on Hollywood With Plans for Original Content

Industries Dow Jones Newswires

(Reuters)

Apple is planning to build a significant new business in original television shows and movies, according to people familiar with the matter, a move that could make it a bigger player in Hollywood and offset slowing sales of iPhones and iPads. 

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These people said the programming would be available to subscribers of Apple's $10-a-month streaming-music service, which has struggled to catch up to the larger Spotify AB. Apple Music already includes a limited number of documentary-style segments on musicians, but nothing like the premium programming it is now seeking. 

The technology giant has been in talks with veteran producers in recent months about buying rights to scripted television programs. It also has approached experienced marketing executives at studios and networks to discuss hiring them to promote its content, said people with knowledge of the discussions. 

In addition to TV, Apple indicated to these people that it is considering offering original movies, though those plans are more preliminary. 

Executives at Apple have told people in Hollywood they hope to start offering original scripted content by the end of 2017. 

The shows Apple is considering would likely be comparable to critically acclaimed programs like "Westworld" on Time Warner Inc.'s HBO or "Stranger Things" on Netflix. 

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Because it is looking at just a handful of carefully selected shows, and potentially films, it doesn't appear Apple is preparing to spend the hundreds of millions or even billions of dollars it would need to spend annually to become a direct competitor to Netflix Inc., Amazon.com Inc.'s Prime Video or premium cable networks. 

Rather, it would escalate the arms race between Apple Music and Spotify, which both offer essentially the same catalog of tens of millions of songs, by adding other content that could distinguish Apple's service. 

Nonetheless, the entry of the world's most valuable company into original television and films could be a transformative moment for Hollywood and mark a significant turn in strategy for Apple as it starts to become more of a media company, rather than just a distributor of other companies' media. 

In addition to its music-related nonfiction shows and documentaries, Apple Music already has bought the rights to a half-hour version of "Carpool Karaoke," which is currently a segment on CBS's "The Late Late Show with James Corden." It is also making a quasi-biographical series about Dr. Dre, the rap star and Apple Music executive, which is slated to premiere later this year. 

But it hasn't yet bought scripted content from outside producers, a more expensive and riskier endeavor that takes it further onto the turf of entertainment companies. The series and movies Apple is now considering buying don't have any particular relationship to music, according to the people familiar with the matter. 

One reason Apple hasn't yet completed a deal to buy a scripted series is because it is still working out details of its business strategy built around original content. But it has told producers that a key advantage it hopes to offer is that it would share data on how many people watch its original content and some demographic data on them. Netflix doesn't share any such information with its content creators, which has been a source of contention among some in Hollywood. 

Apple has been flirting for years with whether and how it should enter the entertainment business. It held talk with television companies about offering a "skinny bundle" of networks over the internet, but was never able to reach terms. It also approached Time Warner Inc. last year about a possible merger before that company agreed to be acquired by AT&T. 

The move into original content comes as Apple is grappling with a slowdown in its traditional business. Last year it missed its own internal revenue targets for the first time in at least seven years as sales of the iPhone 6s fell short of expectations. Sales of the iPhone, which turned Apple into the world's most profitable company, have slowed amid rising competition, particularly in China. 

Apple Music has become a key piece of the company's services business, which has been growing as iPhone sales slow. Revenue from Apple Music rose 22% in the quarter ended Sept. 24, but the service's subscriber base is still dwarfed by Spotify's. 

Apple Music said in December that it had more than 20 million subscribers, most of whom pay $9.99 a month; Spotify counted more than 40 million paying subscribers in September. 

Write to Ben Fritz at ben.fritz@wsj.com, Tripp Mickle at Tripp.Mickle@wsj.com and Hannah Karp at hannah.karp@wsj.com