Apple's $6 Billion Escalates Streaming's Content Arms Race - Here Are The Numbers (And The Fallout)

Apple reportedly will spend $6 billion on original programming to fuel its upcoming Apple TV+ subscription video on demand (SVOD) streaming service. Its goal, of course, is to entice us with exclusive premium content that will compel us to pay $9.99 monthly when it launches in November -- and keep us away from others. But SVODs Netflix, Amazon, Hulu and HBO already spend billions of dollars on their own “Must-See TV” for the same reason. All of this, of course, is great for consumers. The quantity, quality and variety of so-called “television” has never been better (although it’s increasingly challenging to find the specific content that appeals to each of us). It’s also great for creators – the writers, actors, directors and others who benefit from those billions. Call it Hollywood’s full employment act. Call it Hollywood’s "New Golden Age." I'll call it media’s great SVOD content arms race.

On the heels of my most recent Forbes article about the cable bundle-approaching cost to consumers of subscribing to Apple TV+ and its SVOD competitors in their quest to cut that expensive cable cord, let’s look at the other side of the equation. Let's scrutinize the escalating and eye-popping costs to SVODs to create the content that they believe will lure us into their camps and drive us out of the camps of others. Here’s the math that brings tears of joy to the eyes of the creative community, but also tears of tension to SVOD CFOs.

Apple TV+ reportedly will spend $6 billion. Netflix, SVOD’s king (and the one all others hope to slay, or at least severely maim) adds a reported $15 billion annually. Now, let’s bring in Amazon Prime Video, which Prime subscribers stream for “free” thanks to Jeff Bezos's annual content spend of an estimated $7 billion (for both video and music). Then there’s Hulu’s estimated $3-5 billion to bring us The Handmaid’s Tale and other programming under our eye. Let’s next add HBO to the mix at an additional $3 billion annually (although HBO isn't a pure SVOD like the rest). Even if HBO doesn't bring reams of programming to the table, the cost ain’t cheap to bring us Game of Thrones at about $15 million per episode. But that is chump change when compared to what its related upcoming HBO Max SVOD plans to spend for The Big Bang Theory, which alone reportedly will cost HBO Max $1.5 billion.

Together, these SVODs have locked in about $35 billion to keep us in our living rooms, glued to our televisions, couch surfing and streaming our days and nights away. At their hands, we have become binge-watching machines. Who has time to work or socialize anymore? And, here's the crazy part. We haven’t even considered the numbers that Disney+ and all other SVODs (not to mention traditional studios) -- present and future, domestic and international -- bring to the content creation table. Disney alone reportedly will spend about $24 billion this year for its entire family of content, which translates to 22% of the $107 billion global content expenditure by major media companies. Meanwhile, newly conjoined ViacomCBS reportedly will spend $13 billion to fuel exclusive programming for All Access and the entire ViacomCBS family.

But what’s the ROI on all of this for these SVOD behemoths?

For Apple, Apple TV+ functions primarily as marketing to drive us into Apple Stores and buy the tech giant’s expensive high margin iPhones, Macs and endless peripherals. Same can be said for Amazon. Content functions as marketing – a Trojan Horse to lure us in to Amazon's virtual and increasingly brick-and-mortar stores to shop, shop, shop ‘til we drop (well, not drop exactly, because then we can’t shop). Upcoming Disney+ and Hulu (remember, Hulu is now owned by Disney) are similarly situated, because Disney drives multiple revenue streams that include movies, television, theme parks, merchandise and more. So long as Disney+ and Hulu function as productive cogs in Mickey’s overall global machine, then those SVODs serve their purpose. The same can be said for AT&T's upcoming HBO Max. Of course this WarnerMedia-infused giant wants to maximize monetization of the service itself. But the service's primary mission is to drive more wireless plans.

Netflix is the odd person out here (by the way, Jeffrey Katzenberg's upcoming mobile-first SVOD Quibi, which I recently profiled in Forbes, is in the same boat). Netflix owns no other revenue streams. Subscriptions essentially serve as its sole source of revenue. Its singular business model. Here, content can’t merely serve as marketing’s means to an end. Here, content is the end. So Netflix has no choice but to commit even more billions to its originals strategy to keep its relentless stream of “Netflix Killers” at bay, especially as SVODs from Disney and WarnerMedia pull back the Disney Princesses, Friends and other key licensed content from them.

All of these SVODs spend billions, because they believe that exclusive and original programming fueled by those billions holds the key to their overall big picture success. That content is deeply strategic. For one of them – Netflix – content is downright existential.

And, here's the thing. Each additional billion committed by one SVOD will only accelerate the race to spend more billions by the others to somehow break out and attract our increasingly squeezed attention spans. These streamers find themselves in a never-ending hyperloop of premium content activity.

Welcome to streaming's great content arms race, which may destroy several SVODs along the way.