Ep. 10: Original Content 2.0: Apple, Amazon & the Rest. Oh My!

Netflix (NFLX) Apple (AAPL) Disney (DIS) Amazon (AMZN) Facebook (FB) Google/YouTube (GOOG) AT&T (T) Verizon (VZ) Microsoft (MSFT) Twitter (TWTR) Samsung The name of the game is original content. It’s more profitable than third party content and nobody can threaten to “pull” it from your platform if you are the creator (i.e. Disney and Netflix) Amazon and Apple have an advantage over other players in the original content game primarily because of their size and the fact that they are either already producing their own original content (AMZN) or are about to be (AAPL). Apple has a potentially unique advantage in that it could integrate advanced technologies such as AR/VR into the iPhone creating unique viewing experiences. Should the iPhone incorporate AR/VR it would likely accelerate the democratization of content creation/production, potentially positioning Apple as the device make of choice for amateur content creators. This won’t necessarily help “Apple Studios”, but it will help Apple in its mobile device business vs. competitors such as Samsung and Google. DIS pulling its content from NFLX effectively puts NFLX in play. Long-term I don’t believe that DIS is large enough to compete with AAPL, AMZN, FB and GOOG and ultimately will be acquired, most likely Apple given that the two companies have a history (originally nurtured by Disney CEO Bob Iger and the late Steve Jobs). NFLX doesn’t have the capital structure to compete with the big boys. If content providers continue to pull content from the Netflix platform, and given competition from others such as Amazon’s “Channels” effort, Netflix will face an increasingly uphill battle in terms of producing quality original content at an accelerated rate. Accelerated rate because Netflix must offset the loss and potential loss of third party content. Content production is a commodity. AAPL, AMZN, FB and GOOG all have the balance sheet to effectively compete in the original content production space (short, medium and long-form content). Further, because of their robust balance sheets, each of AAPL, AMZN, FB and GOOG all better positioned to pursue and incorporate advanced technologies into their content offerings. AR/VR are examples. We give AMZN the edge over AAPL, GOOG and FB in the near-term as AMZN has been in the original content production game for some years. AAPL could potentially leapfrog the competition if they are able to incorporate AR/VR and other advanced viewing technologies into their original content production capability by integrating the experience into iOS and Apple TV. NFLX in our view will have to rely on old-fashioned quality writing for their original programming. This is the best way to stay relevant in the face of an inferior balance sheet. TWTR the dark horse. In our view the company should continue to work to secure original programming rights, sports in particular so long as Twitter is an independent company. MSFT always a threat given the strength of its balance sheet. T, VZ, CMCSA: the largest of the traditional content providers, dwarfed by the largest tech co’s. We expect AT&T’s WB unit will be poached for talent by AAPL in particular as Apple ramps its original programming effort.