Amid a strong quarterly earnings report, Apple CEO Tim Cook managed to drop a few more clues about his company’s forthcoming video service.
Apple has been on a hiring and dealmaking binge over the past year in what seems like a clear strategy to follow Netflix (NFLX), Hulu, and Amazon (AMZN) with a subscription video service delivered over the internet. The iPhone maker hired the co-presidents of Sony Pictures Television, Jamie Erlicht and Zack Van Amburg, last year to oversee the entire effort. And the pair has been rapidly signing production deals with major Hollywood figures, including Reese Witherspoon, Jennifer Aniston, and Oprah Winfrey.
On a call with analysts on Tuesday, Cook was asked exactly what the company planned for Winfrey. After explaining that the megastar of TV and movies would help develop “great original content,” Cook almost let the cat out of the bag on Apple’s plans.
“As you know, we hired two highly respected television executives last year and they have been here now for several months and have been working on a project that we’re not really ready to share all the details of it yet,” Cook said. “But I couldn’t be more excited about what’s going on there and we’ve got great talent in the area that we’ve sourced from different places and feel really good about what we will eventually offer.”
Although in years past, Apple was reportedly trying to create a package of cable channels that could be delivered over the internet to its Apple TV set top box, the company now seems more oriented towards a Netflix-like service that isn’t limited to the old-fashioned cable bundling model.
“In terms of the sort of the key catalysts and the changes, the cord cutting in our view is only going to accelerate and probably accelerate at a much faster rate than is widely thought,” Cook said, referring to TV viewers who have dropped their cable bundle and prefer streaming internet video services. Cord cutting is at record levels and analysts say it’s speeding up. “All the forcing functions here from the outside all point to dramatic changes speeding up in the content industry, and so we’re really happy to be working on some of them, but we’re just not ready to talk about it in depth today,” Cook added.
Cook’s comments came amid strong financial results for Apple. Total sales increased 17% to $53.3 billion in the company’s fiscal third quarter, the three-month period through the end of June. Profits rose 40% to $2.34 per share, in part due to the big corporate tax cut. Both figures were better than Wall Street expected and Apple’s stock price rose 4% in morning trading on Wednesday.
Within the results, services revenue, which includes everything from app purchases to Apple Music subscriptions to iCloud storage fees, rose 31% to $9.5 billion.
Discussing Apple’s (AAPL) growing services line, Cook offered another clue about the possible video service. Analysts have been unsure whether Apple would make the offering free to iPhone users, add it to the existing Apple Music service, or create a whole new, fee-based service. One of two shows Apple developed so far, Carpool Karaoke, initially was put on the music service and later was made available via an Apple TV app. But Cook seemed to hint at a future separate service with an additional fee for Apple customers.
“On the services side, we’re thrilled with the results.,” he said. “In terms of the next leg of this, given the momentum that we’re seeing across the board, we feel great about our current services, but obviously we’re also thrilled about our pipeline that have some new services in it as well. And so with the combination of these, we feel great about hitting our objectives and maybe even doing a little better.”
