Apple recently announced its plans to invest about $1 billion in an original video content next year. The iPhone-maker is not going after giant companies like Netflix or Amazon Video. Spotify may suffer from Apple’s billion dollar investment. According to Amit Daryanani, an analyst at RBC Capital Markets, Spotify currently has more than 50 million paid subscribers worldwide, versus Apple Music’s 27 million. To close that gap, iPhone-maker clearly needs more than just artist exclusives.
Why does Apple want video content?
Apple’s designated investment is slightly smaller compared to Netflix’s $6 billion, Amazon’s $4 billion, and HBO’s $2 billion.
If the company is able to acquire seven to eight million paid subscribers to Apple Music, it would easily recover the $1 billion investment in just three years. Spotify is the world’s leading music streaming service provider, but if iPhone-maker succeeds with its plans, it might replace Spotify on top.
Apple’s Music application has been growing quickly. The application possesses a larger catalog with more exclusive releases compared to Spotify. More video content could help the service grow even faster than its current rate. The company already hired Sony executives to help produce the video content. Apple recently hired the duo that helped create the hits like “Breaking Bad” and “The Crown.”
Google is paying $3 billion to Apple
Apple and Google can be both best friends as well as enemies when it comes to tech.
According to MacRumors, Google is paying $3 billion per year to Apple to make the Google Search engine as the default search engine on Apple devices. Google is only paying $1 billion three years ago, but because of the licensing fees that make up a large volume of Apple's services, the payment was increased by $2 billion.
Almost 50 percent of Google’s mobile search earnings came from Apple devices, which means that Google might be too scared to stop Apple’s services.
The licensing income from Google is probably the largest or second-largest contributor to Apple’s business growth, which is why Apple also does not want to end its business with Google.
There is no doubt that Google will continue to expand as iOS user base increases. But Google can decide to stop acquiring Apple’s services if the company feels confident enough that most iOS users will prefer the Google search rather than Bing and Yahoo. If that is the case, the iPhone-maker will not have any other choice but to set Google as default for free.
