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Apple is out of control on spending

by on30 December 2022


Wall Street worried about wasted cash on Apple TV

Fruity cargo-cult Apple, founded on ruthless cost controls and excessive margins, has been spending money like water lately.

Seeking Alpha said analysts are worried that Apple is spending too much on Apple TV content with no hope of becoming a market leader.

Wells Fargo forecast that Apple was set to spend $8.1 billion on content this year and estimated that Apple would spend upwards of $15 billion by 2025.

With that sort of cash being thrown at the content, you would expect Apple to buy itself profits, but no analyst thinks Jobs’ Mob is not spending enough to get into the top five.

Disney, Warner Bros, Discovery, and Netflix are all forecast to top $20 billion in annual spending before counting the billions spent on sports content. Disney spends a combined $33 billion on content, with over $8 billion for sports content such as the big NBA deal.

Kantar said Apple has 10 per cent of the streaming market share, but the tech giant only captured a five per cent share of new US streaming subscribers in the third quarter. Apple has a huge issue keeping subscribers after specific content is consumed, as the outfit needs a significant library.

Apple tried to fix the problem by jacking up the price of Apple TV+ to $6.99 from $4.99 per month to avoid having to bring in adverts. Some of the cash that Apple has defined as content is spending vast amounts for sports coverage.

Jobs’ Mob Apple already has deals with MLB and the MLS and just missed out on the NFL Sunday Ticket. The MLS deal costs $250 million annually and is only a minimum payment guarantee.

Apple believed that all it had to do was appear on the streaming market, spend a bit of cash, and its fanboys would sign up. But it needed to realise that it had no experience in streaming and the market was cut-throat.

Disney recently had to hike its prices to $10.99 a month. Despite a combined 200+ million subscribers and a robust ESPN+ package for sports, the media giant is now losing $1.5 billion quarterly on the DTC streaming service.

If Disney could not make cash on DTC streaming services, it was arrogant for Apple to think it could make much of a dent in the market without spending a considerable fortune. What it seemed to settle on was investing tons of cash, but much more was needed to do the job.

But things are getting worse for Apple. Its iPhone 14 Pro production issues and delays, alongside what is turning into a failed investment in the content, are causing Apple investors to lose faith that the cargo cult will bring them vast amounts of cash. Apple has fallen to 2022 lows of $126 and is on the verge of dipping below $100.

Seeking Alpha said Apple could finally face the reality of only getting five per cent growth for the next 4-5 years. Not bad, but nothing like what investors have expected from Apple.

Steve Jobs must be spinning in his unmarked grave.

 

Last modified on 30 December 2022
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