by Lucas Shaw/Bloomberg
After spending more than $20 billion to produce original TV shows and movies that not a lot of people watch, Apple is starting to refine its strategy in Hollywood.
Based on interviews with more than a dozen people, including former employees, current employees and business partners, Apple services boss Eddy Cue has been having regular meetings with studio chiefs Zack Van Amburg and Jamie Erlicht to go over budgets, pushing them to exert more control over spending on projects.
Van Amburg and Erlicht have told some of their top creative partners that they want to change their reputation as the biggest spender in town, according to these people.
Apple doesn't buy the most projects in Hollywood - that is still Netflix. But it splurges on individual titles.
The studio spent more than $500 million combined on movies from directors Martin Scorsese, Ridley Scott and Matthew Vaughn, and upward of $250 million on the World War II miniseries Masters of the Air, one of more than a dozen new series released this year.
Those pictures were all disappointments at the box office, and only Killers of the Flower Moon registered in Nielsen's rankings of the most popular streaming titles.
Masters of the Air delivered a smaller US audience than House of Ninjas, a Netflix show in Japanese, according to Nielsen. Even so, it's the only new Apple show this year to appear in Nielsen's rankings.
Apple is spending billions of dollars a year on original programming that has received strong reviews and many awards nominations. But its streaming service is attracting just 0.2% of TV viewing in the US. Apple TV+ generates less viewing in one month than Netflix does in one day.
"Subscriber growth has been weak, with the platform's original content a fraction of what rivals offer," Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near wrote in a recent note.
Apple has largely escaped scrutiny from the press and Wall Street. The company discloses no data about its spending or the financial performance of its Hollywood operation. Investors are more focused on iPhone sales.
Yet as studios and streaming services across Hollywood cut back after years of record spending and record losses, Apple is also looking to make its streaming business more sustainable. This newfound caution is turning up in plans for upcoming seasons of Severance and Foundation, two science-fiction series that Apple has commissioned.
Management is trying to pay less upfront for shows and is quicker to cancel ones that aren't working.
It's forcing third-party studios to shoulder more of the burden when productions go over budget and is starting to license programming from competitors to reduce the service's reliance on original series.
Apple, which has long sold other companies' movies and TV shows in its digital store, first signalled its interest in original productions with the hiring of Van Amburg and Erlicht, two stars at Sony's TV studio. The Hollywood veterans positioned Apple as a talent-friendly heir to HBO, a place where creators could come and make their dream projects with nearly unlimited financial resources.
Apple introduced its Apple TV+ streaming service in 2019, around the same time as Disney+ made its debut. Hollywood insiders weren't sure what to make of Apple, one of the world's most-valuable companies.
CEO Tim Cook hadn't outlined a clear reason why he wanted to make TV shows or compete with Netflix, and producers worried Apple would dabble for a couple years and then disappear. They also worried Apple wouldn't take risks in its programming. These fears have largely dissipated.
Apple declined to license older TV shows and movies for Apple TV+, which meant the service relied entirely on new shows to satisfy viewers.
The studio chiefs prioritised making a handful of splashy programs rather than flooding the market. To stand out, Apple focused on big stars - names so loud that people had to pay attention. The pair signed deals with Oprah Winfrey, Steven Spielberg and Aquaman star Jason Momoa.
No programme epitomised this approach more than The Morning Show, which united Reese Witherspoon with Jennifer Aniston.
Like all new players in Hollywood, Apple TV+ needed to shell out for a seat at the table, paying them both more than $1 million an episode in the first season.
The two stars will make more than double that for season four, which just started production. Apple is spending more than $50 million just on the cast. Apple's deference to talent and generous budgets have earned it the affection of the creative community, which already revered the company for its devices.
The Apple studio won best picture at the Oscars in 2022 for Coda, a movie acquired at the Sundance Film Festival, capturing Hollywood’s most illustrious prize before either Netflix or Amazon.
The company's programming has also charmed critics, who put many of the studio's shows on their year-end lists. But for all the star power and emphasis on quality, few Apple shows have broken through to the wider public.
Over the last five years, the company has only had four series make Nielsen's weekly list of the 10 most-popular original streaming shows.
Apple TV+ released the most-watched streaming show of 2023 - Ted Lasso - but accounts for a smaller share of top 10 hits than any streaming service save for Paramount+.
Some Apple employees push back on the Nielsen figures, arguing they are inaccurate and incomplete. Nielsen only measures US viewing on certain devices. And if you exclude Netflix, Apple's share of top shows isn't that far behind most of its peers.
They also say that outside criticism and analysis fail to capture the metrics that matter to Apple (in part because Apple shares so little data with the outside world).
Apple invests in entertainment to sell more consumer devices – not to make money in Hollywood.
Entertainment services like music, TV and games generate billions of dollars in sales, but they also create a halo effect around the brand. They make you more likely to buy an iPhone.
The company considers programmes like The Morning Show, Hijack and Slow Horses hits, and its streaming service just earned a record number of Emmy nominations.
Still, many of those hits have gone over budget. In 2019, Apple bought the rights to Severance, a dystopian science-fiction show that was supposed to star Ben Stiller. Though Stiller ended up backing out - replacing himself with Adam Scott - he did agree to direct the pilot.
Production of the first season dragged on far longer than anticipated due to the Covid-19 pandemic.
By the time the first season debuted in 2022, it had cost $40 million more than initially expected. Stiller, whose directing credits include Zoolander and Tropic Thunder, ended up overseeing the first four episodes - and never really left.
The show was an immediate hit with critics and viewers (by Apple standards). It became one of Apple's few breakout hits and earned 14 Emmy nominations. But producers Dan Erickson and Mark Friedman fought.
As the show geared up for a second season, Stiller also had plans to make a movie for Amazon that was being written by Beau Willimon, the creator of House of Cards. Stiller asked Willimon to help with season two of Severance and potentially oversee season three.
Plans for the Amazon movie fell apart, leaving Stiller with extra time on his hands.
Production of Severance was also delayed when striking writers and actors shut down Hollywood. Stiller decided to remain in charge of Severance (alongside Erickson). Apple ended up paying Willimon millions to contribute to a few episodes. All told, the cost of the show ballooned to more than $20 million an episode, making it one of the most expensive projects on TV.
Such stories were common when every major media company was looking for the hit show that would bring customers to a brand-new service. But the industry began to contract a couple of years ago as investors rebuffed the mounting losses in streaming.
Disney, Warner Bros. and Paramount have all fired staffers. Netflix stopped increasing its programming budget and even mighty Amazon scrutinized costs.
Apple hasn't responded to the same degree, and it's still a little unclear just how much pressure the studio is under.
While Van Amburg and Erlicht make jokes about losing their jobs, Cook and Cue seem to delight in attending major Hollywood functions and the steady stream of awards nominations. The company can afford to play the long game.
But there is no question that Apple has learned from several years of investment and is now trying to bring more discipline and strategy to its Hollywood operation.
It wants to end what some call the "Apple tax". Because the company is worth more than $3 trillion, people assume it can and will spend more than anyone else. Apple has declined to buy some of the shows that sellers say the company would have accepted just a couple years ago and, like most peers, is also ordering fewer projects straight to series.
The company has also delayed production on other shows, like the science-fiction series Foundation, to ensure the show doesn't go over its budget.
Apple had started work on the upcoming season of Foundation, but was delayed by the strikes. It then asked the producers to adjust the scripts to account for the additional costs associated with that delay.
The company is now in the middle of discussions about future seasons of Severance. Apple can't wait to make more of the show, but management has a request for Stiller and the show's studio, Fifth Season: They need to bring down the cost.
