CEO Morning Brief

Apple to Splash US$1b a Year on Films to Break Into Cinemas

Publish date: Fri, 24 Mar 2023, 08:52 AM
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TheEdge CEO Morning Brief
Apple views theatres as a way to build awareness for its TV+ streaming service. (Picture via Apple TV)

(March 23): Apple Inc plans to spend US$1 billion (RM4.4 billion) a year to produce movies that will be released in theatres, according to people familiar with the company’s plans, part of an ambitious effort to raise its profile in Hollywood and lure subscribers to its streaming service.

Apple has approached movie studios about partnering to release a few titles in theaters this year and a slate of more films in the future, said the people, who asked not to be identified because the plans are private. The list of potential releases includes Martin Scorsese’s Killers of the Flower Moon, which stars Leonardo DiCaprio; the spy thriller Argylle, from director Matthew Vaughn; and Napoleon, Ridley Scott’s drama about the French conqueror. A spokesperson for Apple declined to comment.

The investment is a significant increase from years past. Most of Apple’s previous original movies have either been exclusive to the streaming service or released in a limited number of theaters. The company has pledged to put movies in thousands of theaters for at least a month, said the people, though it hasn’t finalised any plans.

While Apple has agreed to theatrical releases in order to please talent and outmaneuver competitors for projects, the company also views theatres as a way to build awareness for its TV+ streaming service. If the company is going to spend hundreds of millions of dollars on a Scorsese movie, it wants to turn that into a cultural event. Apple TV+ is estimated to have between 20 million and 40 million subscribers, fewer than rivals such as Netflix and Disney+.

Apple still hasn’t figured out how it will distribute these movies in theaters. The company doesn’t have the expertise internally to release movies in thousands of cinemas worldwide at once, which is why it has approached third-party distributors. But first, Apple needs to come to terms on distribution fees and marketing budgets with potential partners. Movie studios can spend US$100 million or more to market their biggest titles, far more than streaming services spend promoting new shows or movies.

Paramount Pictures will release the Scorsese movie in theaters because the project originated at that studio, and will collect a 10% distribution fee. The studio hasn’t agreed to distribute other titles for Apple.

Like most streaming services, Apple TV+ spends more of its budget on TV shows. Its first huge hit was the comedy series Ted Lasso. Yet Apple has been funding movies from the inception of its Hollywood studio and the smartphone maker’s ambitions in film have grown since it won an Academy Award for best picture for 2021’s CODA. Apple acquired that movie at the Sundance Film Festival for a record US$25 million and distributed it simultaneously in theaters and on TV+.

Its previous movies didn’t receive the kind of theatrical release planned for the upcoming titles. CODA earned less than US$2 million at the box office. Cherry, a crime drama starring Tom Holland, appeared in select theaters for a couple of weeks in 2021. Apple didn’t report its ticket sales.

Tech giants Apple and Inc are increasing their investment in entertainment at the same time they are cutting costs elsewhere. Amazon has fired thousands of workers, while Apple is cutting costs without letting staff go so far.

Apple’s plans will boost theater chains still struggling to recover from the pandemic. Ticket sales remain about a third below 2019 levels and two of the largest chains are on shaky financial footing. AMC Entertainment Holdings Inc, the world’s largest cinema operator, has sought to raise more cash by selling shares, while rival Cineworld Group Plc filed for bankruptcy last year. The chains have repeatedly blamed the dearth of available films from studios for their woes, rather than moviegoers’ lack of interest in returning to theaters.

More help should be on the way. Amazon, which acquired Metro-Goldwyn-Mayer, the studio behind the James Bond films, for US$8.5 billion, aims to make between 12 and 15 movies annually that will get a theatrical release, Bloomberg News reported last year. Paramount, Walt Disney Co and Warner Bros Discovery Inc are looking to increase their output of movies for theaters after experimenting with distributing films on streaming services alone.

The one outlier in this return to the theaters is Netflix Inc, which wants its movies to appear in theaters and online at the same time, or within a couple weeks. Major cinema chains have refused this arrangement. Netflix spends more on original movies than Amazon or Apple.

Source: TheEdge - 24 Mar 2023

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