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Apple’s “CODA” won the Oscar for best picture. Great. But what will happen when the big tech companies stop wasting money? (Asya Demidova/The New York Times)
This week, an Apple movie, “CODA,” became the first film from a streaming service to win the Oscar for best picture. This historical fact means that the Hollywood ruling class finally accepts the movies and series that we watch through Internet connections as legitimate entertainment.
But wait… Why does Apple have a streaming service? And what are the effects for us when mounds of corporate funding distort the market for conveniences we love? (I asked similar questions last year regarding Amazon.)
Having an Oscar is very nice, but success for Apple is largely defined by making more money every year. Sorry, those are the rules of capitalism. It’s hard to say whether streaming video contributes to that goal or is an expensive distraction for Apple.
Spending large amounts of money, sometimes recklessly, in pursuit of possible future profits is a very old business strategy. Sometimes it works. In others, it leads to MoviePass, an initiative that spent billions of dollars selling nearly unlimited movie passes for $10 a month and then went bankrupt.
Either way, reckless spending by companies can be wonderful for us, at least for a while. That has probably given us cheaper and better streaming services than we would have had, low-cost Uber rides, and cheap gas. Yes, I am making a connection between cheap gasoline and streaming. Let me explain.
The products derived from spending, sometimes irrational, in the short term can be at the same time glorious for us and a dangerous mirage if and when the money runs out.
Some background: In 2019, Apple launched a streaming service called Apple TV+. Some people who buy a new Apple device get the service free for three months; otherwise, Apple charges a monthly fee of $4.99 in the US. That’s regarding a third of the cost of subscriptions to the Netflix and HBO Max platforms, where there’s more to watch.
It’s rare for Apple to explain why it does the things it does, and the company hasn’t made its goals for TV+ clear. However, the popular belief is that streaming is part of its strategy to keep Apple device owners loyal and entice them to spend a little more money.
Has this justified the expense and energy that Apple puts into streaming video? Who knows. It’s also unclear whether Amazon’s streaming service has been a successful way to attract and keep members of Prime, the company’s annual subscription program.
Maybe running a Hollywood entertainment empire is just plain fun. Apple and Amazon are so successful that they can splash out some money to find out if they will one day get even richer by offering video streaming services. However, it’s worth bearing in mind the potential disruption to the products and services we love when companies decide their onerous spending is no longer a smart bet.
Uber rides were largely cheap until around 2020, because the company had investor money to find many riders even if the rides didn’t turn a profit. A similar financial imprudence now subsidizes city dwellers who order Doritos and milk delivered to their door in fifteen minutes. In the 2010s, cash flows from investors allowed energy companies to use new hydraulic fracturing methods to extract oil and gas from underground.
In all of those cases, that money that didn’t need to be spent reshaped our world in a big way. We got cheaper gas, Uber rides, and convenient services that mightn’t have existed without investors pouring in their money in the hope that it would pay off in the future. Irrational money also turned Netflix into an entertainment titan and now Amazon and Apple are splurging money too.
We are likely to have better, and less expensive, streaming services than we would if there were fewer companies selling entertainment subscriptions. People involved in creating entertainment have more potential buyers for their content. Well!
But what if the money suddenly needs to be translated into more direct earnings? Netflix needed investors to subsidize its service for a long time, and now the company has a healthy financial footing. However, Uber is still not profitable and rides are no longer cheap. Hydraulic fracturers recklessly used so much of their investors’ money that they are now cautious regarding drilling for more oil and gas even in the midst of an energy crisis, because their investors no longer trust them.
Perhaps Apple and Amazon will be very successful in streaming video. But what if one of those corporations decides it’s no longer willing to spend billions of dollars on entertainment that doesn’t add to its bottom line? Would Netflix cost $40 a month because there is less competition? Would the screenwriters end up like Pennsylvania homeowners dependent on royalties from shale drilling that has faded in importance?
We might simply enjoy the money being spent on our entertainment while it lasts. However, remember that the money cascades may come to an end and it might be painful for the people who create entertainment and for those of us who watch it.