Apple To Make Movies? Maker Of The iPhone's Interest In Time Warner Could Indicate Media Ambitions

News agencies are reporting that Apple Inc. considered buying Time Warner Inc. last year. Though the idea was tentative and no actual move was ever made by Apple CEO Tim Cook to buy Time Warner, the fact that such an idea was even considered shows the tech giant is serious in getting into media.

Apple executive Eddy Cue, who is in charge of iTunes and Apple Music, raised the idea of a buyout deal in a meeting with Time Warner's head of corporate strategy, Olaf Olafsson. Though the two companies never entered into serious negotiations, inside sources say Apple is interested in hiring media company talent, and plans on increasing spending on original media content to the tune of several hundred million dollars a year.

Slowing iPhone sales add pressure onto the world's biggest tech company to expand its reach into other areas, perhaps even creating its own TV and movie streaming service to rival Netflix, Hulu, and Amazon Prime. Chief Executive Officer Tim Cook has already emphasized the expansion of Apple's music, app store, and iCloud services as a way of generating revenue in light of recent stock troubles and slowing sales. The long-term business strategy would make perfect sense for Apple, according to analysts at Bloomberg Gadfly, who foresee bright possibilities for "Big Tech getting together with Big Media."
"In a world where the lines are blurring between technology and entertainment programming, it's natural to believe media and tech companies will start to merge. It's all the more natural as newspapers, record labels and TV and movie studios have struggled to land on the right approaches to meet consumer demand in a digital age while making sure their businesses stay financially healthy. At the same time, tech companies are trying to stand out by giving people what they want, and often that is the movies, TV shows and other news and entertainment offerings made by those dusty old media companies."
Rumors have long persisted that Apple plans to set up a subscription TV service to go with its Apple TV top box, but it's also possible it could acquire an existing media distribution company. Apple is flush with cash, holding an estimated $233 billion cash pile in overseas accounts -- more than any other company in the world. Google's parent company Alphabet, Apple, and Facebook together have more than enough cash between them to cover the total value of streaming giants like Netflix or a telecommunications company the size of Time Warner.

"For Time Warner -- and essentially HBO -- to become Apple's original content production assets in some form or another, that would very much help it catch up with the likes of Netflix and Amazon in terms of having potentially quality proprietary content on its platform," James Cordwell, an analyst at Atlantic Securities, told Bloomberg.

9To5Mac, a website that provides news and rumors about Apple products, reported that at the StartupFest earlier this week, Apple CEO Tim Cook gave an interview to Neelie Kroes where he specifically mentioned he wants Apple to be a catalyst in the entertainment business. Bloomberg also notes that Apple has tried to break into television and streaming for years, but its efforts have all been met with obstacles and failure so far.
"Talks with TV networks such as CBS Corp. and 21st Century Fox Inc. to license their content for a live television service fell apart last year. Apple was attempting to offer a Web package of the most popular channels for $40 a month -- known as a "skinny bundle" -- which would cost about half of the average cable bill in the U.S. Late last year, CBS CEO Les Moonves said Apple put the plans for the service on hold."
However, the company plans on building entertainment content for its TV set-top box, and is currently in talks with television executives to build up a portfolio of shows exclusive to Apple TV. Apple is also in talks to start creating original programming of its own, including a TV series. These moves show a desire by Apple to win over other networks in the current competitive market for licensing rights in this age of streaming.

A company like Time Warner, with a value of $55 billion, would be difficult for Apple to buy, since most of its cash is stored overseas and U.S. corporate taxes make repatriation costly. Other companies like Viacom Inc., which is already putting its stake in Paramount Studios up for sale, could go up for sale themselves soon. Netflix, which has a much bigger global distribution than anyone else in the streaming industry, would be another option, though it would possess less content creation potential than purchasing a company like Time Warner or HBO.

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