Hollywood Torrent: Apple dips its toe into Hollywood

Good morning from New York, where executives from Los Angeles and San Francisco have descended for the annual NewFronts. Twitter, Hulu, Google and Vice will spend the week pitching advertisers on their best shows just a couple weeks before CBS, NBC, ABC and Fox do the same.

One player who won’t be hosting a party is Apple, but the world’s most valuable company is attracting a lot of attention with its recent investments in original programming.

Just last week, Apple announced it had acquired a couple of documentaries screening at the Tribeca Film Festival, one about music impresario Clive Davis and another about Bad Boy Records, the house that Diddy and Biggie built.

Apple Music honcho Jimmy Iovine told Alex Webb and me that Apple Music could release as many as 10 original series by the end of the year, including will.i.am’s Planet of the Apps and Carpool Karaoke, a spinoff of James Corden’s popular celebrity singalong segment.

For the moment, Iovine is mostly focused on music-related video, including a possible sequel to R. Kelly’s rap opera Trapped in the Closet. But eventually he plans to go beyond music and has discussed possible ideas with his friend Brian Grazer, producer of Empire and Genius, and director J.J. Abrams.

So why, after years of speculation that Apple could buy a movie studio or Netflix, is the company finally making shows?

“A music service needs to be more than a bunch of songs and a few playlists,’’ Iovine said. ``I’m trying to help Apple Music be an overall movement in popular culture, everything from unsigned bands to video. We have a lot of plans.”

With iTunes sales in decline and streaming services such as Spotify on the rise, Apple Music is an increasingly important part of the Apple universe. It’s vital to keeping customers loyal to the iPhone (as opposed to phones from Samsung or Google).

That’s why Apple paid $3 billion for Beats Music, why it revamped the service last year and why Apple is indulging Iovine’s efforts to turn Apple Music into a one-stop shop for pop culture. Video and music belong together, Iovine says. That’s the only way for a music service to attain real scale.

Apple Music has signed up more than 20 million subscribers, making it the second-largest paid music streaming service in the world. Spotify is first, boasting more than 50 million subscribers.

Yet the size of those companies pales in comparison to YouTube, the video site owned by Alphabet. YouTube has more than one billion users every month (though almost none of them pay).

Over the course of an hour-and-a-half conversation, Iovine repeated one phrase at least a half dozen times: ``we are competing with free.’’ When Iovine says free, he means YouTube.

YouTube is the bete noire of the music industry, an industry in which Iovine grew and to which he ultimately still belongs. YouTube is an invaluable marketing tool for artists, beloved by fans and loathed by record labels.

More than one billion users go to YouTube every month to watch videos, many of them music videos. It is the most popular destination for music in the world. YouTube has all but replaced MTV, once the paragon of youth culture. And yet, the music industry makes very little money from YouTube (relative to its size). Just look at this chart:

YouTube influences almost every decision at major music companies. Record labels are fighting to get copyright legislation changed because they feel it protects YouTube. They are trying to convince Facebook to take music more seriously because Facebook is the only platform with scale that surpasses YouTube. Record companies have even let players like Amazon and Pandora offer lower-priced subscription offerings because getting people to pay something is better than the alternative.

Meanwhile, YouTube’s competitors are pulling out all the stops to lure consumers away from the site. Spotify offers an appealing free service, much to the chagrin of most record labels. Spotify says the free tier is the only way to funnel customers into the pay tier. If people can listen to a huge library of songs for free on YouTube, why would they pay for Spotify?

YouTube has helped convince millions of young consumers that they can be entertained for free. Like Spotify, Apple Music is making high quality videos to give consumers a reason to pay for a music service.

Apple Music’s foray into video programming could be a temporary dalliance. Like many tech companies, Apple long resisted getting into the content game, opting instead to sell other people’s music, TV shows, and movies and making money flogging hardware.

But then Netflix and Amazon producing award-winning television, and Silicon Valley smelled opportunity. YouTube is funding dozens of TV shows for a subscription service and has built production facilities around the world. Facebook is starting to fund original video series. Even Twitter is buying the rights to sporting events

If Iovine succeeds, the world’s wealthiest company could increase its investment, routinely competing for top projects. “We have the freedom, because it’s Apple, to make one show, three shows, see what works, see what doesn’t work until it feels good,” Iovine says.

Turning Apple Music into a viewing destination will take time. Video production is slow and labor-intensive. Getting people to watch video on a music streaming service will require a sustained marketing campaign. Spotify has commissioned at least a dozen series and hired a former TV executive to oversee its video business. Yet those shows have come and gone with little fanfare.

Apple says it will market its projects like TV shows. With all the competition for viewers’ attention — and so much available for free — will that be enough to turn Apple Music into a player in original programming? We’ll soon find out.

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Strike Watch 2017

Negotiations between screenwriters and some of the world’s largest media companies are going down to the wire.

Members of the Writers’ Guild of America have already authorized a strike, and have set a deadline of May 1 (today) for the talks. The two sides remains a couple hundred million dollars apart in their proposals, according to various trade reports.

For those who haven’t been following the story, I’d suggest this primer on why they are fighting. The abbreviated version? More TV is being produced than ever before, and writers say they are making less from it.

If a strike happens, here’s how it affects various players.

>> Late-night talk shows would go off the air almost right away. They rely on writers’ rooms filled with guild members. Yet they could also strike a separate deal to get back on the air, as David Letterman did the last time around.

>> TV networks will rely heavily on reality programming since many of their scripted summer shows would have to pause. The work stoppage could affect the debut of shows in the fall as well, but only if the strike drags on.

>> Writers would miss a lot of paychecks, obviously.

>> Netflix would be in a slightly better position than most since its studio negotiated its own deal.

>> Oh, and lots of businesses that rely on production, from tailors to restaurants, would lose business. Los Angeles has a diverse economy, but Hollywood helps a lot of it run. The last strike cost an estimated $2 billion.

The Future of TV

Scoop from Anousha Sakoui: Fox is teaming up with Blackstone to make a bid for Tribune Media, one of the largest owners of local TV stations. Sinclair, another station owner, has already expressed a desire to buy Tribune. Mergers are more likely now that the FCC has relaxed rules about the concentration of station ownership.

NBCUniversal is taking on the Disney Channel and Nickelodeon with a new TV channel for kids. Its’ first show? Top Chef Junior.

Twitter wants to stream live video 24 hours a day, CFO Anthony Noto told Buzzfeed. Twitter once marketed itself as a companion to TV. Now it wants to be just like TV; that white noise you leave on in the background. That’s one reason it just made a deal with Bloomberg for a 24-hour news channel.

Warner Bros. is creating its own web video service for DC Entertainment. It will start with a couple of comic book-themed series, including one from heavyweights Greg Berlanti and Akiva Goldsman.

Netflix raised $1.3 billion in debt to fund more original shows. Ted Sarandos, the man responsible for those shows, got a big raise.

Another Bloomberg scoop: Layer3 TV, a new cable company trying to gain customers from established giants, has found an unlikely ally: Verizon. Verizon is letting Layer3 package its cable package with Verizon’s Internet service. While Verizon and Layer3 are competitors for TV customers in D.C., companies like Verizon are increasingly focused on adding broadband customers and less concerned with pay-TV.

Earnings galore

Box office hits Get Out and Fifty Shades of Grey boosted Comcast’s earnings this past quarter. The nation’s largest cable provider reported sales of $20.5 billion (up 9 percent) and net income of $2.6 billion (up 20 percent). Revenue from the film studio grew 43 percent.

Advertisers’ recent griping about their promotions appearing next to distasteful YouTube videos had no discernible effect on advertising sales. Parent company Alphabet reported quarterly sales of more than $20 billion, beating analysts’ estimates.

Amazon reported double-digit revenue growth for the 20th year in a row, and said more than 80 million people now subscribe to Prime, its free delivery service (that also includes alternatives to Netflix and Spotify). Jeff Bezos is now just a few billion dollars away from being the richest person in the world.

Sony reported very strong financial results this week, and its stock surged. But, Sony’s entertainment assets didn’t fare so well. Sony Pictures, which includes its movie and TV studio, lost money on lower sales. The music division reported higher sales, but lower profit.

Speaking of Sony Entertainment…

Sony is homing in on a new CEO of its entertainment division. That man is Tony Vinciquerra, a former executive at Fox.

Weekend box office

The Fate of the Furious crossed $1 billion at the global box office, and won the weekend in the U.S. for a third frame in a row. Next weekend, it will give way to Guardians of the Galaxy, which has rung up more than $100 million abroad in advance of its domestic debut.

Tom Hanks lost to Mexican star Eugenio Derbez at the U.S. box office this weekend.

Fight for the future of Fox News

Roger Ailes is out. Bill O’Reilly is too. And the tumult at Fox News shows no sign of abating. Co-president Bill Shine, promoted after Ailes’ departure to maintain a sense of stability at 21st Century Fox’s cash machine, may be the next person to go. The Murdochs are reportedly looking for a female executive to lead the division, and Shine is reportedly unhappy that the parent company won’t publicly support him.

Host Sean Hannity did, tweeting his support for Shine Thursday. Hannity, long a second banana to O’Reilly, is one of the only winners at Fox News over the past few months, per this Felix Gillette profile.

``From Dec. 26 to March 26, his show averaged more than 2.8 million viewers — a 47 percent increase from the same period a year before. Viewers spent 18.4 million hours watching him in the first 15 weeks of 2017, up 41 percent, according to Pivotal Research Group LLC. And Hannity’s importance to the network goes beyond ratings. He bet early on Donald Trump’s campaign for president and defended him at his worst moments; and now, President Trump himself is an avid fan who sometimes seems to act after getting ideas from the broadcast.

[Bill] O’Reilly’s abrupt departure followed those of two other Fox News stars, Megyn Kellyand Greta Van Susteren, who had their own internecine reasons for leaving. Hannity has outlasted them all, meaning the longtime vice pundit of cable news is now effectively its commander-in-chief. Fox News is betting that fresh-faced, neo-preppy provocateur Tucker Carlson, who took over O’Reilly’s 8 p.m. hour on April 24, will be a key part of the network’s future. But at a time when the company badly needs someone to steady the organization, Hannity, with his mind-meld connection to the White House and his deep, abiding connection to the Fox News brand, is the alpha anchor right now.’’

Speaking of changes at a cable institution…

ESPN laid off 100 or so employees this week, including several high-profile writers and on-air personalities. Job cuts are starting to become all too familiar to some at the network, which let go a couple hundred people in late 2015.

The explanation is pretty simple. The cost of sports rights is on the rise, and the number of people subscribing to ESPN has dropped by about 10 million. Even though ESPN is charging more per customer, it isn’t charging enough to keep adding talent will nilly with little regard to their performance.

More executive moves

My colleague Sarah Frier profiles Facebook Chief Operating Officer Sheryl Sandberg, the executive who keeps the trains running (and dollars pouring in) while CEO Mark Zuckerberg dreams up his next big move.

Verizon fired one of the executives in charge of go90, its struggling mobile video service. Scott Moritz and I covered the flailing YouTube clone here.

Prominent venture capitalist Chris Sacca hung up his spurs.

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