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Apple Partners with A24 Studio to Strengthen Content Portfolio

Apple AAPL is steadily building its film slate with back-to-back deals for its upcoming streaming service. Reportedly, the company has entered into a multi-year partnership deal with Oscar-winning indie studio, A24.

The latest deal follows Apple’s acquisition of global distribution rights for two “family-focused movies”, Wolfwalkers and The Elephant Queen in September.

Although it is not an exclusive deal, A24 will produce multiple movies for Apple. However, details of the transaction were not revealed.

Is A24 a Good Catch for Apple?

New York-based A24 studio is known for its ability to develop innovative content and support talented filmmakers. The studio’s Moonlight won the best picture award at the 2017 Oscar’s beating La La Land. Its Lady Bird won 41 nominations, including best picture, and 13 awards, including best motion picture in 2018.

Therefore, it is no surprise that Apple, Amazon AMZN and Lionsgate among others reportedly made offers to buy A24, which were turned down by the latter.

Notably, prior to the deal with Apple, A24 inked a deal with AT&T’s DirecTV to jointly acquire a few films in the United States, with DirecTV holding the rights to offer films on-demand 30 days prior to their theatrical release. This significantly enhances A24’s content portfolio.

Additionally, A24 also partnered with Amazon to make its movies available on Prime post their theatrical releases.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Apple Focuses on Developing Quality Content

Apple has been on a spending spree to scoop up original TV and film content, featuring some of the biggest directors and actors in Hollywood to support the launch of its streaming service as soon as March 2019. Notably, the company planned to spend $1 billion on original programming in 2018 and is expected to spend $4.2 billion by 2022.

Apple is continuously focusing on acquiring/partnering with Oscar winning content makers to create a place for itself. The company’s recent deal with A24 also indicates how the company is targeting unique and appealing content in the age of big deals with top stars to draw audiences.

The list of new Apple television programs includes a reboot of Steven Spielberg's original series Amazing Stories; an animated series from the Emmy-winning creator of Bob's Burgers; a world-building drama from Peaky Blinders creator and Hunger Games director; an untitled show starring Jennifer Aniston and Reese Witherspoon; a drama series by La La Land director Damien Chazelle; a psychological thriller by M. Night Shyamalan and many more.

Competition Remains Stiff

However, competition is intensifying in the streaming market, currently dominated by Netflix NFLX, which intends spend $8 billion on content in 2018. The company recently said that it plans to raise another $2 billion in debt to finance original shows and movies and license content from others.

Moreover, Disney DIS, which owns Marvel, is gearing up to launch its own streaming service next year called Disney+. Notably, users will also have access to theatrical releases starting with the 2019 slate.

Amazon Prime Video original content has also expanded in the last reported quarter with Tom Clancy’s Jack Ryan, The Romanoffs and season 3 of The Man in the High Castle. Further, Prime Video aired the second season of NFL Thursday Night Football (“TNF”) in the third quarter and had more than 8 million viewers on Prime Video as well as on Twitch. The e-commerce giant is expected to spend roughly $5 billion on original programming this year.

Although it might not be possible for Apple to grab market share from Netflix, Amazon and Disney instantly, the company’s move in this direction is noteworthy. Moreover, the company’s huge cash balance, which is approximately seven times the combined cash balance of all the three companies, gives it a significant advantage.

Apple currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

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