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Aug 3, 2024, 9:50:00 PM8/3/24

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Apple Closely Monitoring Time Warner Acquisition: What It Means for Apple TV+

Apple is one of the few companies that has the financial muscle to buy WarnerMedia-Discovery, the newly formed media giant that will combine AT&T's WarnerMedia and Discovery Inc. The deal, which is expected to close in mid-2022, will create a streaming powerhouse with more than 200,000 hours of content and 100 brands, including HBO, CNN, Warner Bros., Discovery Channel, TLC, HGTV, Food Network, and more.

But does Apple have any interest in acquiring WarnerMedia-Discovery? And how would such a deal affect Apple's own streaming service, Apple TV+?

According to a report by CNBC, Apple and Time Warner (the former name of WarnerMedia) had a series of meetings in 2015 to discuss partnership opportunities that turned into acquisition talks that fizzled. Apple's CEO Tim Cook and SVP of internet software and services Eddy Cue met with Time Warner's CEO Jeff Bewkes and former EVP Olaf Olafsson to explore the possibility of Apple exclusively offering Time Warner's content, such as bundling Turner and HBO content for a monthly fee.

However, the talks stalled over disagreements about fees and marketing. Apple was also concerned about upsetting its existing media partners and pay-TV distributors by offering Turner networks outside of a cable bundle. Moreover, both Apple and Time Warner were wary of committing to an exclusive partnership that could backfire if either party changed its mind in the future.

As a result, Cook, Cue, and Bewkes briefly discussed an Apple acquisition of Time Warner, but Cook was not ready to agree to the deal, which would have been somewhere around $100 billion. Neither Cook nor Bewkes expected to reach an acquisition deal, and Time Warner was ultimately sold to AT&T in 2018 for $85 billion.

Since then, Apple has launched its own streaming service, Apple TV+, in November 2019. The service offers a relatively small but growing catalog of original content, such as "Ted Lasso", "The Morning Show", "For All Mankind", "Servant", and more. Apple TV+ also features some licensed content, such as "Fraggle Rock" and "Peanuts". The service costs $4.99 per month or is included in various Apple One bundles.

Apple TV+ has received critical acclaim for some of its shows and movies, but it still lags behind its competitors in terms of subscribers and content library. According to Ampere Analysis, Apple TV+ had about 40 million subscribers as of Q1 2021, but only about half of them were paying customers. The rest were on free trials or promotions. In comparison, Netflix had 208 million subscribers, Disney+ had 103.6 million subscribers, and HBO Max had 44.2 million subscribers in the same period.

Apple TV+ also faces stiff competition from other streaming services that are spending big on content. Netflix plans to spend $17 billion on content in 2021, while Disney+ expects to spend $14-$16 billion on content by 2024. HBO Max plans to spend $4 billion on content in 2021 and increase its output by 50% in 2022.

If Apple wants to compete with these streaming giants, it may need to make a big acquisition to boost its content offerings. And WarnerMedia-Discovery may be the perfect target for Apple.

WarnerMedia-Discovery will have a massive content library that spans across genres and demographics. It will also have a strong presence in both the U.S. and international markets. The combined company will have more than 200 million subscribers worldwide across its various streaming platforms, including HBO Max, Discovery+, CNN+, and more.

Apple could leverage WarnerMedia-Discovery's content to attract more subscribers to Apple TV+ and offer them a wider range of entertainment options. Apple could also integrate WarnerMedia-Discovery's streaming platforms into its own ecosystem and devices, such as the Apple TV box, iPhone, iPad, Mac, and more.

Moreover, Apple already has some historical ties with WarnerMedia. Apple has a close business relationship with Richard Plepler, the former leader of HBO who left the company after AT&T's acquisition. Plepler signed an exclusive production