Apple's True Intentions in Hollywood—With Top Exec Eddy Cue

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1:29at Vanduel.com slash sportsbook. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET. It is Tuesday, October 14th. What exactly is Apple doing in Hollywood? That's a question you hear a lot around town. It's not that the world's most valuable company isn't a welcome presence in the entertainment business. Since 2019, Apple TV Plus has been one of the biggest buyers of premium, often ultra-premium TV shows and movies, usually with major stars and known creators involved. In 2021, Apple became the first streaming service to win the Best Picture Oscar for Coda. And the service has had some momentum lately, with Severance and the studio scoring a combined 50 Emmy nominations, the studio winning the Top Comedy Award.

2:12But the questions persist around Apple TV +, which was rebranded this week as just Apple TV. Apparently it's cleaner. And that's because the business model around these services is not totally clear, at least not to people in Hollywood. The economics of streaming, for the most part, are about a race to scale. And while Apple has hundreds of billions of dollars at its disposal, it has refused to do things that would help it grow and increase engagement, like build up its service with a library of movies, or premium sports rights like the NFL or NBA, though it does have soccer and baseball. And according to my colleague, John Arand at Puck, they're about to pick up F1 rights as well.

2:49Apple used to give its bigger movie releases a robust theatrical run, but after a few flops, that stopped. With this summer's F1 being the exception, that turned into a hit with$630 million worldwide. Even so, Apple hasn't yet committed to any theatrical releases in 25 or 26. Nor does Apple release any data about who is watching what on its service. So what we know comes only from third parties like Nielsen, which reports extremely low engagement in the U.S. Apple TV doesn't even register on the monthly gauge chart. But individual titles do pop up as hits, like Severance and Shrinking on the TV side and recent movies like The Gorge or last week's The Lost Bus.

3:30More and more of those titles are popping up, which does suggest more and more people are watching the service. That's only domestic, of course, and Apple counters that it's a global service. Okay, but it's all led to an odd situation. Hollywood loves Apple and the kind of content it's making, the good stuff for the most part, but it doesn't quite understand what its intentions are. Is this just a brand building exercise for a company that makes iPhones? Is Apple making money on Apple TV Plus? And for how long will it be committed to staying in this business? That's why I wanted to have Eddie Q on the show to ask him.

4:03If you don't know Q, he's the Apple Senior Vice President of Services, reporting to CEO Tim Cook. He's been at the company 36 years and oversees everything from Apple Music to Apple News, podcasts, and much, much more. But I first met him when he was just starting to put together Apple TV. And that's what we're going to talk about today. The business model, the momentum from the studio and other recent hits, how the content chiefs, Zach Van Amberg and Jamie Ehrlich, are doing, the intentions for theatrical, the spending, his interest in buying another studio or even HBO, as has been speculated, much, much more.

4:36Today, it's Eddie Q and Apple's true intentions in Hollywood. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

4:48All right. Thank you for doing this. Really appreciate it. I asked you at the Apple Emmy party and you said yes. And then you actually follow through, which is nice, which means that you are not a Hollywood person because a Hollywood person would have had five publicists figure out a reason why you shouldn't follow through on what you actually said. So I was, I got to tell you, I've always wanted to do this. So when you ask. Always, yes. Growing up a little more. Always since we've been doing this. So the fact that you asked, I absolutely said yes. And I'm glad to be here today. It's great to be together.

5:22All right. Well, wait till we start the questions. You may rethink that position. Okay. So the rebrand, how many management consultants did it take to tell you to drop the plus from Apple TV Plus? Zero. You just decided. I just decided. We just decided. You know, look, we put the Plus in there because we've used it in our other services like iCloud Plus and News Plus. But we do that when we have a free service and then there's a paid version. We stayed consistent because of it, but we all called it Apple TV. And we said, you know, given where we are today, it's a great time to do it. So let's just do it.

5:58We all call it that anyways. Although I remember when you announced it, Disney was annoyed. Remember? Because they had Disney Plus coming. Yeah, I do. And now I guess maybe it'll be happier. or maybe when you own them someday, you can bring it back. And, you know, you now have this confusion, though, potentially with other hardware. Our hardware is called Apple TV 4K for your TV. I think that's fine. And the app is called Apple TV. It's been called Apple TV on our third-party products as well. So I don't think that'll be a problem at all. People in Hollywood are fascinated by you because, in part, you guys have been an amazing boon for the industry.

6:36the fact that you are spending what you're spending on content, you are making it look and distributed the way that you're making it look and distributing it the way you are. You're working with top-tier talent. You're paying for top-tier talent. You are doing it in a way people around town love, which also makes them terrified about what your intentions are in this business. And I want to talk a little bit about that because you guys are the market leader in a number of businesses that you're in, by far in some businesses. Yet in Hollywood, you're not. You've been content to be niche. Why is that?

7:15Why don't you spend what it takes to be competitive with the big players? Yeah, we're not content to be niche. We're content to be the best. That's what we're trying to be. We're not trying to be the most, but we are trying to be the best. And that's been the goal from day one. And so I get the fact that it's Apple and we do all these other things and people get nervous about what our intentions are, given our size and what we do. But our intentions here have been the same since the day we started. And that is we saw an opportunity to focus on creating great content. Not the most, it felt like everybody in the industry had to go to, we need everything.

7:59Certainly in 2019, that was the feeling. And so we looked at it and said, wow, this is like, I can't believe we would be able to get into this market and be able to compete against people that have been doing this for 100 years or for 20 years. But we saw an opportunity because of this. And so we said, look, let's start something where we're trying to create the best content, the best storytellers, the best stories, create an environment for them to do their best work. And if we do that, we'll be successful. And that's never changed. What is success for you? is this is the service profitable is apple tv plus profitable the service is doing fine look it's a lot harder than it looks as always because when you try to do things that are great it takes longer than you want uh i didn't forecast you know being out of production for a year and a half i didn't forecast a nine month strike from that standpoint so we were a little further behind than where i'd like to be but where we are today is great we are you know our content has never been better.

8:56We now have a started to have a library because we have shows going into seasons three, four and fives and things like that. You know, we've got theatrical movies that have done great. We've got subscribers growing at a much higher rate than are they? Yeah, absolutely. So you guys have not revealed subscribers and the credible numbers that are out there are about 40 million, 45 million. Is that right? Is it more than that? We haven't said what our numbers are, but we're significantly more than that. Significantly more than that. But we're not going to say what our numbers are. We're happy with where we're growing.

9:29But, you know, look, we're trying to be successful. Success, part of success is you want as many people as possible to watch. But when you try to create the best content, it may not be everybody. We don't have content for, we don't have every genre, every piece of content that you could have. But we think what we're offering, we can get a large set of users than we have around the world. But you said in March, you said when we think about our shows and we think about our products, we're not designing them for a small subset of people. We design them for everyone. That's right. But do you think Apple TV Plus is for everyone right now?

10:03I do. I think we have shows that are for everyone. If you look at a show like The Studio, you look at a show like Severance, you look at Platonic right now. Look, our movie, Formula One, is that not for everyone? That is for everyone. You know, the studio, when it started, everyone said, no one's going to watch this. It's a show about Hollywood. It's an insider thing. And as a big comedy star, that's right. And as the season started, you know, and it went through, it kept growing and growing and growing. And so it grew to, you know, the highest, the highest number of viewers we ever had was by the last episode, which shows growth.

10:36So I don't think it's a good show at all. Do you monitor the numbers? Sure. You do every day. I get them every week. Every week. And you pick up the phone and call Zach and Jamie and say, what happened here? No, I, you know, we, I don't need to call them. I kind of know throughout the week and what's going on. and I'm aware of it. And, you know, the numbers are important because they're a scoreboard. But, you know, I measure ourselves. That's a scoreboard. That I can't change. What I can change is what we're creating and what we're doing. And that's where I put my energy. If we do that well, what I've always found is a scoreboard always works in our favor.

11:13So about a year ago, there was some reporting, myself and others, that you had communicated to the team in LA that the costs were too high, that spending should come down, and it was sort of interpreted as a come-to-Jesus moment for TV+. Is that accurate? Look, we've never taken a cut on our spending on TV+. So that's not accurate. It is accurate that we are always looking at how we can be more efficient. Are we spending it the right way? Are there areas that we should be spending more on and areas that we should be spending less? We do that all the time, and we're going to continue to do that.

11:53And did that moment coincide with the theatrical pullback? Because famously, you guys pulled back from theaters. There was a big dust-up over Wolves. Brad Pitt, the director of that movie, were very upset by that. Where do you stand on theatrical for movies? It's never changed. Look, we look at, we're learning. It has changed. No, no, it hasn't changed. We have not, we never said from the beginning that when we were doing movies that every movie was going to be theatrical. We never said that every movie was not going to be theatrical. But there was a cadence of these movies. We said we're going to make it on a case-by-case basis and we'll find movies that we think should go theatrical.

12:28As we've learned about the theatrical business, we're learning more and more about it from that standpoint, what works, what doesn't work. And so we'll adjust. And we certainly made some adjustment on movies that we thought, you know what? We don't think this is a great movie right now to do theatrically. We think it's a better movie to do on direct streaming. And we'll make that call and we'll continue to do that. So you have zero movies dated theatrically right now for wide release. Did F1 change that? Are you going, did F1 was a hit? Will you put more movies in theaters? Absolutely. But what is the barometer for that?

13:03But it wasn't because of F1. I want to be clear about that. Sure. Does F1 give you more confidence? You have success, you get more confident. But no, we were planning on doing some movies theatrically in the coming year. Wide releases? Yeah, wide releases. In 26, you will have wide releases? We would like to have wide release movies in 26, in 27, in 28, in 29. We'd like to do that. You just haven't scheduled any yet. But we'll make the call. That's right. We're going to make the call as when we think it's the right thing. And when we don't think it's the right thing, we won't. We'll go streaming and we'll do a different thing or we'll do a smaller release like you're saying.

13:38We don't have to do everything as a wide release. Sure. You understand why that's important to creators. There is a class of filmmaker that very much cares about that. Yeah, we care about it. Look, we love theatrical movies. Seeing a movie with hundreds of people or thousands of people, there's nothing like that. Yeah, but you don't like the headlines. When a movie doesn't open, there's Apple and there's Bomb in the headlines. You do not like that. By the way, nobody likes that. I know. That's not unique to me or unique to anybody else. Nobody likes that. But you're doing this as a brand halo for the most part.

14:12You want to make money in this business. But the rationale, I understand, for even doing this entire thing is that it's additive to the Apple brand. No way. Bomb is not additive to the Apple brand. That is not additive to the Apple brand. But no way. We didn't start this as a halo to the Apple brand. I think the Apple brand was doing really well and is doing really well without us from that standpoint. We viewed that we could build a real, credible, great business in this. Now, if we did that, would it be a halo to the brand? Sure, it would be. If we do great things, it always helps the brand.

14:43But we didn't start the business because we thought, oh, this is a good halo for the Apple brand. You didn't? No, not at all. It had to be a factor. Yeah, but if you do that, you'll never be successful. Okay, but let's take a step back. Let's say you spend$5 billion a year on content, right? So if the goal is to keep people in the Apple ecosystem, to keep people in the services aspect of Apple, couldn't that five billion dollars be spent differently and have a better return on investment if you put it into discounting if you put it into marketing if you put it into uh you know other things that would grow the services business that have nothing to do with content if you were trying see those that is exactly the point you're trying to make all these scenarios which potentially could be a halo to the brand or helping the brand.

15:38We look at it as a real business. We're building a real, credible, what I think is a wonderful business to be in that is long-lasting. It will be creating content, movies and TV shows, I think, will exist 100 years from now. It's a business that we think we can be really good at, and that's what we're trying to do. And so that's what we're doing. Those other things are important and, you know, we'll do those. But you have to start by the fact that this is a real business that we're trying to do. So the number one indicator of the success of a streaming business, according to your competitors, is engagement.

16:18Engagement on Apple TV Plus is very low. It doesn't register on the Nielsen Gage most months. And there are things you could do that would increase engagement significantly, like license a library. And you've chosen not to do that. I think our engagement is actually quite high for the number of content that we have. That's fair. Right? That's fair. And so, yes, you're right. Look, we took an approach that nobody else has ever taken. Everybody else said it couldn't be done, which is to say, we're not going to license content. We're going to start from scratch and build everything ourselves. Why is that so difficult?

16:53Well, obviously, clearly, you don't have a lot of shows around this. And as we talked about, you know, with things, you know, there were some people that were happy when, you know, COVID got delayed some productions because they saved money. We were not. We didn't have any shows. Right. So we didn't have a huge library. And you don't own a lot of those shows also. We own more and more. You own more, but your biggest hits, Ted Lasso, the studio, others are not owned by you guys. We own quite a few of them. So we're very happy with that direction. I think partnering in both ways is a good thing.

17:22But again, you know, so we started with this idea that if we're going to put our brand and we're going to put our name behind something, then it needs to be us. We don't put our brand on other people's products. We don't do it on anything else that we do. And so why would we do this here? And so when you look at a TV show or a movie, if it has that Apple logo on it, you know, that's us. We did that. We partnered with someone. We worked with writers, worked with actors. That's important to us. That's what we stand for. And so, yeah, it's going to take some time. I wish I had a larger library three years ago.

18:00But today, you know, now we have, you know, three or 400 shows and movies that are in our library. And it's growing. Quick way to do that is to buy something. And I know everyone thinks you guys are almost about to buy everything under the sun. But why have you not bought something? We're interested in HBO. We know that a decade ago. Look, we talked to a lot of folks. We like learning and talking and listening is a good way to learn. But again, I never say no to anything in the future, but it's not our approach. We like building things. We like doing things ourselves and creating them. And we think that that's how we can really stand out and do unique things.

18:43And so you're not going to buy Warner Brothers. I would be surprised. But again, you know, I never say no to anything because you never know what happens in the world. But no, look, we'd like... Not even Disney? Iger has said if Steve was alive, the companies will be merged. That's not something, unfortunately, I wish he was alive. But that's not something we're going to be able to figure out. No, look, we're happy with where our position is and where we're growing and how we're doing it. So you're putting an end to the speculation that Apple will buy any of these companies? I don't know about an end.

19:16I just said, look, I never say no to anything, but we're not actively looking at buying any company of any size. We like building things ourselves. Your churn is still high. And I think it's because you are perceived as a show-to-show service, meaning something new comes on. If you're interested, you opt in. If you're not, you maybe opt out. What are your strategies to reduce that churn other than just building the library? Is sports helping? Is, you know, doing different cohorts of shows for different audiences helping? Look, I think our churn is, one is it's gotten significantly better over the years for the reasons you just said.

20:00As you grow more and you have one show to the next show to the next show that people are going to, it just helps. So that's the primary driver to this. It's creating great content. Our churn is in a good position. We're, you know, look, We price at$12.99. We don't have any ads. We're highly competitive from a price point of view when you look at any one of our competitors. And when you look at the quality of the content that we're offering with no ads, I'll put us up against anybody. So I like our position and where we're headed.

20:43I'm a little killer. I'm a moon moon. From Anne Rice's Immortal Universe comes what Vulture calls the most momentous event in fictional rock history. Thousands of fans love you. I want millions. It's my era. Anne Rice's The Vampire List. All new Sundays at 9, exclusively on AMC and AMC+. Stream now. This episode is brought to you by Holiday Inn by IHG. Everyone knows Holiday Inn, right? Or they think they do. because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else. We're talking modern rooms with real reset mode vibes, spaces that feel like your living room, just a little more low-key chic, and dining done right, from breakfast to dinner and drinks.

21:31Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn. It's a new day and a new stay. Book your next day at HolidayInn.com. sports business. You guys have been in the mix on a number of these sports rights deals and haven't pulled the trigger on anything except for MLS, which is a 10-year,$2.5 billion deal, and Friday Night Baseball. And you are perceived to be negotiating for F1. Is that accurate? It's accurate that we're on MLS and Major League Baseball. F1 as well? No, look, I'm not going to talk about things we haven't announced or haven't done on F1 or any other sport.

22:12Why haven't you pulled the trigger on NBA or an NFL package? You sort of have let Amazon kind of run away with that being the streaming pioneer there. Look, we said we like really looking at sport a little differently. One of the things that we did with Friday Night Baseball, we wanted to learn a little bit about sports. So that's why we did it. But it wasn't an end goal of just Friday Night Baseball. um, MLS is closer to what we wanted to do, which is we'd like to own a sport end to end so that we can offer customers what we do today, which is you don't have to worry about blackouts. You don't worry about how to watch.

22:50We can do, you know, picture in picture. We can do all kinds of things that every sports fan wants. I know that I want when I'm watching all these other sports, taking little rights here and there across all these different sports just doesn't deliver that. And so that's not an area that we've been interested in. I read a lot about us being in the thing and I get that people say a lot of that, but a lot of that gets used because we're big and it helps, you know, sounds that, but I can tell you, we are not, we have not been in the bidding process to take chunks of sports. Well, but you could have taken UFC.

23:22That would have been everything. Sure. Yeah, no. And you didn't get that? Did you want that? Not something we, you know, we, we, not the brand, not something we looked at right now. That very, you could have taken one of the college sports conferences. Did you look at the big 10 or sec or one of those? You couldn't, you couldn't take any of those. Those are, those have all been taken for a while. So now that that's 12, maybe.

23:46Sorry. Um, I'm a cow guy, so I got to make a pack 12 joke. I'm a Duke guy. So we won't talk about the game then. That's we will not talk about that game. why did you not I mean you decided film and TV is interesting to you why not why not podcasts why didn't you want to own podcasts you have such a platform there well we love we love what we're doing in podcasting from a platform but we we didn't move to own like Spotify and Amazon did but I think there's plenty of people doing great work in that area and and we didn't see a way for us to do something that was unique that the industry needed honestly and so you look you know You guys are doing a tremendous job in the ringer.

24:26You look at companies like Wondery. I mean, there's a lot of companies doing great work. And so in this space, we thought there was a real opportunity to do something different. What have you learned in sports so far? You said you did MLB to learn. What have you learned? And what have you learned from MLS? I'll tell you what we learned in MLB that I love. Quality of video. If you've ever watched a Friday night baseball game, the first time that we broadcast, everyone was like, oh my God, what is this? 8K? I don't understand. Because it looks way better. And part of that is because we don't compress it as much.