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‘Severance’ pay: Why Apple TV+ is worth losing $1 billion a year

‘Severance’ pay: Why Apple TV+ is worth losing $1 billion a year

  • 24.03.2025 03:30
  • macworld.com
  • Keywords: AI, Startup

Apple TV+’s $1 billion annual loss isn’t a concern, as shows like Severance boost its reputation and ecosystem appeal. The cultural impact of such content far outweighs financial metrics, positioning Apple as a lifestyle brand beyond hardware sales.

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The article discusses Apple's financial loss due to its TV+ service, particularly the expensive show 'Severance', but also highlights how it benefits Apple's brand reputation and ecosystem.

Context

Analysis of 'Severance' and Apple TV+ Business Strategy

Key Facts and Data Points

  • Streaming Loss: Apple is estimated to lose $1 billion annually on its TV+ streaming service.
  • Severance Success:
    • 589 million minutes viewed in the U.S. in February.
    • Ranked #4 on Nielsen at one point.
    • Surpassed Ted Lasso as the most-watched series on Apple TV+.
    • Received 14 Emmy nominations and maintains a 96% critic rating.
  • Production Costs:
    • Severance costs over $20 million per episode, making it one of the most expensive TV projects ever.
    • Total estimated budget for the show is $40 million per season (assuming 2 episodes per season?).
  • Subscriber Impact:
    • The show has driven significant new sign-ups to Apple TV+, though exact numbers are not disclosed.
  • Brand and Ecosystem Benefits:
    • Severance enhances Apple's reputation as a cultural force, aligning with its goal of diversifying beyond hardware sales.
    • Attracts customers who may later purchase iPhones or other services.

Market Trends and Business Impact

  • Streaming Wars: Apple TV+ is part of the broader streaming competition, where content spending is high but profitability varies by strategy.
  • Cultural Influence: High-quality, critically acclaimed shows like Severance help position Apple as a lifestyle brand, not just a tech company.
  • Long-Term Strategy:
    • Apple's willingness to invest in expensive content reflects its focus on building long-term brand equity and customer loyalty.
    • The show serves as "marketing bait" for the broader Apple ecosystem.

Competitive Dynamics

  • Netflix's Perspective: Netflix CEO Ted Sarandos questioned Apple TV+'s strategy, highlighting differences in business models (subscribers vs. cultural reputation).
  • Apple's Unique Positioning:
    • Unlike Netflix, Apple leverages its hardware-software ecosystem to cross-sell services.
    • Severance and similar shows help differentiate Apple from competitors by associating it with quality entertainment.

Strategic Considerations

  • Reputation Over Profits: Apple's ability to afford losses on streaming reflects its focus on brand image rather than short-term financial metrics.
  • Customer Acquisition:
    • High-quality content like Severance can drive long-term customer retention and ecosystem expansion.
    • The show's success may justify the investment even if it doesn't directly turn a profit.

Long-Term Effects and Risks

  • Potential Budget Cuts: Rumors of slashing TV+ budgets could impact future content quality and brand reputation.
  • Customer Loyalty: Continued investment in premium content is crucial to maintaining Apple's position as a cultural leader.
  • Regulatory Impact: While not directly addressed, streaming services may face regulatory scrutiny on anticompetitive practices or data privacy.

Conclusion

Apple TV+ and Severance represent a strategic pivot for Apple, moving beyond hardware sales to build a service-driven ecosystem. The show's success highlights the company's ability to leverage content for brand enhancement and customer acquisition, even at significant financial cost. However, maintaining this strategy will depend on balancing artistic quality with business priorities in an increasingly competitive streaming landscape.