As I’ve discussed several times recently, despite all the earlier gloomy predictions of the declining value of content, recent moves by major media companies including Sony and Time Warner indicate a belief in the value of entertainment content — music, movies, and (maybe even) online entertainment. This is, I have argued, particularly the case when a vertically integrated company adds value to the core content in some way, such as enabling a seamless experience from discovery and purchase through consumption.
The canonical example of adding this kind of value to content — that I cited in both my previous posts — is Apple. The integrated experience offered by their iTunes software and online store, Mac computers, and iPod and iPhone portable devices is unparalleled and has been a boon to online sales of digital entertainment.
But, ironically, while Apple delivers an integrated value chain around the delivery of digital music, movies, and television programs, it doesn’t own any of the material it distributes. Yet.
A recent BusinessWeek article titled “How to Spend Apple’s Cash” notes that Apple is sitting on a large stockpile of liquid assets: $20.8 billion in cash and short-term investments. The article goes on to speculate that Apple my soon surpass Microsoft’s hoard of $23.7 billion in cash and quotes Piper Jaffray analyst Gene Munster as speculating that “[Apple] could have $40 billion in the bank [in two years].”
As the article notes, investor sentiment could force Apple to begin to spend some of this wealth. The question is: On what? Acquisitions are the obvious choice, but the piece points out that it may make sense for Apple to enter the content business.
Here’s the relevant passage:
One radical possibility would be for Apple to snap up content. Some analysts think the company should explore acquisitions in the music business, taking advantage of the major labels’ dire straits. Though that may create conflicts, Apple could use its knowledge of shoppers to create innovative sales incentives and promote new acts. “The music industry has come to believe that their industry will be smaller,” says one source close to Apple. “Apple wants it to be a bigger, more profitable industry.” Apple declined to comment.
One point the article fails to mention: Apple CEO Steve Jobs has some experience in the content business as the former CEO of Pixar and now a board member at Disney.
Whether or not Apple will enter the content business remains to be seen. But, as I’ve mentioned before on these pages, I’m encouraged by the investments major companies are making in content, demonstrating their belief that entertainment content will continue to be a driver of value in the new economy.
The image of the Apple logo is a copyrighted image, the copyright for which is most likely owned by Apple Inc. It is believed that the use of a web-resolution image for identification and critical commentary qualifies as fair use under United States copyright law.