Where’s That BIG Cash Opportunity Steve Jobs Promised us?

| Editorial

When Steve Jobs was alive and Apple had a mere $25 billon in cash assets, he claimed that Apple wanted to “keep its powder dry” for a strategic opportunity. Peter Oppenheomer has continued that mantra. And yet, as opportunity after opportunity has presented itself in the TV industry, Apple continues to sit on its $110 billion cash hoard. Why is that?

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Camel nose under the money tentThis week we learned that Apple is, once again, begging for the keys to the TV kingdom. Presumably, that’s so Apple can apply its fantastic understanding of customers wants and needs, develop a revolutionary TV viewing interface, dust off its patents and put some major competitors into bankruptcy.

Of course, that isn’t going to happen. The studios know that Apple got too much control in the music industry and isn’t looking to have Apple kill their golden goose or compromise current carriage agreements. Content creators are happy to have many outlets that suit different customers, like theaters, Ultraviolet, Blu-ray, V.O.D. via carriers, Red Box, Netflix, Hulu and so on. Apple will be allowed to participate, and generate incremental revenue, but won’t be given the kind of control Apple typically wants. So what’s next?

The Next Flub

This week we learned that Apple has tried a different technique. This time, according to the Wall Street Journal , Apple has supplicated the U.S. cable providers to let Apple carry their content on (possibly) an enhanced Apple TV. According to GigaOm on Aug 15, “In a March report that Apple was in talks to get cable companies, some of those cable sources complained anonymously to the New York Post that Apple’s offer wasn’t a great deal for them, one saying, Apple wanted ‘everything for nothing…’.” [Emphasis added.]

Once again, Apple appears to be taking the approach that if only they’re allowed into the game, their expertise will amaze and delight both the customers and the other stakeholders. That approach, born of a little bit too much arrogance, hasn’t worked and isn’t going to work. Time to move on.

Sitting on the Money

Back in 2010, when Steve Jobs made an appearance at an earnings conference call, he was asked about what Apple might do with that monstrous $25 billion in cash assets. Mr. Jobs said, “We’d like to continue to keep our powder dry,” and continued, “We strongly believe that one or more very strategic opportunities may come along.”

And yet, with $110 billion now (some of it overseas), Apple seems to be sitting on that cash, solely for the sake of having it. It can become an end in itself. In fact, by one estimate, Apple will have $200 billion sometime next year.

The Opportunity

I don’t confuse TV lawyers with real life heros, but for the sake of literary comparison, I tend to think of the boldness of an attorney like Harvey Specter (USA Network, Suits ). He knows the cards he holds, and he makes bold moves in order to win. What if Apple gave up on the idea of begging its way into the kingdom and just brought a metric crap ton of cash to the table?

We know that money talks. Content providers are always keen to make more money but are not keen to give up control. If Apple were to sit down and say, “Look, we want to buy such and such rights.” A sweeping purchase. And sugest a check that has ten zeros, Apple could have any content deal that it wants. Every show, every sport, anything. For years and years. Ten zeros. A mere 10 percent of Apple’s assets. Five percent next year.

Harvey Specter

Image Credit: USA Network, “Suits”

When a company is small, it tends to think about using some available cash to improve its competitive stance. But when one has more than a hundred billion dollars potentially available, spending a small part, still amounts to a staggering amount of money. It gives one pause. In addition, Apple is well aware of the pits other companies have fallen into by spending an inordinate amount of money to no good end.

This is different. Apple desperately wants into the TV content delivery business in a much bigger way than currently.

But Apple isn’t going to get anywhere with this camel nose under the money tent approach. I fondly remember the vision of Steve Jobs and the Big Opportunity he was waiting for. I keep wondering how long it’s going to take Apple to find it.

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Camel and money image credit: Shutterstock. Thanks to TMO’s Jim Tanous for artwork.

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10 Comments Leave Your Own

jsbow-long

WHY is it that every body gets all upset when a company has money in the bank? How does it hurt any of us if Apple has even $500 billion or twice that?

Every one wants to control so much ($110 billion) money and they get all upset when nobody listens to them. My neighbor loves to tell me that I ought to buy a new car, because he thinks I have some $ in the bank that he would spend on a new car if it were his. Well, folks it is none of YOUR business.

Apple will buy/spend or not when it suits them (not you or your next door neighbor). Get off your holier-than-thou horse and worry about your own fortunes.

John Martellaro

jsbow-long: The cool thing about an editorial is that I am able to express my opinion as well as create food for thought.

jsbow-long

OF Course you are!! I apologize for picking your editorial to finally express my frustration with this on-going “discussion” about how Apple spends it’s money.

It is just human nature to think about what “I’d do with that much money.” You are sharing feelings that I suspect are common to many (such as my neighbor).

I think someone needed to make the other point - and my frustration with people like my neighbor got the better of me.

My hope is that I might have added some food for thought rather than seem to be criticizing you.

aardman

I still think that somewhere down the line Apple will be forced to buy its own pipes.  It’s the one link from Cupertino to its customers that it doesn’t control.  They have got to know that as the computing public becomes more and more dependent on the cloud, the greater are the carriers’ powers over the device manufacturers as well as the cloud service and content providers.

The feds might not be happy with Apple buying an existing wireless carrier (cough, T-Mobile, cough) so either Apple builds their own network from the ground up, or Apple, Google, and MS can form a consortium to buy T-Mobile, and run it as the enforcer that imposes pricing discipline on Verizon and AT&T and protects them from a Verizon or AT&T tax.

Would also love to see Apple buy Comcast.  (And spin off NBC)

BurmaYank

Mr. Jobs said… ?We strongly believe that one or more very strategic opportunities may come along.?
And yet, with $110 billion now (some of it overseas), Apple seems to be sitting on that cash, solely for the sake of having it.  It can become an end in itself...
If Apple were to sit down and say, ?Look, we want to buy such and such rights.? A sweeping purchase. And sugest a check that has ten zeros, Apple could have any content deal that it wants. Every show, every sport, anything. For years and years. Ten zeros. A mere 10 percent of Apple?s assets. Five percent next year.


I think that’s probably a brilliant suggestion!

Would it also be a good idea to secretly be making 5 or 10 such purchases simultaneously, and waiting until all were in Apple’s pocket before announcing them all together?  That would really be a dramatic entrance into “... the TV content delivery business in a much bigger way than currently”

Jim Stead

The nice thing is that Apple gets to make its own judgments. And based on measures like product sold, happy customers, revenues, and profits those judgments are pretty good. Even better than random commentators.

As far as “flubs”, how does Apple’s Flub Ratio compare to other human run organizations, or are you comparing them to Perfection?

John Martellaro

Jim Stead:  Apple, starting with Mr. Jobs and continuing to today, has been about the business of trying to wriggle its way more deeply into the TV business. From all angles. Yet the well documented failures have been notable and the effort remains a hobby. It’s not that Apple hasn’t sold a boatload of Apple TVs. But Apple’s greatest TV ambitions remain unfulfilled.

Amergin

Time enough for Apple to do something with the money when it has something new to bring to the table. Just buying rights to take over an industry sounds more like microsoft in the bad old days or any of the other pitiful corporations who could only use bully boy tactics to stay ahead. Apple is doing remarkably well, better maybe than any other corporation in history, by actually innovating and thinking different. Long may it continue. And I second the sentiment voiced above… The money sitting in a bank is doing no harm, let it lie there until it has a real use.

immovableobject

For Apple to offer “10 zeros” or any other outrageous amount of money for the rights to sell TV content, they would have to believe that it was a good investment.  There is only so much disposable income that people can afford to spend on entertainment.  Many people are already locked into expensive bundles (internet, cable TV, phone service).  How easy will it be to get them to change all their services in order to free up cash for Apple’s content?

A large number of potential customers are afraid or unable to deal with hooking up an Apple TV box.  Apple doesn’t have in-home service personnel to deal with this issue.  In addition, I suspect Apple would have to have to offer content at aggressive (loss-leader) prices in order to get reasonable market penetration.  If Apple charges typical gouging prices for online content, the service will go nowhere.  Even with Apple’s cash payment up front, IP holders won’t like the idea of seeing their stuff offered cheaply, as it resets consumer perception of intrinsic value. They resented Apple’s insistence on keeping iTunes tracks priced under a dollar, and eventually won that battle by withholding permission on offering DRM free music (while allowing competitor Amazon to do so) until Apple gave in. The whole thing is very risky.

N8nNC

I see several problems. Apple doesn’t want to buy into the current TV model. That’s skating to where the puck was (and a bad situation anyway). They want to have the model changed, preferably on somebody else’s dime/risk.

It’s very difficult to negotiate openly if everyone knows you’re loaded. There is no way to get a reasonable estimate of value. It is unlikely that Apple could work through a shell company, since the tv world s so insular.

I can see apple putting the production and self-distributing tools out there and wait for the creatives to bypass the networks. But it’s slow and doesn’t require a lump sum investment.

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