Apple’s television division, long dubbed a “hobby” by its executives, is now a billion-dollar business, Tim Cook told investors at an annual meeting on Friday.
The announcement is the biggest hint yet that Apple is stepping up its ambitions in the TV market, as it searches for new sources of growth, ahead of a new product launch which could come as soon as next month.
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“That hobby was over $1bn in revenue last year,” Mr Cook, Apple’s chief executive, told shareholders gathered at its Cupertino, California headquarters. “It’s a little more difficult to call it a hobby these days.”
The figure includes both the devices and the content sold through its $99 set-top box. In mid-2013, Mr Cook said the existing Apple TV box – which has sold for the same price since it was introduced in 2010 – had sold more than 13m units to date.
Apple has not previously disclosed annual revenues from its TV business alone, but it said in June last year that it sold 800,000 TV episodes and 350,000 movies every day on iTunes, netting around $3m a day. People with Apple TV devices tend to buy more content, executives have said.
Apple made its first foray into TV equipment in 2007 but analysts have long seen potential for it to become a multibillion-dollar new product line.
Mr Cook said that Eddy Cue, Apple’s services chief, has negotiated “a lot of new content” for TV, including 85,000 movies and, in recent months, new channels from HBO, NFL, Sky News and PBS. Earlier this week, Disney launched a new cloud-based app for iPhone and iPad, called Movies Anywhere.
However, Apple’s innovations in TV have lagged behind the likes of Microsoft’s Xbox One, which allows users to access cable TV through voice control, and Google, whose Chromecast device for connecting mobile devices to TV sets retails for a third of the price of Apple TV.
Horace Dediu, technology commentator with Asymco, estimates that the company has sold a total of 28m TV boxes since 2007, generating cumulative hardware revenues of about $3.5bn. An implied growth rate of 80 per cent would make it Apple’s fastest-growing device, Mr Dediu said on Twitter.
‘We are working on a lot of new products. We are working on some extensions of things you can see. We are working on some things you can’t see.”
- Tim Cook
In another possible signal that an upgraded box is on its way, Apple began to offer an effective discount to the current Apple TV by selling it with a free $25 iTunes gift card through its retail stores this week. Apple often discounts older products to clear inventory ahead of a new release.
One source familiar with Apple’s plans has told the FT that Apple is likely to introduce a new TV peripheral – but not a full TV set – before its June developer conference, as has been previously reported elsewhere.
The significantly redesigned hardware will include greater support for video games, already a popular pastime on its iPhones and iPads, as well as other new features which could include bringing its App Store to the TV set for the first time.
The release, which was delayed from the end of last year, could come “any week now”, this source said. Apple has not commented on the rumours, which were first reported by 9to5Mac .
Sitting cross-legged on a stool, wearing a dark blue untucked shirt and jeans and reading comments from folded piece of paper, Mr Cook discussed a range of topics from human rights to the company’s cash pile at Friday’s annual meeting.
He said that Apple had now sold a total of more than 800m devices running its iOS operating system, up from 700m in November. “Several billion” texts and photos are exchanged everyday over its iMessage system, he added.
We are not in a race to pay the most. We are not in a race to get the headline. That doesn’t mean we won’t buy a huge company tomorrow afternoon
- Tim Cook
Emphasising that he was focused on long-term shareholder returns and not short-term investors, at a time when Apple has been targeted by corporate raider Carl Icahn, Mr Cook said that he expected to announce an update to its share buyback and dividend scheme “within the next 60 days”.
“We look at it [cash redistribution policy] all the time but we update it on an annual basis so we can be thoughtful and deliberate about it,” he said. “If you are only [investing] in Apple for two weeks or a month, I would encourage you not to invest in Apple because we are here for the long term.”
Following Facebook’s $19bn acquisition of WhatsApp Messenger, a competitor to Apple’s iMessage chat app, Mr Cook touted a 32 per cent increase in its in-house research and development spending last year.
“We are working on a lot of new products,” he said. “We are working on some extensions of things you can see. We are working on some things you can’t see.”
However, after acquiring 23 companies in the past 16 months, he did not rule out big deals in the future.
“We are not in a race to see how many we can acquire,” he said. “We are not in a race to pay the most. We are not in a race to get the headline. That doesn’t mean we won’t buy a huge company tomorrow afternoon. But it has to be a fit for us and help us make great products that enrich people’s lives.”
All of the motions Apple put to a investors’ votes on Friday were passed at the meeting, and every shareholder motion was defeated. Mr Icahn withdrew a proxy motion pressing for greater cash returns to shareholders ahead of the meeting.
A change to Apple’s articles of incorporation that requires majority voting for the election of directors was narrowly passed by a 54 per cent majority of votes cast. Corporate governance advocates had praised the move.
Apple shareholders’ approval of its executive compensation plan increased markedly to 97 per cent in its non-binding “say on pay” vote, up from 61 per cent a year ago. Last year, Mr Cook changed the structure of his bonus to tie it more closely to corporate performance.
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