Apple embracing its role as maker of 'blockbusters,' not niche products, UBS says
In the age of the blockbuster, Apple's iOS platform is leading the way far ahead of its competitors, investment firm UBS said in a note to investors on Tuesday.
Inspired by the Anita Elberse book Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment, analyst Steven Milunovich compared the record smashing success of the new Star Wars film to Apple's lucrative approach to business.
According to Elberse, who is a Harvard business professor, media companies should build their businesses around tentpole franchises, because in the age of the Internet, consolidation and concentration have grown. She went on to say that Apple's approach to defeating its rivals "looks an awful lot like a blockbuster strategy."
To Milunovich, this makes sense, because the iOS ecosystem is a cohesive platform, making it difficult for other device makers to compete with Apple's level of hardware and software integration.
In addition, Apple executives are aware and acknowledge that their company is dependent on blockbuster hits, Milunovich argued. To him, this was evidenced by the appearance of Apple executives on 60 Minutes Sunday night, offering more insight into how the company operates.
"A higher public profile boosts brand awareness while heightening the mystery around secretive Apple," Milunovich wrote. "It's no longer just the CEO but also designer Jony Ive and retail baroness Angela Ahrendts with whom the public can become familiar. Selling luxury to the masses requires mass appeal."
Milunovich believes Apple's "blockbuster" presentation will continue to work for the company in the long-term, though he did admit he sees tough near-term comparisons for the iPhone 6s product cycle. Still, in his view, Apple is in its "strongest competitive position ever."
UBS has reiterated its "buy" rating for AAPL stock with a price target of $130.
Inspired by the Anita Elberse book Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment, analyst Steven Milunovich compared the record smashing success of the new Star Wars film to Apple's lucrative approach to business.
According to Elberse, who is a Harvard business professor, media companies should build their businesses around tentpole franchises, because in the age of the Internet, consolidation and concentration have grown. She went on to say that Apple's approach to defeating its rivals "looks an awful lot like a blockbuster strategy."
To Milunovich, this makes sense, because the iOS ecosystem is a cohesive platform, making it difficult for other device makers to compete with Apple's level of hardware and software integration.
In addition, Apple executives are aware and acknowledge that their company is dependent on blockbuster hits, Milunovich argued. To him, this was evidenced by the appearance of Apple executives on 60 Minutes Sunday night, offering more insight into how the company operates.
"A higher public profile boosts brand awareness while heightening the mystery around secretive Apple," Milunovich wrote. "It's no longer just the CEO but also designer Jony Ive and retail baroness Angela Ahrendts with whom the public can become familiar. Selling luxury to the masses requires mass appeal."
Milunovich believes Apple's "blockbuster" presentation will continue to work for the company in the long-term, though he did admit he sees tough near-term comparisons for the iPhone 6s product cycle. Still, in his view, Apple is in its "strongest competitive position ever."
UBS has reiterated its "buy" rating for AAPL stock with a price target of $130.
Comments
How Bold
And I don't understand the reference to Jar Jar. While Star Wars episode I didn't fare well with critics, it made over a billion dollars in ticket sales. If anything, Jar Jar seems to support Elberse's theory – with a giant blockbuster franchise (like Star Wars) even occasional missteps don't blunt its economic potential.
edit: Pipped by afrodri.
Frozen is a mass market as possible. Man, you don't know what the hell niche is.
Niche markets often cater to only one specific need of a much broader market.
Like HD audio streams in the overall streaming market.
Not only that, to make sense by "traditional" means, the amazon PE means they've cornered the whole retail market in all of north America and Europe with nothing left for anyone else... Nothing. But, logic mogic.... Who needs to make sense.
Considering cloud margins are going down (with competition heating up a lot), this makes even less sense (even if they diversified).
Entertainment, another area they're going in is not an area of regular big profit. Disney is #1 and they're way down in the list of top companies worldwide.
Amazon is pure insanity no matter how you look at it.
Compared to the average S&P P/E of 20 with estimated growth of 3-5%. Given that benchmark, Wall Street has factored in a 10-30% earnings cut for Apple in FY16.
Possible, I suppose, but $9 EPS/year can buy 9% of the share float per year. Thus, leaving my shares with a larger slice of that earnings pie.