Three Things (7/19)

AppleTV+ and Hollywood

Apple is reportedly in late stage conversations to license more films from major Hollywood studios as it looks to add fuel to the AppleTV+ fire. The iPhone giant has spoken to several of the largest studios about acquiring more programming from their libraries to offer customers both in the US and abroad. Apple licensed about 50 movies from Hollywood studios earlier this year in the US, adding classics such as Mean Girls and Titanic. That experiment went well enough that Apple has gone back to many studios for more, either to license those titles internationally or to add more.

If you’re anything like us, some of our favorite recent programming has been from the hands of AppleTV+ (h/t Ted Lasso, Presumed Innocent, and Severance). The potential injection of new libraries is a departure from their commitment to original content, an approach that has been wildly different from peers but we’d argue just as, if not more, successful when they hit big. Just 11% of US households use Apple TV+, compared with 55% for Netflix which leads us to believe that Apple views old, bingeable reruns combined with their high quality original content as the next frontier to drive consumer adoption.

Small language models

OpenAI on Thursday released a smaller and cheaper version of the technology that powers ChatGPT. The new version of its AI model, called GPT-4o mini, is 60% cheaper to use than the model that powered ChatGPT-3.5 turbo. OpenAI said GPT-4o mini can currently interpret text and image inputs and will later add the capability to scan and output audio and video.

The earliest iterations of large language models have been focused on, well, large language – the biggest competitors have been racing to build the biggest and most powerful AI models possible. The launch is a departure from scale and a step towards a market we believe may be more conducive to success: smaller models, that are built to do specific tasks incredibly well, that are in turn much more profitable for the provider. Smaller may be mightier, especially as consumers and enterprises start to test out what may be possible in the new world of AI. We think this may just be the tip of the iceberg and will be following the success of the launch closely.

Netflix streaming forward

Netflix kicked off large tech earnings on Thursday and continued momentum from the quarters prior with stronger than expected subscriber growth. The company raised the low end of its forecast for full-year revenue growth, a sign of its continued strength as legacy entertainment companies grapple with cable’s demise. The streaming giant added an impressive 8.05 million subscribers in the second quarter but noted that new customer additions should be lower in the quarters to follow.

The earnings results highlight that changes to the Netflix streaming model are working. Its new pricing plan, content lineup, and crack down on password sharing are bearing fruit and are productively passing down the income statement. Netflix clearly continues to lead the pack in streaming as entertainment companies such as Warner Bros Discovery and Disney struggle with declines in viewership and revenues. The results more broadly set up the foundation for strong earnings across other big tech peers – if Netflix is a precursor to dominance throughout the tech ecosystem, it may be reason to send markets even higher.

Disclosures:

As of writing, AAPL, MSFT and DIS are holdings in Titan Flagship. OpenAI is a 4.0% holding in the ARK Venture Fund.

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