Apple's movies are box-office duds. Apple says they're profitable. Huh?

Apple, the company that makes iPhones and computers, also makes movies. Three of them came to theaters in recent months, and … they did not do well.

"Napoleon," "Killers of the Flower Moon," and "Argylle" collectively generated $466 million at theaters around the world. But those movies cost Apple at least $700 million to create, Variety reports.

That's not totally surprising. The fact that "Killers of the Flower Moon" — a 3 ½-hour historical drama — was going to struggle at the box office was conventional wisdom before it ever debuted. And the fact that "Argylle" was a big-budget James Bond kinda-spoof with no audience interest was confirmed when the movie was scheduled for an early-February release. That's the calendar slot studios use to release movies they know will be duds.

Much more surprising from Variety: An Apple source insists that both "Killers of the Flower Moon" and "Napoleon" are actually profitable, "buoyed by ancillary revenue streams."

How's that?

Napoleon made $221 million at theaters and cost an estimated $200 million to make. "Killers of the Flower Moon" cost about the same — $215 million — and made less — $157 million.

Since movie theaters keep roughly half of ticket sales, that means both movies would have needed to make a lot more somewhere else to close that gap.

There are no "Killers of the Flower Moon" or "Napoleon" action figures or fast-food tie-ins. And since the Apple-made movies are expressly built to be shown on its Apple TV+ streaming service, Apple can't make money selling them to a different streamer.

That leaves video-on-demand sales, where Apple and other distributors sell or rent the movies digitally. But those numbers should be a fraction of the box-office receipts.

I've asked Apple PR for comment, but I don't expect a response.

Until then, I can only imagine that somewhere in Apple's accounting department, someone has agreed to say that big, splashy movies with some degree of critical acclaim — "Napoleon" is up for a few Oscars; "Killers" is up for a lot of them, including best picture and best director — generates marketing value for Apple in general and Apple TV+ specifically.

I don't think that's GAAP accounting, but whatever. Apple made $97 billion in profit last year. It can chalk the entire cost of its film slate up to marketing and call it a day if it wants.

Apple, movies, and TV: Why?

The bigger, yet-to-be-answered question: Why is Apple making movies and TV shows at all?

The first obvious answer is that it needs things for its Apple TV+ streaming service. And the second obvious answer is that Apple needs Apple TV+ because it's increasingly focused on making money from "services" as iPhone sales slow down.

But remember — the primary driver for "services" is really "people paying for in-app purchases in games they downloaded from Apple's App Store," plus the $18 billion Google pays the company to be the default search engine on iPhones.

Apple has managed to grow Apple TV+ meaningfully after a rocky start. Antenna, the subscription-tracking service, believes Apple had 18 million US subscribers at the end of January 2024.

That's a small slice of the 80 million subscribers Netflix has in the US and Canada (worldwide, Netflix has 260 million subscribers) But it is definitely something, especially now that Apple is charging $10 a month for the service in the US (like its peers, it charges considerably less in some international markets). Still, even in the best-case scenario, Apple TV+ is a sliver of the $85 billion Apple made from services last year.

But look: I'm not an Apple shareholder, and I am someone who likes to see movies. And I kinda liked "Napoleon," and one of my kids thought "Argylle" was not bad (I love him, but he's wrong — it's awful). And one day when I have four hours free, I'll watch Martin Scorsese's latest movie because he's not going to make many more movies.

So keep making this stuff, Apple! You can afford it, no matter how you define "profit."

Correction: March 7, 2024 — An earlier version of this story miscited subscription-tracking service Antenna; it believes Apple TV+ had 18 million US subscribers at the end of January 2024, not 25 million globally.

Read the original article on Business Insider