On the surface, it may seem like Apple Inc.’s (NASDAQ:$AAPL) recent $1 billion investment towards producing and buying TV programming is a move against popular TV and movie streaming services like Netflix (NASDAQ:$NFLX) and Amazon (NASDAQ:$AMZN). However, Apple’s $1 billion investment into TV is a move against popular music streaming company Spotify more than anything else presently, according to RBC Capital Markets’ (NYSE:$RY) analysts.

Apple’s investment of $1 billion is significantly less than the $6 billion Netflix has invested, the $4 billion Amazon has invested, and the $2 billion HBO has invested for their streaming services, RBC analysts reasoned. Not only have these companies invested way more money, Netflix, Amazon, and HBO also have the upper-hand, given their prominence in video-streaming businesses.  Because of this, RBC’s lead analyst Amit Daryanani explained that it makes more sense to look at Apple’s investment as a means to compete with Spotify.

This is especially true if one considers Apple’s launch of Apple Music just a few years ago. Even with a bigger catalog of music and exclusive deals, Spotify still eclipses the market with about 50 million paying subscribers – almost twice as much as Apple Music’s 27 million paying subscribers. Spotify also offers its services for free, although it is ad-supported and does not allow for downloads.

If Apple can add about 7 million or 8 million more paying subscribers to Apple Music, they can earn back their $1 billion investment to TV programming in just three years, Daryanani said. He goes on to add that if Apple does manage to add that many subscribers, the gains for Apple’s shares could be extremely substantial given the growth in the music streaming business and the still-wide gap in subscribers between Apple and Spotify. “We think this itself provides Apple sufficient incentive to sustain the level of these investments,” Daryanani explained. “In addition, over the longer term, content investments open multiple possibilities including strengthening iTunes media sale/rental business, launching an Apple TV exclusive streaming service, leverage in negotiating with media companies, and driving M&A strategy.”

Given the recent downward slope in iPhone sales, Apple has been working to be less dependent on its hardware sales by planning to double its services business over the next four years. The $1 billion investment fits well into this goal, Daryanani noted.

So far this year, Apple’s stock has gone up by around 36%. This is pretty significant given the more than 8% gain the S&P 500 Index (INDEXCBOE:$.INX) saw, as well as the 10% gain the Dow Jones Industrial averages (INDEXDJX:$.DJI) in the year-to-date.

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