Apple's future TV network
Tags: Marketing, Apple, iPod, Video iPod, Apple Movies, Apple TV, Consumer Electronics, HDTV, Steve Jobs, Front Row
One of the questions I've heard about my prediction of the Apple all-in-one HDTV system yesterday is "How do you watch TV on it? It has no TV tuner!" I've also seen some commentary claiming that Apple's iMac is "Microsoft Media Center Lite" without live TV or personal video recorder capabilities, and therefore has no chance of succeeding in the market.
Well, Apple could add a TV tuner to an all-in-one system (although the majority of people watch live HDTV through a cable box or satellite controller, neither of which use a TV tuner). But let's assume they don't. How would anyone watch TV on such a system, especially one that might only offer a broadband Internet connection? Isn't that a complete loser?
The first answer is to remember that Apple could use Quicktime streaming to deliver traditional channels of TV over a broadband connection. That doesn't seem terribly interesting from a business model point of view, but would work nicely with a Verizon- or SBC-like carrier with an IPTV strategy.
More intriguing, though, is to return to a post I made a few days ago pointing to an article in ManagementChannel.de. That article had a wonderful 2x2 strategy matrix describing different business model strategies for Apple's video distribution business. Apple chose the "iTunes Music Store" model that allows customers to buy video and TV a la carte. What I think might be more instructive is to consider the box right above that: the book club model, where the customer pays a subscription fee and yet still owns the resulting content.
Imagine that the Apple TV network is simply digital NetFlix using the iTunes Music Store for distribution without any need for shipping DVDs back and forth. Customers would pay a fixed subscription fee to own a number of TV shows and movies -- say 20 -- a month. When they decide they are done with them, the consumer deletes one, and that allows them to download another show. Consumers can retain a show indefinitely, but it always occupies a slot in their subscription if they do that. Consumers who end up watching the first season of "Lost" over and over might decide to buy a copy independent of their subscription, but there is no requirement for them to do that.
So what does watching the Apple TV network feel like? It feels like having a TV channel that only has your favorite shows and movies on it, and plays those shows whenever you want. One subscriber might have their subscription tailored for "Desperate Housewives", "Dancing With The Stars", and "The Apprentice". Another might focus their subscription around classic movies like "Casablanca" and "North by Northwest". Think of the these channels like podcast subscriptions that update automatically and which can be changed at will, all for a fixed price per month. And delivering this experience only requires adding this NetFlix-like subscription system to the iTunes Music Store -- and you can bet that much of the mechanism is already there to deal with for-pay podcasts.
There is one exception in this model that requires something different: sports. Much of the value of sports is seeing events at the same time everyone else is seeing it, not a day later. This is where Quicktime streaming rides to the rescue and allows viewers to see the big game in real time as part of the subscription service or as pay per view.
Do I think this will happen? Not right away. Just getting most of the major TV networks and shows to distribute their content through the iTunes Video Store will be a major negotiating job for the next year or so. The Motley Fool has a pretty convincing business case for why the show creators would want to do this. But once we have a critical mass of TV shows on the iTunes Video Store, the Apple TV network will be possible. The big question is whether consumers want to rent or buy their TV content. We believe that most consumers prefer to own their music, but for the majority of watch-once TV content, renting is better than buying -- and it only makes Apple's position in the market stronger.
One of the questions I've heard about my prediction of the Apple all-in-one HDTV system yesterday is "How do you watch TV on it? It has no TV tuner!" I've also seen some commentary claiming that Apple's iMac is "Microsoft Media Center Lite" without live TV or personal video recorder capabilities, and therefore has no chance of succeeding in the market.
Well, Apple could add a TV tuner to an all-in-one system (although the majority of people watch live HDTV through a cable box or satellite controller, neither of which use a TV tuner). But let's assume they don't. How would anyone watch TV on such a system, especially one that might only offer a broadband Internet connection? Isn't that a complete loser?
The first answer is to remember that Apple could use Quicktime streaming to deliver traditional channels of TV over a broadband connection. That doesn't seem terribly interesting from a business model point of view, but would work nicely with a Verizon- or SBC-like carrier with an IPTV strategy.
More intriguing, though, is to return to a post I made a few days ago pointing to an article in ManagementChannel.de. That article had a wonderful 2x2 strategy matrix describing different business model strategies for Apple's video distribution business. Apple chose the "iTunes Music Store" model that allows customers to buy video and TV a la carte. What I think might be more instructive is to consider the box right above that: the book club model, where the customer pays a subscription fee and yet still owns the resulting content.
Imagine that the Apple TV network is simply digital NetFlix using the iTunes Music Store for distribution without any need for shipping DVDs back and forth. Customers would pay a fixed subscription fee to own a number of TV shows and movies -- say 20 -- a month. When they decide they are done with them, the consumer deletes one, and that allows them to download another show. Consumers can retain a show indefinitely, but it always occupies a slot in their subscription if they do that. Consumers who end up watching the first season of "Lost" over and over might decide to buy a copy independent of their subscription, but there is no requirement for them to do that.
So what does watching the Apple TV network feel like? It feels like having a TV channel that only has your favorite shows and movies on it, and plays those shows whenever you want. One subscriber might have their subscription tailored for "Desperate Housewives", "Dancing With The Stars", and "The Apprentice". Another might focus their subscription around classic movies like "Casablanca" and "North by Northwest". Think of the these channels like podcast subscriptions that update automatically and which can be changed at will, all for a fixed price per month. And delivering this experience only requires adding this NetFlix-like subscription system to the iTunes Music Store -- and you can bet that much of the mechanism is already there to deal with for-pay podcasts.
There is one exception in this model that requires something different: sports. Much of the value of sports is seeing events at the same time everyone else is seeing it, not a day later. This is where Quicktime streaming rides to the rescue and allows viewers to see the big game in real time as part of the subscription service or as pay per view.
Do I think this will happen? Not right away. Just getting most of the major TV networks and shows to distribute their content through the iTunes Video Store will be a major negotiating job for the next year or so. The Motley Fool has a pretty convincing business case for why the show creators would want to do this. But once we have a critical mass of TV shows on the iTunes Video Store, the Apple TV network will be possible. The big question is whether consumers want to rent or buy their TV content. We believe that most consumers prefer to own their music, but for the majority of watch-once TV content, renting is better than buying -- and it only makes Apple's position in the market stronger.
posted by Carl Howe at
8:03 AM
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