Editor’s Corner—Apple TV will die so TV+ can live

Once the Roku, Amazon and various smart TV deals are in place for the TV app, the Apple TV will essentially become an overpriced streaming box stripped of some of its exclusivity. (Apple)
Editors_Corner-MUNSON

Apple may have whiffed on its Apple TV+ announcement Monday by offering too few key details about the service. But the company did say that its TV app was coming to Roku and Fire TV devices, essentially sounding the death knell for Apple TV.

Apple had been telegraphing this move for months. At CES, the company announced that a version of iTunes was launching on Samsung smart TVs later this year and touted incoming AirPlay 2.0 support for smart TVs from Samsung, Sony, LG and Vizio. These moves, while not a complete distribution strategy by any means, signaled Apple’s willingness to break down its walled garden for the sake of getting its video service further out into the world.

Wide distribution is key if Apple wants to take on Netflixwhich is the notable holdout for Apple’s video aggregation scheme. As Strategy Analytics pointed out, Apple’s new TV app (arriving via update in May) is starting out with a huge built-in disadvantage, with only 175 million addressable TVs compared to more than 900 million for Netflix.

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Apple has plans to close the gap. The company is launching the TV app on Mac this fall; launching on smart TVs, starting with Samsung in spring followed by LG, Sony and Vizio; and on Roku and Amazon Fire TV devices “in the future.”

The Roku and Fire TV agreements were the announcements of the day, according to Alan Wolk, co-founder and lead analyst at consulting firm TV[R]EV. He pointed toward a tweet from Prashanth Pappu, founder of Vizbee, as a good summation of why those two deals are significant.

Wolk said that Apple used to be able to sit back, wait until an emerging product category became nascent, and then swoop in with a superior product and take over. But lately that strategy has failed, with Apple Music still dwarfed by Spotify and the pricey HomePod lagging behind Amazon and Google in the smart speaker market.

Apple TV is another example of the company’s hardware strategy falling flat. According to Parks Associates figures from the first quarter of 2018, Amazon and Roku combined control more than 50% of the streaming device market among U.S. broadband households. Apple has about 15% of the market. A big contributing factor to Roku and Google’s market dominance over Apple TV has to do with their $30 price points compared to Apple’s $180.

“There aren’t that many people going ‘I want to spend six times as much money,’” Wolk said.

Apple has been able to create perceived value because its products are so expensive. But Apple’s rigid adherence to premium pricing has come back to bite the company in the form of iPhone sales plateaus and sagging revenues for the company’s other devices.

“They’ve hit a point of diminishing returns,” Wolk said.

That hardware conundrum had sparked Apple’s renewed focus on growing its service revenues. The strategy appears to be paying off. In January, Apple said fiscal first-quarter services revenue reached an all-time high of $10.9 billion, up 19% over the previous year. That figure could keep climbing considering that, in addition to its video streaming service, Apple on Monday announced a subscription news and magazine service, a credit card and a streaming video game service.

The tradeoff for this services pipeline, at least in terms of video, appears to be the abandonment of the Apple TV. Once the Roku, Amazon and various smart TV deals are in place for the TV app, the Apple TV will essentially become an overpriced streaming box stripped of some of its exclusivity with Apple software and services like TV+.  

Wolk said that at that point, Apple can let the Apple TV slowly die off and stop pushing upgrades; or do a complete reboot and put out a less expensive version of the device, similar to what the company did with the iPod Nano.

“I would think the former is more likely,” Wolk said. — Ben | @fierce__video

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