Industry Voices—Wolk: How Apple is poised to regain momentum with TV

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Alan Wolk - Industry Voices - FierceCable


Apple has been under a lot of fire lately, as the company that could once do no wrong suddenly seems incapable of doing anything right.

The new iPhone X with its facial recognition technology is a bust. The HomePod smart speaker languishes in development as Amazon’s Echo and Google’s Home gain massive footholds. Spotify is making Apple Music irrelevant, especially among younger users where it has a 47% to 14% market share lead. And the hapless, overpriced Apple TV is limping along at the back of the streaming media pack, leagues behind market leader Roku and rivals Google Chromecast and Amazon Fire TV.

Which makes Apple’s approach to its nascent content division all the more curious.

This is one instance where Apple seems to have reverted to doing everything right again. To begin with, unlike its Silicon Valley rivals, Apple immediately understood that television was a very different beast than technology, which meant they needed to hire people who actually understood television, not technology.

Which they did—snagging Zach Van Amburg and Jamie Erlicht from Sony Pictures Television was a very smart move. Van Amburg and Erlicht understand what it takes to make a hit television show, the egos that need to be stroked, the various levels of talent that need to be hired, both at a series level and at a network/studio level.

Facebook and Google, on the other hand, have steered clear of these types of programming hires, much to their detriment. Industry scuttlebutt has it that Hollywood talent very much prefers to work with Apple because Van Amburg and Erlicht are regarded as known quantities who grew up inside the industry and have its best interests at heart, not outsiders with limited entertainment backgrounds looking to overturn the proverbial apple cart. 

So all good on that front, and Apple has allegedly given the original content team over $1 billion to work with. They’ve already put that to good use, signing up major talents like Steven Spielberg, Jennifer Aniston and Reese Witherspoon.

Still, one huge question remains: How exactly does Apple plan to distribute all their new programming? No one seems to know.

Apple doesn’t have a TV app. And while $1 billion is a whole lot of money, it’s not enough to launch a full on network with, especially when your competition is Netflix, Amazon and Hulu, all of whom have very deep selections of what’s known as “library content” (a.k.a. reruns) at their disposal.

Apple doesn’t have that option. As YouTube’s Red and Verizon’s Go90 found out, there’s not a whole lot of library content out there. Or, to be more accurate, not a whole lot of library content that anyone really wants to watch. All 437 seasons of The Simpsons, Family Guy, Law and Order, Grey’s Anatomy and other recent hits have already been spoken for. Ditto '90s hits like Seinfeld and Friends.

Apple’s options

Apple could release its programming through Apple Music, which is already a subscription service and could certainly use some help in battling Spotify. That’s not an ideal solution, however, as it doesn’t solve the “there’s not a whole lot of content on here” problem and would likely result in high levels of churn as viewers signed up to watch a single show or two, only to revert to Spotify once they were done.

iTunes is another option, but it’s not set up as a subscription service, which means there won’t be recurring revenue. Apple could, of course, fix that, but iTunes has numerous other problems and it too would have the “okay, now what?” issue once viewers finished bingeing on a series or two. (iTunes has a sizable amount of library content, but it’s only available on a transactional basis—users can rent single episodes or entire seasons, which makes frequent viewing extremely cost prohibitive.)

The free option

While Apple could always use its $250 billion cash reserve to buy a Comcast or Verizon, there is a much cheaper option: launch an app that lives across every one of their devices and give the shows away for free.

Call it a billion-dollar marketing campaign that works across iPhone, iPad, Apple TV, MacBook and iMac—one that could conceivably be recouped in a few years via syndication and overseas rights deals.

The original programming would give Apple products a huge (and much-needed) feature advantage over their competitors, while restoring both their cool factor and their premium status, renewed justification for the higher prices Apple charges for their products.

Success would rest largely on whether the shows turn out to be buzzworthy, the sorts of shows that would actually lead people to choose an iPhone over a Samsung. That’s the toughest part of the equation, but, as noted earlier, Apple’s made all the right moves to make sure that happens.

Giving their programming away for free makes sense for other reasons too: consumers don’t have unlimited budgets for TV, and Apple’s $1 billion ante is nothing compared to the $8 billion, $4.5 billion, $2.5 billion and $2 billion that Netflix, Amazon, Hulu and HBO are, respectively, alleged to be spending on original content.

In addition to the massive amount of free publicity Apple would get from this move (and the amount would truly be massive), they'd also get something of even greater value: data.

By distributing the programming to billions of people worldwide (or even just to hundreds of millions in the U.S.) Apple gets to track viewing behaviors and use that information to (a) obtain new customers and retain existing ones, (b) drive tune-in, (c) make better viewing recommendations and (d) make better programming decisions.

While Apple has been adamant about safeguarding user privacy, data that lets them know which shows are popular with younger iPad users so as to recommend those shows to those users does not seem to be at odds with Apple’s privacy standards—it’s not as if they’re providing that data to advertisers or anyone outside the Apple ecosystem, which is where consumer privacy concerns arise.

Free TV can easily be a long-term play for Apple too, the feature that sets their ecosystem apart from all other ecosystems. That means continuing to spend billions on original series, so that the offering becomes even more impressive.

Apple can also, if so inclined, look at providing some version of the app to non-Apple users for a fee. So that Android users would pay $10 or $15 a month for something Apple users get for free.Making the shows available to everyone would also be a way to cut down on the inevitable piracy issues.

With $250 billion in cash reserves, Apple can do pretty much anything it wants to in terms of television. After years of sitting on the sidelines, giving away their programming for free would be the sort of bold, in your face move that Apple has been known for, proving that the company can still “think different” and all that.

Alan Wolk is co-founder and lead analyst at the consulting firm TV[R]EV. He is the author of the best-selling industry primer, Over The Top: How The Internet Is (Slowly But Surely) Changing The Television Industry. Wolk frequently speaks about changes in the television industry, both at conferences and to anyone who’ll listen.