44 Comments

Summary:

Make no mistake, Apple is in the process of staging a coup. That’s what a very close look at the new Apple TV reveals. Despite its somewhat innocuous appearance and diminutive stature, it’s a weapon of war. The opponent? The entrenched cable and satellite service providers.

airplay_appletv

Make no mistake: Apple is in the process of staging a coup. That’s what a very close look at the new Apple TV reveals. Despite its somewhat innocuous appearance and diminutive stature, it’s a weapon of war. The opponent? The entrenched cable and satellite TV service providers.

That’s not the surprise, though. Even just by introducing video purchases and rentals in iTunes, Apple was ostensibly taking aim at traditional means of TV distribution, so they’ve been contending with cable and satellite for quite a while now. The difference now is that the Apple TV could be the weapon that sways the balance overwhelmingly toward Apple’s side, guaranteeing the company victory.

Now, I don’t own one of the new Apple TVs. In fact, I went to great lengths to describe the reasons why I probably never would. But that was before a couple of things came to light:

  1. The Apple TV shows signs of supporting apps
  2. The extent to which AirPlay would be supported across apps became apparent

Alone, either of those would be enough to have Time Warner Cable, et. al. shaking in their boots. Taken together, it amounts to advance warning of an imminent invasion, which is why the aforementioned Time Warner is being coy about 99-cent rentals. Grasping the outstretched hand of your obvious successor isn’t really an easy thing to do, especially when doing so would speed along your demise.

But 99-cent rentals aren’t the real beachhead. They’re a gamble for more interim revenue, and possibly even an olive branch, but it’s not something Apple’s banking on in the long-term, because they have a means of cutting out the networks and cable providers altogether if they won’t play nice. That means is AirPlay, and to a lesser extent, apps.

AirPlay will allow anyone to play whatever content they can view on their iOS device on their Apple TV. Where that once still represented a relatively limited content pool, Apple’s recent relaxation of App Store restrictions has allowed apps like CineXPlayer and VLC onto the iPad, which means playback of more video formats is here and set to improve in the future. While Cupertino would probably rather you still get your media the legit way from its iTunes store, it’s becoming more apparent that if it means selling more hardware, the company is willing to look the other way regarding how users acquire what they watch, especially if it can’t strong-arm TV and movie content providers into playing by its rules.

By avoiding having actual apps on the Apple TV initially, Cupertino is hoping to have its cake and eat it too. AirPlay allows them to access the media content of any app, in theory, which also has the advantage of encouraging iOS device sales. At the same time, it keeps the Apple TV platform relatively closed, something which should appease the content providers and avoid direct conflict for the time being. Now, if providers pull out in protest of Apple’s growing dominance over distribution, it has AirPlay and a more format-friendly iOS in its pocket to force them to make nice, lest iOS users turn to less legitimate sources for their content.

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  1. The networks and the content providers (cable specifically) need some fresh competition. The cable pricing model and forcing channels onto everyone’s monthly bill is patently unfair. I understand that production is expensive, but just because you have an idea called the “Bowling Ball Channel” doesn’t mean that I should have to pay for it along with the other channels I do watch.

    Cable used to be advertisement free (yes, a long time ago). They quickly realized that was dumb, and moved to the same model as broadcast.

    Paying for what we use is a fairer system. I love the fact that I can pay for only those songs I care to listen to rather than shelling out $16 for 16 songs, only one or two of which I like.

    The world is changing. Apple is bold to make the change. Others can complain, but change is inevitable in the digital world. Network execs need to look at this from somewhere other than their 2.5 hour lunch at their favorite trendy restaurant (for once).

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  2. This is all well and good, but until you can watch the latest episode of network TV shows AT THE SAME TIME IT AIRS ON CABLE, it’s simply never going to take off.

    The average user doesn’t want to wait an entire season to watch the episode of House or the Monday Night Football game that cable users watched last night on TV.

    Until that time, Hulu, Apple TV, Google TV and all the rest are just a geek toy.

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    1. Really Great write up here.
      Darrell, unlike most of the regurgitated information masked as articles dominating the the web these days, this is a sincerely refreshing article with thought and originality, nice work.

      James, I disagree to a point. The concept you speak of is quite ingrained in the psyche of tv watchers everywhere, ie instant gratification, yet that is changing with the entire “time-shifting” technology that has been around a while. Viewers are becoming more forgiving with “time-shifting” there viewing habits with most content. Yet this only applies to movies and TV shows. Sports, cable news and premiers will always give Kabletown the advantage of a “live” feed viewership. But the writing is on the wall. A-la-carte creep is occurring and it is offered, not by Kabletown, but by Google, Apple, Netflix, Hulu, BBC to name a few (and most are next day). Air-share will be a “wow” factor that could make this more mainstream. And with the addition of Apps (i.e. more content, HBO anyone?) and the possibility of casual gaming, cable and verizon will become the dumb pipe they were always meant to be. Middle man out! Fu-geti-bout-it.

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      1. Apple needs to buy some programming or develop some in order to jumpstart an openness in the set top box market.

        NFL rights, HBO, ……, in-house exclusive shows, etc.

        AMC is showing the industry how to develop high quality shows on lower budgets.

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  3. Darrell, what I find amazing is that on top of what you’re suggesting, consider AirPlay + Game Center and all of the games that are being upgraded to take advantage of the retina display on the iPhone.

    With AirPlay, our iPhone has basically turned into a six-axis touchscreen motion-sensing joypad with internet and near-field multiplayer functionality that streams HD game output to your TV via the AppleTV!

    Processor load too high on the iPhones to take care of all that? Nevermind…offload the video and rendering component to a free companion app on the AppleTV.

    The console market is about to get a shake up too, big time. Apple is putting us back in front of the TV with a brand new paradigm that could never have been predicted.

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    1. What’s the new paradigm? A set-top box with controllers?

      Such synchronicity is a nice value-add for existing customers, but the “shake up” you’re describing requires the purchase of at least two devices, where a new controller for this “console” is $200.

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      1. A set-top box with dynamic multi-touch controllers and where one of the devices is an iPod or iPhone that people would already have.

        What’s the problem with a controller that cost $200 when you consider all the other stuff it can do.

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  4. AppleTV is only a threat IF they secure the broadcast rights to the NFL and/or the NBA. Those are the key to the switch-over to online TV replacing broadcast and cable TV. That will drive the viewers to online TV.

    And GoogleTV could do the above just as well and has even deeper pockets to do it.

    The above is what NewTeeVee should keep an eye on. NewTeeVee reporters should be asking AppleTV and GoogleTV when they will make a bid for the NFL and/or the NBA. If either or both give a possible date (no matter how far out), that will sign the end of broadcast and cable TV.

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  5. Right, like Google was going to fight for net neutrality. I don’t see it. The cable companies are too entrenched and people are too dependent on their exclusive content to give that all up. People are going to play Angry Birds on their HDTV instead of watching the latest episode of “Mad Men?” I don’t think so.

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  6. That’s great until you want to watch a sports event. The NFL (let’s face it, this is the big one) has an exclusive deal with DirecTV that will outlast almost all past/present Apple hardware.

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    1. Excellent + correct.

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      1. DirecTv’s deal with the NFL expires after the 2011 season. All apple has to do is ante’s up some of it’s $40 Billion + on hand cash to outbid directTV for the rights to stream rather than broadcast NFL…..and they can do the same with NBA, MLB, the NCAA and whoever else they want to

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    2. gvslim – Very interesting idea. That would certainly upset the apple cart ;-)

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      1. gvslim is also incorrect. The DirecTV deal runs through 2014.

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  7. “The networks and the content providers (cable specifically) need some fresh competition.”

    Actually, one thing that is kind of sad is that back in 1970s and 1980s, the FCC regulated the broadcast networks such that they could not own or be financially involved with the studios that produced programming. Some of you remember the syndication market in the 1980s where stations would buy programming–this is where “Star Trek: The Next Generation” got it’s start. Paramount sold it directly to stations.

    In the 1990s, you got quite a bit of consolidation. Part of the reason for this, of course, was Cable TV’s effect on the Big Three networks. Because ABC, CBS, and NBC did not produce their own programming (they weren’t allowed to), they made all of their money from advertising. It was the studios that made money on the programs–first run from the networks and, after that, from syndication. As viewership shrank at the Big Three due to Cable TV, they weren’t making as much money. So in the mid-90s, the government dropped the rule that networks couldn’t produce their own programs. The networks were promptly swallowed up by the studios. Now the studios controlled both the production and distribution of programming. To me, this is where our problem lies.

    Studios create programming for their own distribution system. Yes, they’ll try to sell it to other ones, but the vast majority of programming you see on network television is owned by the studio that owns the network. Look at ABC–most of the programming is owned either partially or wholly by Disney. Same with NBC and Universal, FOX and 20th Century Fox, and CBS and Paramount. The problem is that they have a big financial incentive to feed their own distribution system because their distribution system costs them money.

    The solution? Cut those ties like they used to be. Studios produce programming but are not allowed to own the distribution method. Which means studios will be willing to sign deals to get that programming out in whatever way will make them the most money. At that point, we’ll see if 69 cents per view without commercials makes the content creators more than what they would get from a network which includes commercials.

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  8. My digital cable subscription, with DVR, is a little over $65/month, with no premium channels. That’s a little over $2/day for as many shows as we can watch or record. My household watches more than 3 shows a day – meaning Apple’s $0.99 “rentals” would be MORE EXPENSIVE than cable!

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    1. Excellent point. My guess is many folks are considering a new generation of media consumer who consider YouTube a primary place to watch video. So the “video” part of the cable bill – no matter how affordable or not – seems unnecessary. What that will do to the Mad Men, Rescue Me, It’s Always Sunny in Philadelphia, et al, in the long run is undetermined.

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      1. For people who only watch a little television but still subscribe to cable, Apple TV may end costing less or close to the same while also getting to watch content when they want and w/o commercials. These are also Apple’s best customers – they are doing something with their time and it probably includes things like listening to music, surfing the net, Youtube, video games, etc.

        These folks also match the demographics most desired by advertisers. What happens to cable when this small but very desirable group leave? The thing is, people who watch the most tv are actually the least desirable to advertisers. Instead of being out and spending money, they remain at home on the couch. Typical Apple – target the most profitable segment of the market.

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    2. Doug petrosky Friday, October 1, 2010

      Well no $#!^ it would be more expensive than cable, because cable is paid for by ad’s!!!!! People don’t seem to understand this. Today you pay for your TV twice. Once by watching the Ad’s and once for the delivery to your house.

      I ended my subscription to TV almost 2 years ago and have purchased all TV through iTunes. My monthly bill for a single HD DVR with no premium channels via DirectTV was $85/month. My family watches 25 new season shows per year with each having upto 25 episodes. That is 625 shows at $1.99/episode or $1250/year and I own the shows. Or I could have spent $1020 on directTV and still had to watch commercials (even fast forwarding you still watch them). Not to mention all the banners, logos and other garbage the networks always popup over top of what I’m watching. What is even better is most of those shows are closer to $35/season and you can purchase iTunes gift cards at about a 10% discount. So do the math and you are looking at $875 less 10% or about $800 (note this is for SD not HD). I have 1.5TB of re-runs I can watch on any TV with an Apple TV, any computer (up to 5) on my network and any iPhone, iPod or iPad connected to any of those computers. COMMERCIAL FREE!!

      The networks are correct $.99 does not make sense to rent their content, it is way to freaking expensive at that price.

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    3. We’ve seen this argument before, and the resulting outcome, with the major recorded music labels clinging to their old ways. They refused to un-bundle content, even when it became apparent that mass-market distribution thinking was alienating the key influencers.

      Fast-forward to today: with the support of content producers the traditional pay-TV industry have resisted a-la-carte channel selection — forcing all subscribers to subsidize over-priced channels, like ESPN in the U.S. market.

      That said, some video content producers (include Hollywood studios) are no longer willing to sustain the myopic one-size-fit-all legacy business model, at all costs. Granted, some will choose to hold-out to the very end, and lose market share in the process.

      That said, industry analysts are already telling those that hold the securities of big-media companies to unload any stock that is led by a company who has a CEO that’s trapped by denial that a market segmentation and multi-thread distribution strategy is now essential.

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  9. I must say that when you run plex media center on a new Mac mini you’ll get a pretty awesome system, adding to that you’ll can the stream all your movies from your plex media server to your plex iPad app It works GREAT !. So why do we need Apple Tv ? Everything you need is already here today ! Mac mini is also a really good computer.

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  10. I think Apple TV, and all the other media streaming devices for that matter, play perfectly into the strategy of the legacy cable/satellite providers, especially now that the content providers are becoming the content producers (e.g. Comcast-NBC).

    All they have to do is withhold content, forcing these devices to remain entrenched in the realm of the hobbyest, while companies like Apple, Google, and Boxee hash out all the technical details of what consumers want in a media streamer and for what they’re willing to pay.

    Then, the cable companies can offer consumers their own streaming solution flush with content in some kind of bundled package used to retain customers.

    Unless the content available to today’s generation of media streamers quickly approaches the level of content available from cable/satellite companies, they don’t have much chance of mainstream success.

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  11. “AirPlay will allow anyone to play whatever content they can view on their iOS device on their Apple TV.”

    The addition of the netflix app to the iPhone made your premise much more sustainable but I think one more problem with iOS had to be resolved before it becomes a cable TV beater. Right now, iOS users of the iphone, et alia cannot view flash video clips. That means you cannot watch such things as John Stewart’s The Daily Show replays. When Apple adds flash capability to the iOS, then I think cable companies are in serious trouble. If I can watch replays of my favorite shows and tons of movies through netflix with Apple TV for free (or some for $1 a pop), then I’m much more likely to ditch cable. The one thing I personally would miss is ESPN and my local cable sports channel. But given how big my cable bill is, maybe I could live without these as well.

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    1. Apple had two main reasons not to use Flash
      2) Buggy (according to them at the time)
      1) Chews up battery

      Item 2 is simply a matter of more time in QA before release.
      Item 1 is irrelevant if ATV does the Flash work!

      Welcome Back Kotter and Welcome Back Flash!

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    2. medlaw:

      Think…HTML5. It is where Google, Apple, and even Microsoft see the future of video play. Flash is not the linchpin that many seem to think. In fact, Flash has been an itch that developed a scratch long before Apple came out with their devices that don’t play Flash – plug-ins to block Flash on browsers.

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  12. This could be an opportunity for media conglomerates. You know that (growing) niche segment of the market that has dropped their cable subscriptions? This is the way to bring them back into the fold, or at least make some $ off of them. Some people want the buffet, others want a la carte. Now is the time to take advantage of the plummeting costs of media distribution and offer both.

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  13. Let the studios sell direct to the viewer, let the viewer choose what and when to watch without commercial interruptions, let the telecoms sell bandwidth and let the networks pound sand.

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  14. No one seems to take into consideration that both iTunes and the AppStore have open the market to small independent content creators.
    We now have an outlet for new creative works which might have difficulty finding a slot on Network TV.
    What would be the chances of survival of a Sci_fi show if it only had to worry about getting enough people to pay for the season (up-front) from all markets around the planet?
    The beauty of the internet is the ability to form aggregates of audiences regardless of national borders.
    The rest becomes a matter of private investors joining up with talented content creators to find that next Lost or Heroes. Las Vegas Casino meets Hollywood Studio.

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  15. “Apple ain’t no ticking time bomb for no cable or satellite provider, is this guy DRUNK?

    Comcast, the U.S. largest ISP, just bought NBC for crying out loud.

    The cable and satellitte providers are rolling in the cash because they own the transmission lines bubba. Video, voice, internet, they got it!

    Apple, Netflix or anyone else can get their content throttled to a near standstill by these internet providers. So then they get slapped back to the phone lines and near snail mail speed DSL? QWACK!!!

    Heck Netflix is already being throttled on Comcast’s highest speed as it is!

    This article is your typical Apple fluff piece, lacking on facts and being totally unrealistic to say the least.

    Posted from my MBP, the Linux netbook I dearly love is busy downloading a ISO.”
    Bizzarro

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  16. Apple TV is closed, proprietary, walled garden approach to IPTV.

    Google TV and Android based set-top-boxes are open boxes and open always wins. Open means more features and cheaper prices.

    Google TV will even support BitTorrent and live p2p streaming apps, easy one-click install, so everyone can if they want just type in the name of any movie or TV show and directly download any video contents FOR FREE. Even live p2p streaming can happen at same quality as anyone has in upload speed on their home Internet connection. Nobody can stop this from happening. Not Google, not manufacturers and especially not the copyright holders.

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    1. “…open always wins.”

      You mean the way open won the iPod wars? Or the way Microsoft – with a decade head start – won the mobile phone and tablet wars? Or the way open destroyed that “closed, proprietary, walled garden” approach of Apple by transforming them from one of the weakest companies in tech to the strongest tech company in the world? Is that the open you’re talking about?

      OK, now that we’ve done away with the meaningless mantras, let’s turn to the rest of your argument. “Open means more features and cheaper prices.” Apparently you haven’t been paying attention. People don’t want features, they want benefits. And they don’t want cheap, they want value.

      I take no position with regard to Google TV because I do not yet know enough about it. But until you recognize that open and closed are merely strategies, and until you recognize the advantages of benefits over features and value over price, there is really no point talking to you. No point at all.

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      1. Thank you, FalKirk, for handling that for me. Charbax seems to be the typical get everything for free or steal it type of teen (mentally if not physically).

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      2. Open always wins in the end. If closed proprietary platforms try to control things for a while and pump people’s money while doing it, they can. But with a more and more connected world, closed platforms have smaller and smaller opportunity to have their influence.

        Apple may be second biggest company valuation in the world, but they base that on getting more than 70% of their revenues and profits from the closed walled garden that is iOS devices. iOS is obviously being destroyed by Android faster than Steve Jobs can say “ups”.

        More features also means better features become available. Out of competition among features, the better features come to the front. Apple’s controlled features only works to bring forward proprietary features, but those only have a limited reach and consumers will simply not accept it anymore.

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  17. Lest we not forget in this discussion, Steve Jobs is the major Disney shareholder. That’s not insignificant clout.

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  18. I like the idea of AirPlay.

    The iPAD, iPhone or iPOD Touch in a sense becomes your remote control; but instead of just scrolling & picking channels or adjusting volumes, you can actually the select content you want streamed to your HD TV.

    You really wouldn’t need apps. The apps will reside on your iPAD, iPOD Touch or iPhone.

    For example, you could launch Pandora, tell the device to stream the music and you’re listening to your favorite songs category on your stereo system.

    You could launch a game and use the device as a controller while you see the game on your TV full size! Interesting???

    This in turn could, the keyword is could, spark a new wave of content providers that specifically tailor their content to be streamed from the aforementioned devices.

    Especially games.

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  19. Looks like the campaign push for H.264 will also help this Airplay feature.

    still the internets is getting ahead of itself. I doubt your’e going to watching video on your TV via airplay if the content provider doesn’t want you to.

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  20. Arnold Waldstein Saturday, October 2, 2010

    Great post…

    I intuitively feel that Apple is the one to break open the gulf between the couch and the big screen TV because they understand the mass market consumer and that is the first key to get this revolution started.

    Your thinking on AirPlay stimulated some more thinking.

    My quick thoughts on this @ http://bit.ly/9JysME

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  21. You guys watch a lot of TV in the US. Don’t you ever do anything else with your sparetime?

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  22. Why would any over-the-top service be a ticking time bomb for Big Cable? Big Cable provides the broadband on which over-the-top services depend. To the extent Big Cable begins to lose video customers to Apple, Netflix or Hulu, won’t they just begin charging more for high-speeed data?

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    1. Thank you, Positive Sum. Some sanity in an insane world. I think that the author completely missed the point here.

      In order to consider a device’s success, you need to consider what it depends on.

      All the cable companies will do is raise your Internet bill and lower your TV bill. They can do that however much they want. You can have an Apple TV, a Subaru TV, a Maytag TV, it doesn’t matter. Whoever owns the pipe collects the toll.

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  23. The nerdy nurse Monday, October 4, 2010

    I am so excited about airplay and a very really opportunity to ditch traditional cable in the near future!

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  24. I have a question for everyone: Do you still watch any over-the-air broadcast TV from local stations in your area? Why and how much? Or, why not and why don’t you any more? Beyond the fact that you can still watch the “Big 4″ network shows over-the-air for free (albeit, with commercials), you also get a variety of local programs including news, entertainment and live sports. (The amount and quality of which, granted, depends largely on the market where you live.)
    Here’s another question: in times of emergency, how will you get up-to-the-minute, locally-focused notification if you’re watching so-called IPTV streaming from the Internet? (If there’s a big storm, will you even HAVE a clean connection to the Internet, let alone electricity?)
    It appears we all hate “Big Cable” to various degrees, even as we must acknowledge, as several have here, that they own the pipelines that will deliver these killer-app TV streams… if they don’t throttle them down, first. But cable serves rural areas very well when it is hard to receive over-the-air signals out in the hinterlands. And what about those niche cable channels that you don’t watch much, but do have a show you like to watch now and then? What about HGTV and FoodTV and Animal Planet and SciFi, even Bravo and Biography? Will they be streaming shows, too?
    I’m not a fan of cable. Nor do I think streaming TV is the panacea so many seem to think it is. And broadcast TV has its own issues… dwindling revenues may kill off many local stations in the next decade, maybe only 5 years, as just one example. Not to mention that no one seems to acknowledge that there’s a huge majority of viewers out there that can only afford just one TV delivery method at once… and new streaming technology simply isn’t ready for their prime time.
    I’m trying to play devil’s advocate, here: Dream and/or argue as you will for your favorite Next Big Thing in TV Viewing. I’ll even join with you– I hope to get a new Apple TV for Christmas! But let us all remember that the early adaptors still don’t run the show, they only seek to guide it. And we may see yet a few more delivery channels emerge (and some die off, too) before everyone can afford to jump into this pool. ;-)

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  25. One thing that some people do not seem to understand is that comparing pricing for cable/satellite vs. appleTV doesn’t really fly.
    Come on folks, you have to pay me at least 20 bucks to watch a 2 hour movie on cable because I have to sit there another hour watching stupid ads. Besides, has nobody noticed what it does to people’s brains. It amazes me how much the american consumer is willing to swallow if he can save a dollar or two …. mind blowing …. and it is true, that the american consumer pays at least 3 times: 1. monthly service fee, 2. watching stupid ads, 3. and dealing with the aftermath of all that chaos and time loss. Now put a price tag on the package … meaning they would actually have to pay me!

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    1. Yes, but that’s what DVRs are for.

      Actually surprised more hasn’t been done by advertisers and content providers to combat the DVR.

      Is the general public still that clueless about them or does most of the general population still watch shows “live.”

      I definitely agree that it is impossible to watch a 2 hr movie on cable because it turns into 3 hours.

      It’s really the same with sporting events. Cut out commercials and halftime and a football game is under 2 hrs instead of 3. Cut out the down time between plays and you can watch a football game in under 45 minutes.

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