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Apple’s agnostic approach to TV: better than Google’s but not a win for viewers

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The TV industry is in a strange holding pattern. Its longtime business model — which involves force-feeding expensive bundles of unwanted channels to subscribers — is unpopular and outdated, but no one has been able to disrupt it due to industry incumbents’ death grip on prize content.

The best hope for a shake-up comes from rich tech giants Apple (S AAPL) and Google, (S GOOG) which have been nibbling for years at the edges of the so-called “TV Industrial complex” but still haven’t made a big bet. The reason they’re holding back has nothing to do with tech and everything to do with content: the rights to popular programming like the NFL or Game of Thrones are wildly expensive to license, and any disruptor will need to buy a lot of it to truly compete with the cable and satellite guys.

The two tech companies have adopted different strategies to solve the content dilemma and, for now, it appears Apple has the better one. As Brian Stelter explained this week, Apple is providing access to more and more content from across the TV industry (ESPN, HBO, Sky News and so on) by means of its $99 Apple TV box. Google, meanwhile, is contemplating a cable service of its own but is having a hard time finding major content partners to play with it. The search giant is also still dabbling with Google TV, a would-be Apple TV rival, but the product (made by multiple manufactures) is just a wee fraction of the market.

There is a huge catch, of course, with the Apple option: viewers still require that “pesky cable subscription” to get a lot of the goodies, raising the question of whether Apple can be more than a handmaiden for the existing lords of TV. Skeptics, for instance, point to Apple’s impending deal(s TWC) with Time Warner Cable as evidence that nothing is really changing.

Taking a longer view, though, Apple appears to have set the foundation to become a TV powerhouse in its own right. The company will be in a position leverage its web of partnerships to gain control of more content — a task that will be easier if the company goes ahead with proposed gimmicks like paying networks cash if people skip their ads. And, in the short term, Apple can keep adding high value content — including, as Peter Kafka points out, even NFL games.

In the meantime, Apple is doing a good job of spreading to more corners of more living rooms: the company now accounts for 56% of streaming boxes in America. This number, combined with its access to more and more shows, means Apple’s long-awaited arrival as a major player in TV could come take place almost by stealth.

As for Google, the company risks being left in the cold when it comes to the TV landscape. Its cable network is an uncertain proposition and will take a long time to emerge, and its device presence is a shadow compared to Apple. In the long run, these factors could mean any major move by Google could come too late — especially if other would-be disruptors like Intel (s intc)and Aereo can make a name for themselves first.

The bottom line is that Google and Apple are both competing to buy licenses for content to put on their respective versions of internet-based pay TV. But Apple is poised for the win because because its devices are already everywhere and because, unlike Google, it has chummy relations with networks and existing distributors — meaning it has its fingers in more pies and will have a much easier time getting critical content deals.

As for consumers vexed by cable bills that can easily go north of $100, the emergence of Apple as an alternative could well bring a better viewing experience but, given the likely array of partners to be paid, little relief on costs.  In other words, Apple as the new TV boss would, in many ways, be same as the old TV boss.

21 Responses to “Apple’s agnostic approach to TV: better than Google’s but not a win for viewers”

  1. PhiloFarnsworth

    “more than a handmaiden for the existing lords of TV”?

    Hey, I have an idea… Let’s make iPhone & iPad free, and then Time-Warner, Disney, NBC, CBS, Viacom etc could have a new free network & screens to charge customers a discounted TV service. With the cost of the receiving equipment and broadband free it would be a total re-invention of TV – This would be a great crowd pleaser… right? A new economy of scale would surely make the programs cheaper.

    Why is nobody writing the articles from this point of view?

    Conclusion: The Steve Jobs notion that they were about to crack the TV Holy Grail was simply folklore like Pall Bunion and Jack and the Beanstalk.

    All of you internet-freeloaders who are dreaming about cracking the TV empire are really just idiots. It isn’t gonna happen.

  2. Apple is an international company with more revenue outside of the US than in the US. TV solutions that only create access for content / revenue are not in Apple’s interest – even short term. They must approach this like they did music with global licensing.

  3. Jim8151

    I still don’t think Apple has shown its hand completely, but the clues are there for massive disruption. To the person who said that cable is popular and people have voted with their wallets, where’s your imagination? No one likes to pay for shows they don’t watch, but cable has been the only game in town for so long, we grin and bear it.

    If someone-Apple or anyone-could provide a massively better experience, on-demand everything, all the time, people would leave cable in droves. The cable companies know this and are terrified, but the smart ones are looking for alternatives.

    Time Warner on Apple TV is a small, tentative step. ESPN and HBOGO are other puzzle pieces moving into place. Even though I still pay for cable, I’m finding myself switching to Apple TV more and more. I browse to the ESPN app to find the latest on a game result or other story.

    I use a TiVo DVR to record cable shows, but what if I didn’t have to worry about setting up recordings, I could go just watch what I want when I want? There is a ton of room for improvement in today’s TV-watching experience, and I for one am looking forward to it.

  4. I hate when people sit back wondering when Apple will disrupt TV and moan about how they want ala-cart access and the end of bundling…….HELLO!!!!! It already happened 4 years ago. Most people are just too comfortable with the devil they know to make the move.

    I cut the cord over 3 years ago and I’m not looking back! I know, I know the cost looks just way too expensive and for a family of 5 it might be if you don’t get creative but that is because you just believe that your cableTV bill is a given and adding to it seems expensive. Stop thinking that way and assume you end cable. For me 3 years ago that was getting rid of DirecTV with a single HDDVR at a cost of $85/month. If you do the math, that is $1020/year to spend on TV show via iTunes.

    Even if you paid the $2 per episode, most full seasons are less than 25 episodes or $50. That means at full price you would see 20 new seasons of shows each year. But wait it gets better. When buying season passes the price drops to an average of closer to half that price $25-$35 for new season shows. So that allows you up to 40 new season shows. Back catalog shows can cost as little as $15/season.

    But I’m still not done yet! Every year in the summer and winter BestBuy or some other store sells iTunes gift cards @ 20% off so Boom! My $1020 is more like $1275. Why hasn’t everyone done this?

    Well the main reason is NFL. There are a number of popular sports you can purchase for AppleTV, but the NFL is not one, for that I use an over the air antenna. I have a HomeRun and can encode for later use or watch realtime. (this can work for other network shows as well to reduce your over all cost). I also spend my $8/month with netflix for now but the new episodes are few and far between now.

    The last part of this is sharing. iTunes has the best DRM policies in the industry 10 total direct devices, 5 computers (to which an unlimited number of iOS devices can sync or share). And the new piece is AirPlay of Networks. Discovery, History, TLC, ABC, NBC, CW, etc…

    It has been disrupted and the more of us there are the faster the TV industry will understand.

    • But I like programs that cable and satellite provide that I cannot get if I cut the cord. Already tried that and it didn’t work for me. I like my live news and weather. Can’t get OTA , because I am in a rural area and am blocked from the TV towers of the nearest large city by miles and miles of forests. The city is 40 miles away. Even an outside antenna won’t get reception because of the trees. If it wasn’t for that , I could use OTA and supplement with Netflix and Hula.

  5. James Katt

    You can’t fight the cable companies and content creators. Like Apple is doing, you have to work with them, make them happy, then make a great product that makes your customers happy. Only Apple can do this.

  6. James Katt

    GoogleTV failed because Google tried to supply content for free without the cable company and content provider’s consent. Of course they blocked Google’s attempt very rapidly, leaving GoogleTV with very little content other than YouTube.

  7. James Katt

    Cable TV is popular. People vote with their wallets for it. Only a vocal minority doesn’t like it – primarily because they are cheap.

    Cable companies these days also are the content creators and owners. Comcast for example owns NBC and Universal Studios.

    Content is expensive. Creating movies and television shows is expensive. Sports events are expensive. Cable companies are able to supply the content fairly inexpensively because like Costco, they buy it in mass quantities at a discount.

    Others trying to break into the TV industry are trying to cojole the content owners to sell their products cheap. This is not going to happen.

    Apple is smart to simply work with the cable companies and content owners rather than fight them. With Apple’s strategy, we can get a unified TV experience that is easy to use with happy cable companies and content providers. Again, only the vocal minority of cheapskates will complain.

  8. Seems to me that Netflix, Amazon, and YouTube actually have a better chance to disrupt the TV industry by continuing to create good original content. Google and Apple are merely repackaging content, which isn’t really disruptive, it’s just changing the medium.

    • Repackaging content can be disruptive, look no further than iTunes and the number of artists bemoaning the death of the album now that people can purchase “just the good songs”.

      Likewise, I’ve cut the cord and get most of my content OTA (100+ channels here in Houston), and supplement it with Amazon Prime streaming and iTunes purchases. As such, I’m now buying “just the good shows” and no longer pay for the shows and channels I don’t care to watch. I saved nearly $700 for the first half of 2013.

      I’ve been documenting this via my blog at AtariAge:

  9. Mark Halvorson

    You seem to be a victim of “conventional thinking.” Apple hasn’t made it’s play yet, and may not for years, and it will likely be unexpected. Look deeper and follow Horace Dediu. Thanks.

    • Valentine North

      No, whatever tricks they had up their sleeves, are gone.
      Right now, they’re riding the Steve Jobs inertia; I hated the man, the company and it’s products, but damn, he was a good businessman, which the current leadership is not.

      You can already see it now, their fastest evolving market, mobile IT, lost the majority incredibly fast after he died, lots of deals went bad, and lost a lot of the positive public opinion.

      Right now, they have nothing, just 100 billion in the bank, which they’ll hold onto with their teeth until they can find at least a mediocre replacement.

  10. mlapida

    With Google Fiber, the tech giant is building a cable company from the ground up. In the future, couldn’t they utilize the deals made through this for concent streaming to Google TV? I’m surprised nothing about Google Fiber was mentioned in this article.