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business model — which involves force-feeding expensive bundles of unwanted channels to subscribers — is unpopular and outdated, but no one has been able to disrupt it due to industry incumbents’ death grip on prize content.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