Following up on my last post about Apple’s strategy in the television market I thought I’d share this link. I think it strengthens my assertion that the first cracks in the status quo of the television (all encompassing) supply chain are going to be legal issues regarding what you can and can’t do with content. What do you have the “rights” to view either for free (FCC controlled broadcast television in the US) or that you’ve paid for (cable/satellite). The company that leverages the legal loopholes and provide a great experience should have a great first mover advantage.
There’s been a lot of talk and speculation about Apple and their entry into the television market. I thought I’d throw my hat in the ring with my own speculation.
I don’t understand why Apple would be interested in building a television. What makes more sense to me is that they would build the next-gen cable/satellite box.
Here’s my rationale:
- You don’t replace your television very often so adoption of an Apple television set would be slow. My guess is that the average television probably lasts 7 years. I had a rear-projection set that I bought in 1996 that lasted until 2010! Granted it wasn’t my primary set by that time but it was in service none-the-less.
- There are a ton of competitors in the television business but only a handful in the cable-box business. And they suck at software. Scientific Atlanta (now part of Cisco) and Motorola are players in this market. Apple could reinvent the user experience as they’ve done in music (iTunes) and mobile apps (App Store) and disrupt that market.
- The pixels on a television aren’t disruptive. How you interact with the content could be. This is where they would focus their attention. A new software platform and the right partnerships (Time Warner, Comcast, Cox, DirectTV, Dish Network) and they could dramatically change the way most people interact with their television content.
Here’s the kicker. A lot of people claim that everyone wants to get rid of their cable or satellite and go “over the top” and pay for content as they consume it. Ain’t gonna happen! At least not very quickly. It’s not as simple as getting rid of the middle man and paying for your content directly. Who would fund the expensive production costs for the high quality shows you’ve come to love and expect when you turn on your tv?
I’ll claim that it’s not paying the cable or satellite bill that everyone is tired of. It’s not being able to digest the content on-demand. So here’s what Apple is going to do…
They figured out that the key is in making video available on-demand, not trying to displace the cable/satellite providers. I don’t think it’s the $100/mo that’s the problem. It’s that you feel like you’re paying for content you don’t get to see. You will obviously never be able to watch all of it but you might be willing to continue paying $100/mo if you know you have access to all of it when you want it. And, you’ll never have to worry about recording something in the future.
When you pay your cable or satellite bill each month you buy the rights to view a plethora of content. Let’s say there are 100 channels that you have access to and each of those channels is broadcasting 10 hours of original programming each day. That’s 1000 hours of content that you have the right to view every day! How much of it do you consume? Nielsen tells us you watch something like 5+ hours per day. So there are 990+ hours of content that you have the right to view but don’t get to see. After it has aired, unless you record something with a DVR, you can’t see it until it has been “programmed” to air again.
So I think Apple has figured out that the key to disrupting the television market isn’t a television, it’s making all the content you’ve paid to have access to available anytime you want to see it. And they’ll make search and discovery a joy for a change. Apple is going to record every show that comes across one of their partners distribution pipes and make it available on-demand from their cloud of servers in North Carolina. They only have to store one copy and if you have purchased the rights to see it (ie. paid your cable or satellite bill) you have access to that content 24 hours a day, 7 days a week. And you can view it not only on your television set (with new Apple box) but on your mobile devices as well. ”Siri, I’d like to watch Discovery Channel” or “Siri, I’d like to start watching season 4 of Mad Men”.
I’m not an attorney nor do I have access to the contracts that the distributors sign with the content owners but what gets interesting is whether or not Apple could get into the business of either stripping out the commercials when you time-shift the viewing (maybe another fee for commercial-less viewing?) or they can act as the middleman and offer ad targeting services to the distribution partners.
The cable companies want to ease out of the content business and focus on the high-margin bandwidth business. I’ll claim they may jump in bed with Apple and cede that part of the business to them over the next decade. Apple isn’t going to deliver you a new television. They’re going to build the world’s largest DVR and give you access to an amazing catalog of content with your iPhone and iPad as the “remote control” of choice.
Am I crazy?