What is Apple’s next “TV” move?

“I’d like to create an integrated television set that is completely easy to use,” [Jobs] told me. “It would be seamlessly synced with all of your devices and with iCloud.”…”It will have the simplest user interface you could imagine. I finally cracked it.” Walter Issacson — ‘Steve Jobs’

Apple didn’t attend CES as usual. Nevertheless, I predict they will make two big moves in 2016 that will shake the foundation of the next generation of TVs and we’ll be talking about it at CES 2017. One is content and the other is Smart TVs.

This is not based on any insider knowledge but rather by connecting the dots and looking to Apple’s past. Apple is rarely first — they see what is getting traction and they deliver a premium experience.

Smart TVs have underwhelmed and it could be Apple’s game if they attack in 2016. Leading manufacturers are getting better fast — time is of the essence.

First some background.

Netflix

Netflix started out in the distribution business — DVDs by mail. That was a stop gap solution — the “Net” in Netflix clearly indicates their long term thinking. They cut long term distribution deals with the very same people they are disrupting and these folks are not sitting back — they are launching competing services like HBO Now, Hulu and Shomi (in Canada). Things are going to get very interesting as the distribution deals expire.

Netflix spun out their H/W division (Roku) and planned out world domination by delivering a premium native app to virtually every piece of glass — and in 2015, made serious inroads into the content and binge viewing habits of their customers with shows like Orange is the New Black.

Their strategy is working and cross platform apps are core to their strategy. Netflix announced at CES that they have 70M subscribers and operate in 130 countries! If you have doubts the future is TV is anything other than apps, you’re seriously missing the big picture.

However, that is not enough. Netflix HAS to create their own content to protect their future. Popular original content leads to three important effects:

  1. Increase subscriptions with exclusive content — you need Netflix to watch these shows which results in more subscribers.
  2. Allows content to be available globally — no more geographic restrictions that are typically imposed in media distribution deals. They own the content and can do what they want. It gets Netflix closer to a universal service.
  3. Ensures they have enough content as distribution deals expire and content creators launch their own competing solutions. No content, no Netflix.

Amazon

Amazon is taking a different multi-pronged approach but they have a wild card in their back pocket.

You can access content through their app on mobile as well as their own Amazon Fire streaming box and streaming stick, both of which are gaining serious traction — claiming to be catching up to Roku which is very popular!

The trick card is Amazon Prime and their “everything store”. The implication is that they can afford loss leaders like hardware and even content. If those services lead to new Amazon accounts and ideally Prime, they’ll make substantially more revenue per user. A Motley Fool article (take with a grain of salt) pegs the life time value of a Prime customer at roughly $4k and that’s just based on current services!

If they can link everything together properly, $4k life time value of a customer will be substantially higher.

And of course Amazon is getting into original content. I can’t wait until Top Gearrelaunches! It was rumoured that Apple was trying to secure the Top Gear stars but Amazon won out!

So, WWSJD?

Apple Content & Smart TVs

I have absolutely no doubt that Apple will get into the content business in 2016. Firstly, as Netflix and Amazon have figured out, it is a smart move.

Secondly, rumours abound:

There have been rumours in the past but its different this time — they needed to revamp Apple TV and they have done that with tvOS.

How about Smart TVs?

In my opinion, Apple would be crazy not to launch their own TVs in 2016.

Why?

The Smart TV market is hot. 
There have been over 300M Smart TVs shipped so far and shipments are growing at 20–30% per year depending on the report you’re looking at. More than 50% of TVs sold are Smart TVs and that is set to grow rapidly as price drops and quality increases. The numbers are compelling and research has shown that people would be willing to pay a 15–20% premium for an Apple TV set.

Unfortunately, some manufacturers have delivered a very poor user experience in the past and the market is is really fragmented. Roku TV, Android TV, Yahoo Connected TV (dead), LG WebOS, Samsung Orsay (discontinued), Samsung Tizen, Firefox TV OS (used by Panasonic). Then you add consoles like PlayStation and XBOX and it is a real mess. Some of these are great and some aren’t but that’s just too many.

People want Smart TVs — why wouldn’t they? Extra boxes are a pain and people love to buy new super sharp big screen TVs. But the fragmentation is too confusing. Apple will come in and there will be some carnage.

Apparently Apple hasn’t entered the market because they haven’t figured out how to truly differentiate. So let me help with a few ideas:

  • The main TV as the media hub with HDMI sticks for secondary TVs (similar to a USB stick)
  • Connected audio throughout the home via bluetooth speakers — control from any iOS device in the home
  • Airplay from phone to any of the TVs to view apps, photos and videos

Add to this piece of mind: you know it will be easy to use and robust, especially if you’re already an Apple customer.

The stars are aligning

With the massive improvement and popularity of Apple TV via tvOS, original content that is delivering for Amazon and Netflix and the popularity of Smart TVs, I think this is the year Apple will make big moves and start to dominate by creating original content and launching a Smart TV.

Look for it September 2017!

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