The Apple TV Plus Announcement and What It Means for Video….
Yesterday Apple announced several new “services” that it was launching headlined by a new Apple TV Plus service that brought Oprah, Spielberg and others to the stage. It felt different from most Apple launches and was the most media centric announcement from Apple since announcing selling legal music licensed from the labels on iTunes back in 2003-there was no hardware announced outside of a physical card, which I guess is “hardware”. We are obsessed with video at StayTuned and are constantly asking ourselves how the video industry is changing and how we can get smarter about it. My immediate reaction was that Apple TV Plus could potentially impact video subscriptions (the current crown treasure for all media companies and platforms alike) in the long term the same way iTunes impacted apps by setting new precedents for content distribution.
iTunes had a profound effect on the app ecosystem of today when it launched in 2003. At the time, the negotiated agreement between the record labels and Apple was 30% of every song or album-this number was set as a precedent because wholesale to retail CD sales were approximately the same revenue share. Remember the price of a CD at Tower Records was~$15 while the wholesale price was closer to $10 (Amazon was selling wholesale CDs at the time). When Apple launched the App Store in 2008, they ended up adopting the same wholesale to retail pricing for rev share on apps giving 30% to Apple and 70% to the developer. It was an arbitrary number at the time purely based on the precedent from iTunes that changed the app ecosystem beyond Apple. Shortly thereafter, Google launched Android Marketplace which later evolved into Google Play adopting the same precedent for revenue share. Obviously there is a lot of debate these days on what this revenue share should be, especially across different content and distribution variants but the important point here is that the first song sold through iTunes made a huge impact today across all apps.
The Apple TV Plus announcement had two huge messages to me that will potentially impact the broader ecosystem. The first is pretty simple and the second is more complex, unclear and could have long term ramifications:
#1) the Apple TV Plus app is going to be available everywhere. It will be on Samsung, Vizio, Sony, LG, Roku, Amazon’s Fire TV and others. Don’t be surprised to see Android (especially given that Sony TVs run on Android OS). To my knowledge, Apple has only done this once before with Apple Music/Beats Music. THIS IS DIFFERENT. Video services are much more reliant on exclusive content whereas music is a commoditized product that is more reliant on user experience with a full catalogue (I know there are some instances of music have an exclusive window but by in large the focus is more on a complete catalogue). It is the first time that Apple is creating an app it will aggressively distribute everywhere touting the content offering and not the experience as the reason to subscribe. Of course the design will be beautiful and Apple-like, but people will be coming for the content that is not on Netflix or Disney or other places as well as getting all the “table stakes” offerings they expect like HBO, Showtime, select networks and other content that Apple will deem “table stakes” as skinny bundles have. The scary thing for a content creator is that if you are below that “table stakes” line it could hurt your audience size and your content’s brand if you are not Netflix or Disney. For the first time, Apple is competing with a 3rd party app based on its content differentiation.
#2) Will there be a future independent creator channel that anyone can upload/apply to if they meet minimum requirements like developers do for the app store? The comparison that everyone keeps making is that to Amazon Prime Video and likely because of the exclusive content plus the bolt on channels for HBO, Showtime, etc. What I have not seen is the mention that Amazon also has something they called Prime Video Direct that enables independent creators to upload their content to Prime Video. It is almost like a curated YouTube letting every independent creator distribute on Amazon Prime. One thing that I learned while on Google Play and part of the reason we started StayTuned was that 99% of content creators big or small don’t have the resources to do technology integrations or keep up with the latest channels: subscriptions and billing are very hard, formatting and optimization is a headache across form factors and the list goes on and on. Making this easy for video creators who Apple can “approve” like they do for the app store feels like an obvious next step and a natural place where it would compete with Amazon Prime. Every video creator should have an opportunity to create content to the Apple TV Plus app through some kind of program like Amazon’s Prime Video Direct. Nothing was mentioned but this feels like the natural next step and the most “Apple” way to compete with Youtube and somehow get independent creators onto their platform in an organized and approved way. Independent creators are too big of a market opportunity to overlook. Doing so also enables a standard that levels the playing field between all video creators, no matter how premium they are perceived to be standardizing rev share, audience engagement and merchandising of content. The app store had the same impact on apps, leveling the playing field of delivering an app whether it was from two guys in a garage or a Fortune 500 company-leaving the merchandising decisions of what audiences see to Apple’s discretion and giving Apple an incredible amount of power. Are we going to experience an iTunes to app store deja vu?
The video space is growing, all the big tech companies are competing, fragmentation continues to increase and the consumer continues to get awesome content consumption options. We are watching closely at StayTuned and keeping a pulse on all of these video related developments.
