Will Apple take a bite out of Hollywood ? updated
UPDATED
Andrew Wallenstein at Variety just scored what is possibly a huge scoop tonight, with potentially momentous implications to the media/telco industry. Famously mum Apple is said to be pondering an aggressive move into original programming and head to head competition with Netflix, Hulu and the other key OTT players. This has long been in the cards as the next logical move for Apple, which created a hardware category and hundred of billions of shareholder value when it made a move into music in the early aughts.
AppleTV, the so-called “hobby” tech of the company, has been rumored to be central to an in-the-works Apple-negotiated “skinny” bundle of channels, to rival Comcast/NBCU and others. The “special event” on Sep 9 is supposed to be marked with a significant AppleTV announcement, which could surpass the direct sales of HBO via HBO Now announced last March.
Apple’s negotiations with content holders, namely the storied Hollywood studios, have understandably been long and tough. The studios are either integrated into larger content-centric structures e.g. Disney-ABC or Paramount-Viacom, or more telecoms-cable-centric e.g. Comcast-NBCUniversal. The telco/cablecos surely do not want to be cast in the role of the music labels, seen as weak players in their early deal with behemoth Apple.
As noted by Andrew Wallenstein in his piece, the “double edged sword” represented by Apple, client but rival, is going to keep management at the content holder/producer companies up at night. The potential combination of Apple’s technology pipeline with the means to override the pay tv and cable model could have industry-wide reorganization consequences. Should Apple have in its arsenal massively adopted end-user technology AND premium content, all the other media/telco players will be quickly mounting countermoves.
The size of Apple’s war chest ($200 billion), the scale of its ambitions, its Pixar-Disney DNA by way of Steve Jobs’ special affinity for content, all this makes for exciting developments and for more potential mediaquake tremors:
- Apple’s possible next move: a deal to have a US telco bundle web carriage with each AppleTV, without pesky telco-imposed monthly caps ? This could mimic Apple’s iPad 3G/LTE strategy and boost AppleTV in the market for the cordcutters/cordnevers.
- Another possible move by Apple: go big and acquire Time Warner (its market cap currently sits at $59 billion) and with it a major Hollywood film studio and tv producer. An alternative with a potentially lower price tag for Apple, Sony Pictures, which parent company Sony Corp could be looking to divest after the negative publicity from The Interview.
- Rupert Murdoch’s News Corp, part owner of Hulu, goes all-in and acquires Hulu outright from its current partners.
- News Corp goes back to its satellite roots and acquires both Echostar and Dish Network from Charlie Ergen. With satellite rival DirecTV merged with telco at&t, Dish&Echostar could be looking to join forces with a larger player, ideally a content rights holder.
UPDATE — Sep 2
In his latest post, Alan Wolk correctly assesses Apple’s position in the content space as “weak”: “Their decision to cling to the TVOD (transactional VOD) business model for iTunes, when everyone else was moving to subscription has left them behind the pack, to a point where it’s seemingly impossible for Apple to pivot, as almost all the existing network content of any value has been snapped up by Netflix, Amazon and Hulu, and all that’s left for Apple are the scraps.”
In TheWrap, Altimeter’s Brian Solis summarizes the ongoing content rumble: “Solis calls it “inevitable” for Apple to move into the streaming space. “The content business isn’t just a domestic product,” Solis said. “It’s a global experience. For a company like Netflix to scale globally, it’s protecting itself from any types of local or emerging global competitors.”
Apple has clearly taken its time before diving into tv/film in a bigger way than the run of the mill transactional iTunes business. The entire industry has been waiting for Apple to lay out its plans, not without putting some roadblocks in the rumored $40 Apple network bundle.
Precisely because of this weak position, Tim Cook and his team could come at it by addressing digital content’s weak spots, chiefly content discovery and the “leanback” function craved by couch potatoes.
Apple could concurrently leapfrog the telco/cablecos and become a cableco 2.0, in essence the premiere broadband “bundler” of the best streaming content, in addition to underwriting a few “big” original series/films for branding. By bundling and curating the best streaming content available, Apple could tap into a new market of viewers who will soon tire of signing up to individual Netflix, Hulu+, Amazon Prime, Viki monthly subscriptions. Buzzfeed’s report that the new AppleTV could feature Siri-powered universal search adds another enticing element to Apple’s strategy. The current generation of AppleTV has started the curation process by bringing niche channels/apps such as Tastemade, Crunchyroll, or WillowTV.
Should it need guidance&inspiration Apple should look to Europe, particularly France where Iliad’s Free has been a leader in IPTV via its proprietary set top boxes for 10 years. France was the second-largest IPTV market by subscribers after only China and is home to four operators ranked among the global top 20, according to SNL Kagan. Jean-David Blanc’s upcoming Molotov.tv service, a “Netflix for live TV”, to be rolled out in France this fall and in the US in 2016, should also be closely monitored.
Next week will surely bring its load of exciting developments, come back here for analysis and comments !
