Apple TV Plus: the move to video streaming won’t be easy

Last week saw Apple’s first ever keynote sans a hardware announcement. The showstopper wasn’t a snazzy i-something device. It was a star-studded content-centric announcement before curtain drop.

The ‘Show Time’ event made one thing loud and clear — the shift in focus from devices to services.

In a post peak-smartphone era, the company is betting on services instead of devices to propel growth and revenue profitability in the coming years.

It’s no secret that the smartphone market has reached a plateau as user growth has slowed down. With near ubiquitous adoption in various markets as well as lengthier upgrade cycle due to diminishing game-changing returns with new models, users are sticking to their devices longer.

However, don’t let this fool you into wrong conclusions. People are not losing interest in smartphones or other devices. In fact smartphone addiction is a greater concern now than ever. So it’s understandable that Apple would want to foray into content to leverage on this. Numbers from Neilson suggest that American adults spend more than 11 hours a day listening to, watching, reading or and generally engaging with media.

So it’s no surprise that the company announced a slew of new services —premium subscription platform (Apple News+), new gaming subscription platform (Apple Arcade), and a streaming content platform (Apple TV+).

Here I focus on Apple’s move into the video streaming market.

Concerns with Apple TV+

1. Saturated market. The online video streaming market is already populated with existing big players such as Netflix, Amazon Prime, and Hulu. According to Nielsen, approximately two-thirds of US homes already subscribe to one of these three. If existing players can provide enough engaging content to occupy most of a typical person’s TV viewing hours, how much of a compelling draw will Apple be? According to Parks Associates, only 16% of homes in the US subscribe to three or more streaming services and there is a limit to consume. Netflix has reached a plateau in domestic subsciprtions and is now focussing on international viewers,
2. Value proposition? Originals, originals, and only originals with big marquee Hollywood names attached to it. Apple has spent the last couple of years curating an ambitious slate of two dozen TV series and four feature films. In comparison, Amazon Prime had only 5 original series, and Netflix 6 in their first two years. But do big names guarantee quality? Well, Baz Luhrmann’s $120 million The Get Down, $90 million Sci-fi Bright starring Will Smith, Cary Fukunaga’s Maniac staring Ema Stone, and Chelsea Handler’s TV show on Netflix failed to deliver and live up to the hype. Furthermore, not having a catalogue of licensed shows or movies puts Apple at a disadvantage when compared to Netflix and Amazon Prime’s huge content library.
3. No details on pricing. If Apple hopes to win a large audience for its video streaming service, pricing is going to be key. Apple announced that pricing and more specific details will be available only this fall, leaving very little information for potential consumers to make any decision at the moment. As mentioned above, Apple needs to add value distinct from incumbents to get people to give up something they are already happily subscribe to or justify added expenses, but there was nothing on this front. If history is anything to go buy, Apple is unlikely to use price as a differentiating factor. It launched Apple Music with the same pricing structure as its competiro Spotify.
4. Disney’s inevitable entry. Last but far from the least, a formidable competitor in the form of Disney is entering the market soon gunning for a huge portion of the market share. With a huge library of proven popular content for a diverse demographic, it is expected to tip subscribers to its favour. Their combined catalogue will involve content from Walt Disney Studios, Marvel, Disney animation, Pixar, Star Wars and Fox. Cue take all my money meme?

What Apple has that no one else does?

What’s in Apple’s favour though is access to a billion ioS devices. Add to these Macs and Apple TVs. These are great avenue for Apple to push its content. Netflix currently leads the market with close to 140 million subscribers. If Apple manages to convert only 15% of its billion devices, they already have 150 million accounts. Apple thus can leverage on this as well as key partnership and distribution. Analysts point out that Netflix has a huge customer acquisition cost, so partnering with Apple can prove to be an advantage.