Apple Music seen as gateway for streaming TV service, may need 30M subscribers to succeed
The recent launch of Apple Music --?while important to the future development of iTunes -- is also thought to be part of a larger effort to push consumers toward Apple's long-rumored web television service by softening the ground for monthly subscriptions.
Apple could be counting on its new streaming service as a way to kickstart the eventual television offering because the second sale is often easier than the first, according to The Information's Jessica Lessin. She likened the Apple Music customer base to Netflix's early DVD subscribers and Amazon's Prime users in that regard.
While Apple Music already has a substantial 10 million users, Lessin said that some in the industry believe Apple may need to double or triple that number in order to make its video effort viable.
Apple is also said to be considering a tiered video service, in which a subscription would grant access to only a portion of the video library, while the rest would be sold or rented a la carte. As noted by Lessin, this is much the same way that Amazon's Prime Video offering works.
Irrespective of the service's design, ESPN is likely to come along for the ride. Late Apple CEO Steve Jobs is said to have been "adamant" that ESPN be included in any such proposal, and the close relationship between Apple and Disney --?ESPN's corporate parent --?would seem to virtually guarantee a deal.
Apple could unveil its new video service as soon as next week, with the company expected to show off a new fourth-generation Apple TV on Sept. 9. AppleInsider will be on hand and will bring live coverage from the event.
Apple could be counting on its new streaming service as a way to kickstart the eventual television offering because the second sale is often easier than the first, according to The Information's Jessica Lessin. She likened the Apple Music customer base to Netflix's early DVD subscribers and Amazon's Prime users in that regard.
While Apple Music already has a substantial 10 million users, Lessin said that some in the industry believe Apple may need to double or triple that number in order to make its video effort viable.
Apple is also said to be considering a tiered video service, in which a subscription would grant access to only a portion of the video library, while the rest would be sold or rented a la carte. As noted by Lessin, this is much the same way that Amazon's Prime Video offering works.
Irrespective of the service's design, ESPN is likely to come along for the ride. Late Apple CEO Steve Jobs is said to have been "adamant" that ESPN be included in any such proposal, and the close relationship between Apple and Disney --?ESPN's corporate parent --?would seem to virtually guarantee a deal.
Apple could unveil its new video service as soon as next week, with the company expected to show off a new fourth-generation Apple TV on Sept. 9. AppleInsider will be on hand and will bring live coverage from the event.
Comments
WTF. The largest TV provider Comcast only has 22 million subs. Time Warner only has 11 million subs.
So Apple needs 30 million to be viable? GTFO.
You can make the argument that all cable companies are the same so you should add the numbers. They sell the same product. They take a feed of the local CBS or whoever affiliate and they put it on a cable line. The total number of pay TV subscriptions (so satellite+cable+fiber) in the US is about 100 Million.
The local CBS affiliate works as a CBS "franchise" in a way. They take the nationwide CBS feed and slap ads and a local news program on it.
If Apple is going to replace this system, then they need to bring in enough revenue to replace the fees CBS gets from the current model. Once local affiliates and cable companies see themselves being replaced, they're not going to want to pay the networks the same amount anymore.
By declaring such a high number... it's easy for the pundits to call it a "flop"
And talk of an Apple "flop" gets pageviews!
I'd love to see a study comparing blog ad revenue with Apple news and without.
i'm firmly in the camp of "i am sick of monthly subscriptions"
i feel nickle & dimed, and would much rather pay per consumption of individual items.
the monthly fees are what led me to ditch cable in 2006 when ATSC rolled through Philadelphia.
So are you telling me Comcast with their 22 million subscribers is not a viable company?
So Dish with its 12 million isn't viable?
Comcast, Dish, ect rely 99% on TV to make profits. Apple can break even on TV and still it would be a big plus if it strengthens the ecosystem.
Its just total bullshit that these people expect Apple to be the 1# TV provider from the get go and if not they are a failure.
No you missed the point. The current distribution model, customers pay for broadcast TV from a pay TV provider, and that pay TV provider pays a local affiliate (who also sells ads), who then pays CBS, has 100 million subscribers.
If you want to transition to a on-demand streaming, Hulu-like service and cut out the cable companies and local affiliates, you have to bring in enough subscribers to preempt the existing 100 million strong model.
Otherwise, the networks aren't going to give up money from their 100 million customers, to gain 2 million Apple TV users. Those Apple TV users have to bring in enough revenue to make up for the loss, but obviously, people aren't going to pay 50x more than cable.
Luckily and thankfully for Apple, Disney has chosen to use hardball negotiations with Apple just as it has with every other company it has negotiated with to get the best possible financial and distribution deals for Disney. Any whisper of anything less by Disney just might trigger an anti-trust lawsuit by the DOJ and FTC (and nearly every state in the United States) against Apple.
On the DOJ and FTC path, I admit I have not read anything so far this week about an investigation being started against Apple due to the Tidal PR campaign against Apple. Maybe, just maybe, the week will pass without an investigation being written about.
Networks can sell to both Apple and the Cable companies. They have ZERO problem with that. Its not like they have to choose one or the other.
Why the hell would the Networks not want Apple's $$$$ when Cable/Network ratings and cable subs have been going down every year?
You think Comcast is going to sit by idly and watch all their customers cancel cable? Isn't the point of the Apple TV content to make people cancel cable? Do you think Comcast is going to sit by and keep paying the same rate as the networks cut them out? Simple business. Apple's got to make up for what they lose on cable. Think about it.
What if I was Fox. I go to Comcast and say, "If you pay me 50% more, I won't sell to Apple. Since people must watch American Idol, they won't cancel your service." It only takes one. So Apple must bring in enough viewers so this can't happen.
Hmmmm... it seems like paying for every individual episode of TV is the ultimate in nickel and diming.
I guess it depends on how much TV you tend to watch.
Networks can sell to both Apple and the Cable companies. They have ZERO problem with that. Its not like they have to choose one or the other.
Why the hell would the Networks not want Apple's $$$$ when Cable/Network ratings and cable subs have been going down every year?
this is actually wrong, and the reason it took so long to get HBO to offer its content without a cable subscription.
the *cable* companies have a problem with it, and their distribution contracts have (historically) denied the networks from offering the same content elsewhere in a franchised area. hence why it was such huge news that HBO was, for all intents and purposed, self-delivering content through an app.
This also leads into the huge issue of franchise rights in television distribution, and the ongoing legal fright between Comcast & Verizon (specifically in Comcast's hometown of Philadelphia). The same franchise system is what led Comcast to tell the FCC that them buying Time Warner Cable wouldn't decrease competition because "they operate in different markets". Those different markets were created by the cable companies specifically to keep competition out.
Television distribution is all so very screwed up in the United States - and it is all in the name of closed markets, lack of transparency and huge amounts of profit.
Hmmmm... it seems like paying for every individual episode of TV is the ultimate in nickel and diming.
I guess it depends on how much TV you tend to watch.
Definitely depends on how much you watch.
There are months when my Netflix fee seems exorbitant compared to my usage.
I already get more content than i can watch via my free** OTA HD.
**yes, i have a small HTPC, $400 investment 9 years ago, and it is still running swimmingly, thanks SageTV
You just pointed out Apple's difference from the usual subscriber business model... Apple doesn't have to make a profit off the entertainment if their goal is to strengthen the ecosystem which increases hardware sales. Above all, Apple is a hardware company, not a service provider.
iTunes makes some serious profits (compared to many other companies) but in the whole picture of things, it barely moves the needle on Apple's overall profit picture. I have to give it to Apple - they are looking at how they can enhance the entertainment experience for Apple users, and not just be another entertainment provider. It's not easy to heard cats, which the disjointed current delivery method is like. But Apple appears to being willing to roll up their corporate sleeves and give it a serious college effort!
Very cool!
Yeah I was thinking about the girl who pays $8 a month for Netflix and binge-watches 3 seasons of Grey's Anatomy in one weekend. It's easy when you simply pay once a month for access to that show plus thousands of other episodes on-demand.
But I can't imagine she would pay $1 per episode for that.
Luckily there are multiple solutions for consuming content!
Very cool!
Yeah I was thinking about the girl who pays $8 a month for Netflix and binge-watches 3 seasons of Grey's Anatomy in one weekend. It's easy when you simply pay once a month for access to that show plus thousands of other episodes on-demand.
But I can't imagine she would pay $1 per episode for that.
It's two different methods of consuming content.
Agree. And i think we may finally be on the cusp of a marketplace that can please both types of users.
You just pointed out the real issue in being a consumer... the usual model is to almost force you to consume. If you don't spend time consuming entertainment, you don't get your money's worth of content... by consuming content, you are also fed ads for more things to consume. If you buy the "toys" you see on TV, then you need to take more time to "play with your toys." If you don't consume enough goods and services, then the economy, which is based on a certain rate of consumer spending, suffers, and you may be out of a job... Consumers are like rats on a wheel and the system is designed to keep you there.
But getting off the wheel is really easy... consuming is actually optional. But first one needs to realize what's going on. The "consumer economy" did not exist until after WWII. It's a recent construct. Just stop being transfixed by the matrix and "see the man behind the curtain" and spend your money deliberately.
But now, with the Internet and all kinds of different streaming services, the networks and the content creators have many more options and because of that, a stronger hand when it comes time to negotiate. They will be less likely to sign exclusivity agreements and less likely to agree to any bullshit terms and conditions from the cable companies. Content creators may also be able to divorce themselves from the networks and sell directly to the distribution service (streaming), or possibly even directly to the consumer.
The home entertainment industry 5 years from now will be vastly different than it is today. We are still at the leading edge of a major disruption. I think we'll see a lot more quality content coming. Scripts that major networks have repeatedly passed on will find their way to small independent studios and the shows will be filmed and sold to the streaming services or directly to end users. Like TV today - some of them will be crap - but others will be amazing! It's not just the cable companies that will be relegated to a posting of irrelevance - at least they'll still have the pipe to provide internet service - but the TV networks are likely to disappear completely as more and more content providers find it easier and more profitable to sell directly to the consumer (or to one of many streaming services). There are no longer a limited number of "channels" and time slots that have to be fought for. Everything that is good can be produced and made available on-demand.
We'll be telling stories to our grand children about the evil TV empires, limited content available only as certain times and rushing home on a specific night to watch a specific show and they'll just stare at us with disbelief and wonder and they will shudder at the horror of it all...
Problem with these 10 million Apple Music "users" is that none of them currently pay anything to use the service and cannot cancel access to it until their non-renewal date comes up. When the 3-month trials begin expiring in a few weeks, we will have a truer picture of Apple Music's actual user base.
I don't know how this 30M figure came up. Unless Apple's planning another forced integration clusterf*** like how it shoved Apple Music and iTunes together, I'm not sure how the subscription TV service would be an outcome of Apple Music adoption.
Also, the assertion of ESPN being on board from the get-go is rather dicey. Right now, the average carriage fee for ESPN comes out to nearly $7/month per subscriber, and that universe includes the vast majority of pay TV households, since ESPN is typically found on the basic service tier. If Apple plans an a la carte TV service, then the carriage fee will need to be bundled into every subscription. Assuming that Apple wants its normal margin on the service, then you're talking about somewhere around $10/month for just one channel.
If anything, much of the discussion among pay TV providers to retain subscribers is to offer a "no sports" tier. It's no secret that most of the channels with the highest carriage fees are the sports networks. But, the economics of sports programming only work if the carriage fee is charged to every subscriber on the basic tier. And in fact, that's how the carriage fee structure works across most other popular channels as well.
Going to a la carte offerings would result in higher carriage fees per subscriber.
The real mystery with any streaming TV service from Apple will be whether the programming is bundled or offered a la carte. For viewers that only want a limited selection of channels, it could save a lot of money. But, for viewers who watch programming on many different channels, then the cost when adding channels individually could actually wind up costing more.
The direction of the industry is all of the individual services developing their own original programming. This is the HBO-Showtime-Starz premium cable scenario all over again. Viewers that want to watch a broad cross-section of programming will need to subscribe to all of those channels, and the costs will add up.
I'd like to see them offer options that are more granular than a month. For Hockey or Baseball, I would like to watch a game here and there - but it doesn't make sense to me to pay for a full month to just watch 2 or 3 games. I'd like to be able to purchase the rights to watch a specific game or to subscribe to a single channel for just one day, or buy a block of hours that I could use over the course of the entire year.
For example, suppose a sports bundle that included 5 channels was offered for $20/month. If I knew that I was only going to watch 2 games, I'd prefer to pay $7/game than $20 for the "right" to watch 50 games within the month (since I knew I wouldn't actually watch any of them). Because I can't do that - I pay nothing and I go watch the game at a sports bar or at a friends place - so by not offering that option, they are actually losing revenue ($14). There may not be a ton of people that do what I do now, but I'm sure I'm not the only one and I think the number of people that make similar decisions will only grow as time goes by. So - since it doesn't cost ESPN any extra to show me the game that is already being broadcast, why not take my $14 and sell me just the one or two games? Or sell me a 3-hour block of viewing time? In the past, it would have been a nightmare to try and administer this type of billing model - but today, it would be easy.
I think if they (the cable companies) were to offer some strictly use-based pricing options, they would see fewer people cutting the cord completely - and if they actually acquired some compelling content and maybe provided the option to pay a little extra ($1-2?) per day to watch commercial-free, they may actually be able to turn things around and maintain some degree of relevancy. Sadly, I think egos and corporate greed will more likely send them the way of Research In Motion and they will not realize the extent of the problem until it's too late to stop it.
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Comcast, Dish, ect rely 99% on TV to make profits. Apple can break even on TV and still it would be a big plus if it strengthens the ecosystem.
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Not correct - for cable and Telco TV (e.g. fiber like FiOS), the vast majority of profits are in broadband access - not the PayTV service. The cost of content has risen significantly in the past 10 years eroding the margins. PayTV still does generate profit (and of course good top line revenue), but its primary purpose is to obtain the subscriber & position broadband. At least historically, most customers, if moving to a new area, look first for a PayTV provider, and then a broadband provider.
Apple will only make small margins on a TV service due to the same factors. However, if offered, it is a way to pull in more overall customers to the ecosystem (buy an AppleTV, which works great with the iPhone and Apple Watch...). Apple will also increase sales of its existing iTunes movie rentals and TV purchases. These are not big movers on their own, but do help to grow the Apple "services" revenue into a reliable annuity business. Wall Street does like, and understand, that...
Is that what people want? I thought we were getting beyond "channels" that only show one thing at a time.
It's currently 5:20pm on the east coast. Right now... AMC is showing a movie called "The Day the Earth Stood Still"
But at 5:30... "Terminator 3: Rise of the Machines" begins showing. Everybody on the east cost will see these movies if they turn on AMC.
So even if you could buy the AMC channel for $2 a month... you're still locked into whatever master control in New York decides to show. That doesn't sound very exciting.
Or... would people rather subscribe to an AMC app that lets them choose any movie or TV show that AMC offers at any time?
We live in a digital on-demand world. So the idea of a channel that broadcasts one movie or one TV show at a time is kinda silly.
I understand the promise of true a la carte TV... that you will pay less for fewer channels. But you're still getting channels that broadcast 24 hours a day... even when you're asleep and at work... and someone else is choosing the content.