The full fledged Apple television set, or even a cloud based DVR set-top box from Apple have long been rumored. The main reason seems to be that we’re looking for the next big thing from Apple. To a lesser extent, we want Apple to change the TV industry which is heavily entrenched in an archaic and restrictive model. It’s unclear if Apple has the might to break down long held standards of providers and broadcasters, but Apple may be our only hope to do so. For Apple to succeed in the TV industry they need to change the way the entire industry operates, and that’s why there’s such difficulty in negotiations up until this point.
As a pre-cursor to what Apple’s dealing with, the current television industry is set-up on a package basis, and that’s why we get hundreds of channels we don’t watch. For instance, if you want Comedy Central, you need to sign-up for the 17 other channels Viacom offers. If you want ESPN, there are 10 channels in total you need to pay for. Almost any channel you want falls into these types of packages, and the broadcasters want to keep them together to make as much as possible, and the providers need these channels to get customers.
Then there’s local sports which may be the biggest conundrum as broadcast rights skyrocket. As bidding rights increase, the broadcasters want to get a return on their investment so they want their channel available to as many people as possible. Providers want to provide the channel to only those that want it, and put it in a special sports package. The broadcasters want it on a regular tier available to all, and a recent example is Time Warner Cable Sports Net which is the home of the Lakers, that Time Warner Cable acquired for a $3 billion 20 year contract. All of the other providers then tried to get the station, with DirecTV the biggest longest hold-out for the reasons discussed above, and this is just one example for Southern California, and there are local sports across the country.
The DVR is another aspect that changes the industry as it changes viewing patterns considerably. Not only can you watch shows at your own time, but you can also fast forward through the commercials that broadcasters make money on. An example in this case is the new NBC show Revolution which gets about 9 million viewers in its time slot, but when DVR viewing is added in there’s an extra five million viewers. NBC can only sell ads based on the 9 million number, as the extra five million are likely not to watch those ads. The DVR is confusing an entire archaic industry on revenue streams, and live sports are one of the strongest entities preventing DVR recording, another instance of their higher cost for providers. Beyond the DVR, there’s also the convoluted remote controls, tedious grid interface, and rudimentary lists.
Mobile is another big aspect that is changing viewership with the proliferation of iOS devices among others. More and more people like watching shows on the iPad or a laptop, and yet the industry doesn’t embrace them properly. There are great apps like HBO Go, WatchESPN, ShowTime Anytime, TNT, and more, but the problem with all is that they require a subscription with a provider. The broadcasters don’t seem to understand that they could set-up an in-app purchase subscription in their apps for the same cost they’re giving providers. For example, HBO is $15.99/month extra for DirecTV, but to use HBO Go you need DirecTV with an HBO subscription, but why couldn’t you cut out DirecTV if you’re HBO to offer a $15.99/month in-app purchase.
All of these facets tie together to create a broken system that is in need of a savior, which brings us back to why we want Apple to make a television set. Apple has the potential to change everything, but it’s unclear if they can make deals with companies holding so hard on to their existing broken model which generates billions. Broadcasters and providers have little incentive to deal with Apple as they could destroy the status quo.
Imagine if Apple could set-up an a la carte programming package where you could pick the channels you want, and pay for each one individually. Say you only want to watch your local channels, ESPN, HBO, Showtime, TNT, NFL Network, and your favorite sports teams. You could buy each one individually, and pay the final cost. When they say Time Warner Cable SportsNet wants $3.95 per subscriber, ESPN $4.69, or TNT $1.16, your bill would just add up each individual one, and that’s it without hundreds of channels you don’t watch, and the direct cost to the consumers without a middle man’s extra cost. Then you could record anything you want available in the cloud so you would play it back at anytime, anywhere, on any of your devices. Apple could also use iOS devices as remotes or even your voice, and have a streamlined software system.
That is a dream scenario that we hope Apple would bring to market. Broadcasters wouldn’t like it as you don’t buy all of the various channels included in packages. Providers don’t like it as they have archaic interfaces, revenue streams based on huge packages, and all kinds of monthly fees for HD, boxes, and mark-up. Apple is dealing with parties that don’t want to make a deal, and that’s why it’s a dream scenario. It would be an amazing way to watch TV, but there are too many companies that are tied to the old ways which generate existing profits, and they don’t care about improving the customer experience.
The next time you hear about an Apple TV set rumor, take it with a grain of salt, because there’s no doubt Apple has the hardware and software known-how, it’s the content that’s the question.