Apple TV+ Is Much More Than a ‘Netflix Killer’

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Apple announced several new services earlier this week. Apple TV+, the star of the lineup, will launch this fall with some high-profile original content — something that has become key tothe success of any over-the-top streaming service.

Apple also announced Apple TV Channels, an aggregation service thatwill pull together content offerings from cable and satellitechannels, as well as other OTT services, such as Hulu.

With this announcement it could be argued that Apple is hedging itsbets. It’s trying to be both a streaming service — or “Netflix killer,” assome media reports have branded Apple’s OTT play — and anecosystem player along the lines of Roku.

What is notable is thatinstead of Apple TV Channels existing solely on an Apple product, the servicewill be available through devices from Roku and Amazon, and evenon smart TVs from companies that could be considered Apple’s biggestcompetitors, including Samsung and Sony.

“Apple is evolving into a services company,” said Joel Espelien,president of the Corum Group.

“They will increasingly offer services that run outside of Appledevices — but always work best on Apple devices,” he told theE-Commerce Times.

“The TV announcement was a baby step, but still a step towardsoffering real bundles to consumers,” added Espelien. “They clearlywant to offer full subscription services — as with music also. Theyjust don’t have a mix that works yet for TV, so are going with a safer’channels’ marketplace type approach to start.”

Big Presentation but Small Payoff

To make its announcement, Apple pulled out all the stops, featuring anonstage appearance by media icon Oprah Winfrey. In some ways, theevent arguably overshadowed the announcement.

“If it were any other company except Apple making the announcement,there would have been a huge yawn from the market,” remarked Steve Blum,principal analyst at Tellus Venture Associates.

Perhaps Apple tried to pull out the stops to draw attention away fromwhat it didn’t announce.

“It was a mixed bag, because we don’t know how deep its content catalogwill be. We don’t know pricing, and we don’t even have a firm date onwhen it is launching,” said Greg Ireland, research director forconsumer digital transformation and multiscreen video at IDC.

“What we saw was that it was billed as a competitor to Netflix andHulu, and we have some information that big stars are creatingcontent,” he told the E-Commerce Times.

“But we already knew they were spending a lot of money, so now we haveto wait and see, and assess how impactful this will be,” added Ireland.

“The Apple TV service, at least what we know of it, isn’tsignificantly different from any other OTT service,” Tellus’ Blum told theE-Commerce Times.

“They’re putting the pieces together a little differently — they’reborrowing business model bits from several different platforms, butoverall it’s still the same business model,” he added.

However, what could make it different are Apple’s branding andits ability to leverage its existing customer relationships and hardware/software ecosystem.

“It’s a fair question whether that’s going to be enough to make itstand out in the TV business, but it’s a unique advantage and Apple issmart to use it like this,” said Blum.

OTT Market – Competitive but Not Crowded

It would seem that Apple’s entry into the OTT space might come at theexpense of another service, but this likely isn’t the case. Even atUS$10 to $15 per service per month, consumers seem to be willing tosubscribe to more than one.

“Our survey data shows that consumers subscribe to two services, andthis is the growing market as it inches up, so there is room formultiple services,” noted IDC’s Ireland.

Apple can grow in the OTT space, but that doesn’t have to be at theexpense of Amazon Prime Video, Hulu or Netflix.

“There are opportunities for a good handful of OTT services to havesuccess, so Apple TV+ doesn’t need to be a Netflix killer to besuccessful,” added Ireland, “but a lot will depend on how they want to define success.”

Apple appears to be breaking the traditional OTT mold while rewriting the playbook, to mix metaphors.

Apple will “have exclusive programming, as the big OTT players do, andthat will help it position its video brand as it has for HBO andNetflix — but it’s just icing on the same cake as everyone else’s,”suggested Blum.

“This is a lot like the early days of digital satellite TV in the mid-90s,” he added.

“There was some programming that was unique to particular platforms –DirecTV’s NFL package, for example — but for the most part programminglineups were identical,” noted Blum. “What distinguished them wasbundling. Dish, for example, focused on low-cost packages anddistribution. DirecTV and U.S. Satellite Broadcasting were launchedvia RCA’s then-formidable consumer electronics retail channel.”

Competition for Content

To be successful in the OTT space will require a certain amount of content.

Today, there is simply more programming than ever before, thanks to original programming on broadcast TV, basic cable, premium cable, and now OTT services. It has fractured the audience, but the major playersare willing to make a big splash to get eyeballs.

What once was the domain of paid-TV services such as HBO andShowtime now includes Netflix, Amazon and Hulu. For Apple to betaken seriously, it clearly needed to include its own must-see TV.

The paid-TV services traditionally have paid big dollars to developcontent, and Netflix entered the space by going the same route. Thequestion is, what happens if the content investment doesn’t pay off?

“That is the big thing. How much money do you have to throw at it tobe successful?” pondered Colin Dixon, principal analyst atnScreen Media.

“Apple can throw a billion dollars and that might be chump change tothem, but when you are at a standing start you can’t get there in sixto nine months and have a creditable service,” he told theE-Commerce Times.

“You have to license content, and people are smarter about licensing,” Dixon added.

Netflix, for example, may have high-profile true “original” series,such as House of Cards and Stranger Things, but a lot of the other exclusive “original” content, such as Babylon Berlin, was only purchased by Netflix. Bablyon Berlin actually was co-produced by Germanpublic broadcaster ARD and pay-TV channel Sky.

“There just isn’t enough of that content out there; it is tied up,”explained Dixon. “What Apple TV+ is offering is a mix of eclecticcontent and not much of it.”

Pipeline for Shows

For show runners and would-be producers — not to mention actors,writers and directors — now could be a golden age, as the bar may belowered just so that all these services can truly offer “exclusive” ifnot in fact “original” content.

“The broadcast networks have for their entire existence had to throwout a lot of shows and accept that not everything is going to stick,”said Ireland.

“As a content provider, you need to have things in the pipeline,” he said, “but as noted, Netflix has content that comes from other sources, andNetflix is a lot more than what they produce,” explained Ireland.

Netflix has been able to pick and choose through itsinternational partnerships. It can take a series such as BabylonBerlin, based on the success the show had in Germany and Great Britain,and the risk is mitigated because it only licenses the show.

That strategy has made Netflix a success.

“There is simply a breadth of content, so it doesn’t have to appeal toeveryone,” noted Ireland.

Content That Doesn’t Stick

However, it was high-profile programming such as House of Cards, notthe imports of Scandinavian cop shows, that originally drew audiencesto Netflix. The question for Apple, as well as any of the other OTTservices that are built on the binge model, is what happens if there isno more content to license, and the truly original content turns outnot to be so binge-worthy?

Apple could be taking a gamble by investing in high-profile offerings from Steven Spielberg and Oprah Winfrey.

“Apple is wooing big talent, and in this way it’s like a studio betting big on a movie to be a box office hit,” said Ireland.

“If it isn’t a hit, the studio has to figure out a way to recoup thecosts, and it isn’t clear if there are options when this happens to anOTT series,” he added.

That is why network series tend to get the fall rollout withfour or five episodes, and if those are a hit, the series gets afull season order. Amazon tried a similar approach by ordering anumber of pilots and having viewers vote to see which they’d like towatch for a full season.

About the only hit of the bunch was the acclaimed series The Man in theHigh Castle, but that was an adaptation of a book that already had developed a cult following.

Trying to get the next big thing already has been a problem forbroadcast networks, pay services, and basically every other contentprovider. Providing more content doesn’t equate with better contentfor viewers.

“As HBO moves from highly curated limited content to significantlymore content like Netflix, the danger is the quality will go down,”suggested Roger Entner, principal analyst at Recon Analytics.

“As of last year, Netflix spent 10 times as much on original contentto get as many Emmy awards as HBO,” he told the E-Commerce Times. “Apple TV+ stands ready to fill that highest-quality, least-failure shows niche if HBO vacatesit.”

Lower Risk for Apple

Apple, of course, can afford to take risks on a full season –at least financially — in a way its rivals can not. When Netflix movedfrom a DVD rental by mail service to OTT streaming video service, ittook a huge gamble with original programming.

“Netflix wasn’t a multibillion-dollar company. They just made moneyfrom video, unlike Apple, and their overcommitment on content couldhave sunk them,” explained Ireland.

For Apple, $2 billion invested in original content won’t sink thecompany, and that gives them an advantage — but only so far.

“It could be disappointing on both sides if the content isn’t good,”warned nScreen Media’s Dixon.

On the one hand, early adopters who are disappointed by Apple’sofferings aren’t likely to remain loyal subscribers, so if the showsdon’t measure up out of the gate that could hurt Apple. On the otherhand, the big name talent that Apple has attracted could equatelack of eyeballs with failure.

“I don’t see Spielberg sticking around if Apple can’t get his show outthere,” said Dixon.

“Apple is starting from nothing, which is different from, say, a Disney– a company poised to launch its own OTT service. They have thecontent you know and already love, and it has name brand recognition,”he added.

“Apple is a bit late to this market, but brings a lot of firepower,”said Roger Kay, principal analyst at Endpoint Technologies Associates.

“Netflix pioneered the model, and Amazon improved on it,” he told theE-Commerce Times. “Apple has to do something. The smartphone market issaturated and getting more competitive every day. Apple is trying toswing over to services, and this effort is part of that — but it’sbeyond their existing expertise, so it won’t be easy.”

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