Apr 24, 2014 — by: E. Werner Reschke
Categories: Apple TV, Tim Cook

Yesterday Apple revealed some numbers they don’t often break out. One of those secret statistics was about Apple TV — Apple has sold over 20 million of the devices. Moreover, Apple CEO, Tim Cook, called it a billion dollar market — no longer a hobby indeed.

Most intriguing is where this puts Apple in the carrier lineup. DirectTV claims about 30 million subscribers in the U.S and Latin America, while Dish Network has roughly 14 million subscriptions. When all is said and done with Time Warner, Comcast will boast of having 30 million subscribers. Apple revealing 20 million Apple TV's sold puts them right into the mix as one of the big boy content providers — a real player in the space — not to be ignored. Apple’s distinct advantage is there is their ala carte system of choosing programming. With Apple TV a large portion of the programming is pay as you go, for only the content you want. There is no blanket charge of $50-100/month for all the content you want (for a gluttony of bad content most never even watch).

Apple TV’s main drawback is most of the channels they have added lately (ESPN, HBO Go, A&E, History, etc.) all require a cable or satellite subscription. This relegates Apple TV to a secondary device for the home (for other TVs), as the primary set in the home has the cable package connected. It is a provider statement: We still have the power and monopoly with the network bundles, so you either play our game or you don't get the content.

In order for Apple TV to become dominant in this space, it needs to quit piggy-backing on cable/satellite subscriptions. Apple needs to offer each channel a way to sell direct to customers through its Apple TV device. For example the History channel would cost $3.99/month or Watch ESPN for $7.99/month. Netflix provides their content in this fashion and it has proved highly popular. Unfortunately, it isn't this simple. Disney/ABC, should they provide Apple ESPN ala carte would risk losing cable subscribers, where they make money on all 15 networks they sell Comcast or DirectTV... Trading $15 for $7.99 a month makes no sense. Pushing a pay per network model may be what the majority of consumers want, but it's a heavy risk that stands to cost the networks due to de-bundling.

We can only hope that in the next round of negotiations, Apple has an upper hand in viewership which Cook and company can leverage over the networks, balancing the play between selling direct through Apple TV as well as through cable/satellite providers. This would expand the network’s reach around the globe in addition to generating revenue from those who only want to pay for what they consume (ala carte).

The other hand forcing the market into an ala carte Apple TV model may simply be offshore internet streaming of U.S. cable content. Millions are dropping their cable packages in lieu of Apple TV or computer-to-TV internet streaming, and getting by just fine. Once a user gets use to that model, there's no going back to paying $120+ a month there's no going back. The only way to hook those content consumers back into the mix, is via an individual pay per network option.

As this market blurs and continues to fragment, we shall see if Apple can pull another rabbit out of the hat and radically change how network television is consumed. The consumer is ready for massive disruption, the only question is - is Apple?

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