Apple News & Analysis : Three Guys And A Podcast

Apple_hdtv2Yesterday, Apple released two additional networks onto Apple TV: CNBC and Fox Now. While both have clips or what often amount to short promo videos of full length shows, neither network ads much value without a key or a cable or satellite subscription. Without a TV subscription service, these, and dozens of other networks, on Apple TV are virtually useless.

High value networks such as EPSN, CNBC, HBOGO, ABC, Disney Channel and over a dozen other networks all require TV subscriptions to access popular content. Apple TV is being manipulated by carriers into a cable TV accessory.

The cable industry thinking goes like this: If a user has a cable TV subscription, they can puchase an Apple TV and gain network content in a second or third bedroom, adding value to the cable subscription, deepening the dependence on it. Apple TV does not give users access broad access to dump cable subscriptions, rather bolster then need for them.

Apple has worked tirelessly, and mostly in vein for several years attempting to get cable operators such as Comcast (NBC/Universal) and Time Warner to sell their networks al a carte. However, cable providers bundle networks in order to create perceived value. “You get over 100 networks/channels for only $29.99 a month). It doesn’t matter to the cable companies whether you watch only five or fifty of the 100 channels, the bundle is their value. If cable companies started selling networks as stand alone channels it would destroy the lucrative bundle sales, and whether it was Steve Jobs or now Tim Cook, there has been no Apple mastermind able to shake the industry lose of their icy bundle grip.

More and more channels are appearing on Apple TV, and while it is not doing anything to promote cord cutting, it could be that Apple is setting the stage for a much larger play.

The first step is launching an updated Apple TV "hockey puck" product. The new Apple TV would include an app store, and be capable of downloading - or at least - playing 4K (UHD) games via other iOS devices. A robust game center for network gaming is already in the iOS roadmap with iOS 8, and gaming would also be a key to wide Apple TV’s adoption. Movies currently, for rent or purchase, would be offered in UHD also, along with select shows, such as Netflix’ House of Cards. Apple would have UHD gaming, movies and some TV shows available. Playstation, XBox One and other box providers would not be able to deliver the vast amount of UHD content Apple could provide nearly instantly.

Apple's living room solution would not stop with a Apple TV cable of connecting to other UHD brand sets. Apple would also offer a few sweep spot UHD TV's with Apple TV built-in. Unlike Steve Jobs, Tim Cook continues to drive more options into each line of product. Apple TV could be a stand alone product, or an all-in-one integrated UHD TV.

Unlike the non-marketing Apple has chosen to deploy for the current Apple TV, this new UHD wave of product would be heavily promoted, with Apple’s goal of mainstreaming the product, quadrupling current Apple TV sales. The result would be a wave of eyeballs viewing their latest, hippest shows, movies and gaming via a UHD Apple experience.

The last shoe to fall is a large media house offering their networks al-a-carte.

Apple would launch the new Apple TV and integrated UHD TV set versions with a few key cable players. FoxNews or CNN would be available for a monthly fee (somewhere in the $4.99 a month sweep spot pricing), along with EPSN, or an ESPN network bundle. FoxNews or CNN coupled with ESPN cannot be overstated. They are they most powerful players in the cable network world, and are the key reasons U.S. consumers own cable TV. As for UHD being a key play to Apple’s solution, Apple could co-finance ESPN or a news network to provide the majority of prime time shows in UHD, initially exclusive to Apple TV.

The networks, like iTunes music content, may be a slight loss leader or barely profitable, but with millions of Apple TV’s selling each and every quarter, and EPSN and a cable news network racking up subscribers, cord cutting will likely begin in earnest. Independent networks will be quick to get in line, while ABC's properties would be next to follow suit, along with Viacom and Time Warner's networks. The last player to come kicking and screaming would be Comcast's properties. But by the time they start yielding content, cord cutters will be fleeing their ever increasing Comcast pricing in waves to Cupertino’s nearby shores.

Currently, adding networks requiring a cable subscription means little to millions of cord cutters, but it slowly sets the stage for a much bigger play. The lastest information is pointing towards Q2 2015 (WWDC?), but we suggest taking rumors on a radically new Apple TV launch with a few pounds of salt.

 

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