http://recode.net/2015/12/09/why-apple-walked-away-from-tv-for-now/
Why Apple Walked Away From TV (For Now)
Stephen Lam / Getty Images
Yes, Apple has walked away from the negotiating table with the TV guys, which
means you won’t be getting a subscription TV service from Apple anytime soon.
And yes, there’s a dispute between Apple and the TV guys about how much Apple
should pay the TV guys.
But there’s a conflict about money in any negotiation. Apple’s beef with the TV
Industrial Complex is a bit more nuanced. It’s also a significant one: If Apple
gets its way, TV will undergo a significant change, just like the music
business did when Apple launched its iTunes store in 2003.
Industry executives say Apple has spent much of 2015 pushing for a “skinny”
bundle of TV channels — limited to perhaps a dozen core networks — delivered
over the Web, which would retail for no more than $30.
So while the price of the individual channels that Apple wants to package has
been an issue, it’s the composition of the package itself — which channels go
in and which don’t make the cut — that is just as important to both Apple and
the programmers, according to sources.
If Apple gets its way, it means the traditional pay TV package, which averages
around 100 channels, will get shrunk by nearly 80 percent. And while TV
executives will say they understand that consumers don’t want to pay for
channels they don’t watch, all of them will argue that their channels are
must-haves.
That means 21st Century Fox, for instance, is reluctant to sell Fox and Fox
News without bundling in its FX channels or its new Fox Sports 1 network. The
same goes for Disney (ABC, ESPN, Disney, etc.) and NBCUniversal (NBC, Bravo,
USA, SyFy, etc.) and on down the line.
Apple media boss Eddy Cue has proposed selling additional tiers of programming,
like a sports tier, on top of its core service. But he has been insistent that
Apple’s base package be limited to a small group — both because that’s the way
to keep the price low and also because he thinks that’s what customers want.
“The optics are important to him,” said a TV executive who has talked to Cue
about his plans. “He doesn’t want to have filler.”
While the TV industry has been experimenting with skinny bundles over the past
couple of years, it hasn’t fully embraced them. Verizon’s plan to sell
make-your-own bundles that would be slightly smaller than traditional ones, and
which would give consumers the option to drop channels like ESPN, has generated
a lawsuit from Disney.
And while Dish’s Sling TV service offers a smallish bundle of a couple dozen
channels, that Web TV service is only comprised of Disney and a few other
programmers, which are each bundling their own channels.
Sling is also intentionally constructed as a service without the full
functionality of “real” pay TV — many of its channels, for instance, don’t
offer the ability to pause or rewind programs. And Sling’s licensing deals also
give the networks the ability to bail out if the service gets any real traction
— Apple would be insistent on a service built for a mass audience.
Still, earlier in the year Apple had seemed confident it could get all of this
done, after years of false starts. It had hoped to launch, or at least
announce, the new Web TV service this fall, along with its new Apple TV box.
Instead, Apple launched Apple TV as a standalone product, along with messaging
about the notion that apps, not bundles of TV networks, are the future of TV.
TV executives say Apple has been quite vocal about the fact that it has stopped
negotiating for new licensing rights for a couple months. In retrospect, the
surprise is that it took this long for someone like CBS CEO Les Moonves to say
so out loud.
Now the question is when the two sides will come back to the table, and what it
will take to get them there.
It would help Apple’s case if it could prove that Apple TV is indeed a
transformative platform, instead of an update of a nice-to-have, not must-have,
box; to do that, it will need some amazing apps, which don’t yet exist.
Apple may also be counting on continuing erosion from pay TV’s subscriber base,
and/or an increase in investor concern about that base, to soften the TV guys’
stance. But for now everyone is standing pat: The TV guys don’t want to give up
their bundles until they have to, and right now they don’t.
Join the conversation:
Regards
Craig
