http://bits.blogs.nytimes.com/2015/09/13/tv-bundles-challenge-apple-to-make-a-deal/?_r=0
TV Bundles Challenge Apple to Make a Deal
Never let it be said that Apple releases products quietly. In an event on
Wednesday that lasted more than two hours, the Silicon Valley giant unveiled
new iPhones, a really large new iPad and — for the fashionable among us — nice,
new watchbands.
But a new, beefed-up version of the Apple TV device, which not all that long
ago was deemed a hobby by company executives, received much of the pre- and
post-event attention.
Yet, for all the changes to Apple TV, one thing still missing was a hoped-for
bundle of television programs. So what happened?
Blame a combination of complexity and cost that doesn’t work in Apple’s favor.
“Television broadcast and digital rights are incredibly complicated, especially
when you get into international rights,” said Dan Cryan, senior director, media
and content at IHS, a research firm. “This is tougher than film. It’s an
absolute snarl of contracts and agreements.”
Television shows are crucial for any tech company that wants to make inroads
into our living rooms. Apps for video games and other pastimes are all well and
good, but television shows bring in viewers.
“Apple TV needs TV shows to succeed, especially live sports,” said James L.
McQuivey, an analyst at Forrester Research. “Otherwise it doesn’t stand out
from other products that let us stream Netflix and Hulu.”
In the United States, Apple might have to negotiate with a network like CBS for
content, but it would also have to negotiate with local affiliates for rights
to some shows. People with knowledge of Apple’s television negotiations say
that local affiliates pushed back against some content deals.
In many cases, the digital rights to a single show are held by several
different parties, which means that companies that want to offer them, like
Apple, have to wait for some of those contracts to expire. Mr. McQuivey points
out that HBO doesn’t even have the rights to everything it has created for its
own app, since it’s waiting for agreements that it made with other distributors
to expire.
The complexity of these agreements increases exponentially when you account for
the fact that deals need to be renegotiated in different countries.
“Ten years ago there were no templates for doing digital deals and figuring out
complexities like streaming rights and union negotiations,” said Brian Wieser,
an analyst at Pivotal Research Group. “But now those templates exist and a
company can get the rights to content if it’s willing to pay a huge amount of
money.”
The price tag that Apple would have to pay at this point would be high, because
the TV world that Apple is dealing with now is stronger than the music industry
was when Apple needed songs for iTunes and the iPod.
“The record companies were facing what was obviously a mortal threat with
illegal file sharing,” Mr. Wieser said. “You could argue that Steve Jobs didn’t
let a good crisis go to waste and he cut some very good deals.”
By contrast, Mr. Wieser says that viewers in about three million of the
country’s 110 million homes watch television shows via broadband only. “At that
pace you can understand why there’s no sense of urgency” to work with Apple, he
said.
The headache of securing television content is one of the reasons why things
like amateur action sports videos are so appealing to digital outlets, and why
they might make for easily accessible app content on Apple TV. They’re not
encumbered by the copyright and distribution restrictions that govern
traditional television shows.
There has been some talk that Apple could bypass some of these rights issues
and high costs — and still provide entertaining content to users — by
emphasizing apps.
During the company’s special product event last week, Eddy Cue, Apple’s head of
software and services, showed off apps made for Apple TV by the room-booking
giant Airbnb, the fitness company Zova, Activision Blizzard’s Guitar Hero and
Disney’s Infinity video game. A shopping app from Gilt also got prime-time
exposure.
The message: Televisions are for a lot more than just watching TV.
And apps could get more television content onto Apple TV internationally if a
local broadcaster that already has the digital rights to the shows that it
broadcasts builds an app, Mr. Cryan says. In this scenario, Apple wouldn’t have
to negotiate with anyone for content. The broadcaster has already done that and
is now bringing what it has to Apple TV via its app.
People are spending more time looking at their app-centric mobile devices than
traditional television, according to a study from the Yahoo-owned analytics
company Flurry. But it’s not clear whether local broadcasters will have digital
rights to make an appealing app, nor is there a guarantee that they’ll want to
make an app at all.
But for now, YouTube stars and shopping apps aren’t enough to create a broad
base of users around Apple TV. For that, the holy grail is still more
traditional programming like sports and hit television shows.
“Getting these deals done is no longer impossible,” Mr. Wieser said. “But for
now it’s incredibly expensive instead.”
Emily Steel contributed reporting.
