Apple’s Content Distribution Dilemma

Apple is serious about content. You just need to look back at the past year to see not just their ambition but also it’s investment in this space.

Back in June, Apple went on a hiring spree. First, with the former head of Amazon’s Fire TV business D. Twerdhal and then, with Jamie Erlicht and Zack Van Amburg, two Sony Pictures executives hired to oversee all aspects of video programming and reporting to Eddy Cue.

In August, the Wall Street Journal reported that Apple was planning on spending roughly $1 billion to procure and produce original content over the next twelve months. So far, this year, Apple produced two original series “Planet of the Apps” and “Carpool Karaoke” which were only received mildly.

In October, news broke that Apple had struck a deal with Steven Spielberg for the updated version of the Amazing Stories series. According to the WSJ report, Spielberg will be producing ten episodes of the original series with a budget of $5 million a pop.

Finally, just last week, Apple was said to have ordered a yet to be titled drama series starring Reese Witherspoon and Jennifer Aniston based on the book “Top of the Morning: Inside the Cutthroat World of Morning TV” by CNN reporter Brian Stelter.

When I saw the news about this last show, I jokingly asked on Twitter where I could watch it. This to me is a serious question Apple must address as it plans to create more content.

Reaching a Broader Base than Apple TV can offer

If Apple is planning to spend $1 billion in content, surely the hope is to reach as broad a base as they can. Apple has been trying to find the right formula for its “TV Hobby” for some time now.

It first focused on Apps, but the magic that apps brought to the iPhone and iPad failed to materialize with Apple TV. Apple then turned its attention to “fixing TV” by improving content access by enabling single sign-on. The issue with that is that TV providers like Comcast are also focusing on making it easier for users to find their content and they market features such as voice control quite heavily. Digital Assistants like Alexa and Google Assistant are also getting in the game.

While Apple has not shared Apple TV sales numbers for a while, it is reasonable to expect that even with the latest update that brought 4K support, Apple is still not seeing the numbers that would guarantee a broad enough audience.

This would explain why the first attempts of produced content were distributed via Apple Music rather than Apple TV. iPhones and iPads offer Apple a much broader base for its content. Making the content part of the subscription is also, of course, a good way to reward subscribers. However, I don’t think this would be a viable long-term solution for Apple. Apple must decide whether it is serious about TV in the home – especially as the little box doubles as a connected home hub – or if it is serious about creating content and competing with Amazon, Hulu, and Netflix. While the two are not mutually exclusive, Apple could also decide to create a new service that is not tied to Apple TV. iTunes is too tired as a brand to help Apple in its endeavor, and Apple Music should be about music. Also as costs increase, Apple could not just roll this new content into the current Apple Music subscription. Of course, as consumers have choices being able to offer an all-inclusive subscription for video and music at a competitive price could be a differentiator for Apple, at least over some of its competitors.

Access to the Right Content….

Aside from producing its own content, Apple has also been in talks with Hollywood studios to get earlier access to movies to be distributed at a premium price on iTunes. So far, studios received stiff resistance from theaters due to the significant loss they would be the money that we all spend on popcorn and other concessions more so than the number of paying customers for the movies themselves.

For the studios, the biggest problem would be to guarantee that the content could not be easily pirated. Although, earlier wider availability might lower in-theater piracy. While iTunes encrypts video, one could always record the movie from an external device such as a phone. Screening Room, a new service that Napster’s founder Sean Parker is trying to create that also allow for early viewing of movies still in theater used a watermark which, while not deterring piracy, makes it trackable and therefore punishable.

For consumers, a rental price of between $25 and $50 per movie would still represent a very competitive price compared to what a movie outing usually costs. The service would also speak to changing consumers’ behaviors. Larger, high-definition TVs are dropping in price making that home-theater experience a reality for more and more consumers. At the same time, the theater experience has not improved in a way that many consumers would consider proportional with the price hikes for 3D and Imax. It only takes going to a couple of popular movies to see that the longer line is usually for the regular screening rather than the 3D or Imax screening.

….and a New Ways to Consume Content

Content consumption is also changing. AR and VR open up opportunities to experience content in a different, more immersive way. Tim Cook has been very vocal with his believes that AR offers a much broader opportunity than VR and I tend to agree with him. Yet, I do believe that VR offers a great opportunity to deliver a premium content consumption experience as well as new content altogether. Anything from a behind the scenes tour of a movie, to a meet a greet the stars. VR also plays well with music and sports by providing access to concerts and events. Apple’s attempt to engage users with artists through Apple Music was not very successful but who would say no to having their favorite artist perform for them in their living room?

With rumors around a possible set of Apple Glasses, I can see Apple offering this as a premium service for the home.

With the Apple Glasses a couple of years away, Apple needs to decide if the pool of consumers interested in such content today is big enough to start thinking about Mac support for VR. While the number of Mac users is a drop in the ocean compared to Windows, they represent a much more profitable target for content providers and developers, one that should not be overlooked.