Sunday, August 16, 2015

Fearing an Apple TV Service

Tim Schmitz:

A TV service from Apple is likely to work a lot like Hulu. It might have a greater variety of content or a better UI, but the commercials will be there to stay. Why is it filling me with fear if it’s so similar to existing streaming services? Because an Apple TV service is likely to be far more successful and widely used than Hulu. It’ll turn a niche product into a widespread one, and the ad model will come along for the ride. Once everyone is used to un-skippable ads, they’ll be awfully hard to get rid of. We’ll be back where we started 20 years ago: watching the same ads for Chevrolet pickup trucks for 18 minutes out of every hour. (Oh, and those 18 minutes? That’s 30% of an hour, which just happens to be the same percentage that Apple takes as a cut from sales on the App Store. Certainly a coincidence, but an eerie one.)

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I fully agree that an Apple TV service (or any other similar offering on another platform) will revert us back to the pre-DVR ad-filled days, which is why I share Tim's disinterest. I do love my TiVo, and if one has a sane MSO, which I'm lucky enough to have, one can stream most everything to mobile.

But I find it interesting that he brings up Hulu for a completely different reason.

I think an Apple TV service in the way they've long envisioned it will never happen. It's not just delayed, it's simply vaporware despite Apple's fervent desires. And a goodly part of my reasoning has to do with Hulu. The service Apple wants to roll out needs content from all the Hulu consortium partners. And unlike the music industry when Apple swooped in to drink their milkshake, TV content still has pricing power, which gives the Hulu consortium partners options.

If I were the Hulu consortium partners, I'd avoid the hell out of Apple, and set up my own OTT platform on my own schedule for two absolutely crucial reasons:

- Why not own the equity in the service, thus receiving the potentially massive upside, rather than just giving the equity upside away to Apple?

- Why not retain full control over the future over the service, thus being able to balance their interests in the OTT and multicast markets, rather than just giving the control away to Apple?

And finally, while this isn't Hulu-related, the minute Apple were to roll out a mass-market Input 1 Replacement service, (which is their aim, after all), they immediately hit the last-mile problem. Every single MSO in the land will implement draconian bandwidth tier pricing, in order to make up what they lose from the erosion in their multicast business.


It's interesting to look at the example of Sling TV, the only thing even vaguely approximating the kind of OTT service Apple wants to offer. It's also an Input 1 Replacement, but it's very specifically tailored to only appeal to broke millennials. This is accomplished by an intentionally unwieldily interface and lousy QoS. Sling TV had no choice in matter, as some of the UI decisions were imposed by the content companies, and many of Sling's content licensing contract actually have written limits on the number of subscribers Sling can sign up.

This also solves the last-mile problem, as the lack of a mass-market audience keeps the MSO's at bay.

Apple's never-to-happen service would upend all of that, of course.

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