Apple TV 4K, Still a Hobby

"In retrospect, I wish I had not invested in video content from Apple."

Don't invest in services tied to a single hardware supplier.

-----

I heartily concur that Apple TV's pricing strategy is literally insane. But I disagree that Apple TV is still a hobby.

They're on the rails to spending a billion dollars a year on content. That's real money, even for Apple. That content is going to be only accessible via Apple TV, (and Apple mobile devices, of course, but the lean-back is where video content has its real value.) Just given the money being spent, we seem to be exiting hobby territory.

Apple's strategy is truly insane because $1B/yr really isn't that much in this market. Here's what other companies spend on programming for comparison:

Netflix: $6.5 B/yr
Amazon Prime: $4.5 B/yr
HBO: $2.5 B/yr
ESPN: $7 B/yr

So, we have an unholy duality of Apple:

- Spending far less on programming than its competitors.
- Unlike all of its competitors, having its content available only on a single (and uniquely expensive) hardware platform.

(And FWIW, Apple TV isn't just competing with Fire TV, Roku, etc. It's also competing with the app platforms built into pretty much every new TV anyone buys. Personally, I'd never use a "smart" TV's app platform rather than a Fire TV or Roku or TiVo, but a TV's built-in app platform is free, has 100% market penetration, and will play pretty much everything but Apple content.)

The entire strategy is dumbfounding. It seems likely intended to slow Apple's long bleed in video to its competitors, rather than actually gain new customers. But a huge amount of that bleed has already happened. The horse is already out of the barn. And even if Apple's $1B/yr investment manages to produce a single true "watercooler" show, will that really convince any non-customers to shell out $240 for a box/remote simply to play that one damn show? I don't think there's a chance in hell that'll happen. In fact, no matter how good the quality of any show they produce, the lack of widespread access to the show will prevent it from becoming a "watercooler" show in the first place.

At the end of the day, I guess it depends on how we define "hobby". Apple's current direction seems to have no prospects of success, but at their new budget levels, if it's still a "hobby", it's suddenly become a very, very expensive hobby...

(And along the same lines, the real problem with Apple TV isn't that their hardware is so damn expensive, it's that you can't view Apple video on other platforms. If Apple allowed their content on other platforms, and also produced their own expensive box that was a best-of-breed experience, that'd sorta make sense. It'd make more sense than maintaining a hardware exclusive on their content and shipping a $40 Apple TV. But, of course, they're following the standard "Cupertino business model" of services exclusively tied to their own hardware here, unfortunately it makes less than zero sense in this particular market.)

OTOH, I'm sure the supply chain for the box will be top notch.

@Chucky: I presume the spending on original programming is meant to sell iPhones and iPads, more than Apple TVs. So I don’t think it really affects the hobby status.

Yeah, the hardware exclusive makes no sense because it makes their content worth less and less likely to catch on. And if you’re going to make an expensive box it had better actually be really good. For example, gaming could have been a big competitive advantage if they had focused on it and bundled controllers.

Don't invest in services tied to a single hardware supplier.

How do you feel about multiple hardware suppliers but only one software supplier, e.g. Kindle? It’s not as if there are many choices.

"How do you feel about multiple hardware suppliers but only one software supplier, e.g. Kindle? It’s not as if there are many choices."

Yeah, there really aren't any viable choices for e-Books other than Amazon.

But I'm far more comfortable with a single software supplier whom I trust, who also has a demonstrated commitment to allowing access to from other hardware platforms. Thus I'm quite comfortable in purchasing rights to both books and movies/TV from Amazon because:

1) They've supported multiple hardware platform access for over a decade.
2) Their own corporate incentives seem to be strongly aligned with continuing to do that for the foreseeable future.
3) I don't think they're about to go out of business.
4) Based on past performance, and their own future incentives, I trust them to honor the rights, and provide reliable service.

When you get to down to purchasing digital rights, there's really no way around the "single supplier" issue. It's sorta baked into the whole concept of digital rights at the current moment.

Thus, in a certain sense, I'm not sure this a valid comparison. "Single hardware supplier" for services also definitionally means a "single software supplier", but the reverse does not apply.

(Of course, it's always safer long-term bet to buy dead-tree books and Blu-Rays or DVD's. But given a certain threshold level of trust, convenience often steers me to digital rights. When I can rent a movie from Amazon I think I may well want to re-watch, and the buy/rent multiple is 2x-3x, it's often an easy choice to buy, since I think I'll still have access in 5 years without having to make compromises in other ways.)

"I presume the spending on original programming is meant to sell iPhones and iPads, more than Apple TVs. So I don’t think it really affects the hobby status."

Hmm...

That did not occur to me. It's possible, but it's weird if true. $1B/yr is a lot of money, even for Apple. It'll reduce their profit margins by a noticeable notch. And I'm not sure it'll really move mobile devices. While folks do often watch video on their mobile devices, the overwhelming industry wisdom remains that video pricing power, (and thus perceived consumer value), is much higher in the lean-back than it is on mobile.

I remember some major video service discussing offering a potential discounted service tier that they would make it impossible to view in the lean-back. And IIRC, they concluded they could only sell it for a third of the lean-back tier.

Or for another example, Amazon hasn't had any problem in allowing Prime Video on Apple mobile devices, even at the same time it went to war over leveraging Prime to get Amazon video sales/rental on Apple TV, which should give an example of how they view the value of video on mobile vs the lean-back.

And one more example, I'm a big fan of old films, and TCM has long had a streaming app that they refused to allow in the lean-back. They felt fine with letting their catalog be watchable on phones, but kept the lean-back off-limits until they developed better monetization strategies, which they recently began rolling out with FilmStruck.

In short, if you're right about the $1B being about enhancing mobile devices, it's a silly strategy. And if you're wrong, it's still a silly strategy. So it's difficult to suss out their intentions, given both options are silly. (But I do, on balance, tend to think the programming investment is primarily about their Apple TV aims.)

Heck, the upper-end of the 4K Apple TV is pushing to *game console* pricing. You can get a 500 GB Xbox One, for example, for only a little more than Apple asks for the 64 gig Apple TV - and the Xbox has all the same video providers (more in fact, since it has Amazon for one already) *and* is an actual gaming platform.

The Apple TV pricing is nuts, and I say this as somebody who used an Apple TV for years starting with the original biggie-sized model.

"the updated remote features a new more prominent Menu button with a white circle around it."

Which is not the most-cited problem with the remote, and will be virtually useless in the dark. What is needed is some asymmetry, some significant physical, tactile difference that indicates what orientation the remote is in, by touch alone.

>(And FWIW, Apple TV isn't just competing with Fire TV, Roku, etc. It's also competing with the app platforms built into pretty much every new TV anyone buys. Personally, I'd never use a "smart" TV's app platform rather than a Fire TV or Roku or TiVo, but a TV's built-in app platform is free, has 100% market penetration, and will play pretty much everything but Apple content.)

And game consoles too....Apple TV seems like a distant third box for many people. Many people still use game consoles and pay TV boxes, so anything not built into the TV is often a third tier option anyway. With the popularity of Fire and Roku devices for that third box spot*, at least in the USA, seems like Apple TV is an awkwardly priced tweener (more expensive than most streaming media boxes and far less capable for gaming than any console made in the last 11 years) that often lags behind most of their competitors anyway. Apps, voice, games, 1080p, 4K etc. have debuted with other devices first.

If you aren't locked into Apple, I don't see the value proposition at all.

*I have been Roku as first or second spot on the TV for years now, but most of my clients and friends still have pay TV boxes and the 45 and younger set often have game consoles too.

Kevin Buchanan,
Exactly agree. I was also an Apple TV person, first with the silver box and then with the 2nd gen (never got a 3rd gen because it was so close in features to the 2nd gen). I just don't see the value proposition right now. Shoot, Roku and Fire Sticks have occasionally been $25ish anyway, so adding that to a console, so you have two different TVs covered with streaming, not that much over a single Apple TV. Just saying.

$200 goes a long way for non Apple devices....if you don't need gaming....that's a handful of Roku or Fire sticks for a whole home....

I agree with Chucky, while not thrilling either way, I actually trust Amazon more than Apple because of the former's history of supporting multiple platforms.

Then again, when the Fire tablets came out, the Amazon video app strangely remained tied to Fire OS, even though Fire OS is Android, so why no Google Play love too? Even the app store on iOS got support as well, just not Google Play.

However, you can still add Amazon video to other Android devices via the Amazon app store. Made possible because of the platform allowance for sideloading, so maybe that was the Amazon play for general Android support, "Come to us for apps too."

"Then again, when the Fire tablets came out, the Amazon video app strangely remained tied to Fire OS, even though Fire OS is Android, so why no Google Play love too?"

Huh. Interesting. I wasn't even aware of this. I'd strongly assume that the answer is a combination of the sideloading option you mention combined with the lean-back war Amazon has been waging with Apple and Google.

Amazon will let you have Amazon Video (with the Prime sweetener) on any lean-back platform, just as long as you let them do retail video business there without taking a cut large enough to make retail impossible for them.

I don't think they care too much about mobile video, since that's not where most of the value in video rests. So if they weren't at war with Google over the lean-back, they'd have released an app for Google Play. And if the sideloading option didn't exist, they'd also have released an app for Google Play, just as they did for iOS. I assume it's the combo of the lean-back war and the sideloading option that made them think it'd be a nice opportunity to promote their own app store there.

However, there's one more wrinkle I don't know enough about. If Amazon released an app for Google Play, would it automatically be available for Android TV? And does Android TV take a cut like Apple TV and Chromecast do? Because if so, that'd be the red line for Amazon that'd keep them off Google Play: a lean-back video app where Google would take a cut big enough that Amazon couldn't do retail video business...

(But the bottom line remains: Amazon wants to be on any platform in the lean-back that'll have them without making their video retail business uneconomical. That's a massive part of the reason they spend so heavily on Prime Video: to get leverage to get on lean-back boxes that otherwise want to take massive commissions. And it's a big chunk of what I mean when I say that Amazon's corporate incentives going forward align with my own incentives of having any video I purchase be available on a wide variety of lean-back hardware platforms.)

"I actually trust Amazon more than Apple because of the former's history of supporting multiple platforms."

And to repeat myself from upthread, it's not just their history, it's also their incentives going forward that make me trust them.

[…] Previously: Apple TV 4K, Still a Hobby. […]

[…] Apple TV 4K, Still a Hobby, Why Apple Should Make a Cheaper, Streamlined Apple […]

[…] Apple didn’t even bother supporting it with iOS 11’s Control Center. Meanwhile, the Apple TV 4K does not impress. I’ve tried to avoid having more than one silo of videos, but at this point […]

[…] Apple TV 4K, Still a Hobby, Cultural Insularity and Apple TV, No 4K iTunes Videos on iPad Pro or […]