Apple Reignited the Mac, Now It’s Time to Do the Same for Apple TV

4th gen Apple TV with Siri

At WWDC Apple showed how they could wow us by reigniting the Mac, and now it’s time to do the same for the Apple TV.

Apple TV (4th Generation)
The now ancient Apple TV (4th gen, HD only) shipped in October, 2015.

Decline and Fall

What got me thinking about this theme is a recent report at the Wall Street Journal. “Apple’s iTunes Falls Short in Battle for Video Viewers.” [Subscription required.]

This is a short but complex article that explores several aspects of Apple’s video business. The key opening sentence is:

The company’s market share for renting and selling movies has been falling for several years, tumbling to between 20% and 35% from well over 50% as recently as 2012, according to people with knowledge of the matter.

The rest of the article explores the nuances of Apple’s video business and requires careful reading. That’s because its video business is increasing modestly, but its market share is falling. Why? The end of the article suggests a certain amount of malaise and lack of success on Apple’s part over the last decade.

After launching iTunes movies in 2006, the company quickly took a dominant position in movie sales and rentals largely because of the success it was already enjoying in digital music sales. No other competitors had as sophisticated an online store or a suite of devices to play its content, like the iPod and Mac. Netflix was still relying on the U.S. Postal Service to mail DVDs to subscribers and entertainment was a tiny business for Amazon. [Emphasis mine.]

Competition and Exclusion

As we know, Apple has tried to translate its success with music into video rentals and sales. But the content holders have been very shrewd about how they license movie rights. That has allowed Amazon, Hulu and Netflix to become aggressive, to grow, leaving Apple to take, according to the WSJ a modest 15 percent take when watched on the Apple TV.

Also, an accompanying chart from PriceWaterhpuseCoopers shows how subscription services (like Netflix, Hulu and Amazon Prime Video) have overtaken and gone beyond the video-on-demand rental/purchase models. This suggests that, like music, customers would prefer to pay for a monthly subscription and have an all-you-can-eat movie buffet to chose from. That’s in contrast to Apple’s iTunes model of buy or rent movies, singly, on demand. And that thinking is likely what drove the thinking behind Apple’s new TV app.

Apple has made much of developing its services business. Taking a 15 percent cut from the apps available on Apple TV seems to be a decent approach. But, as a whole, we know that customers are now favoring the Roku box (#1 in market share) by a large margin and then selecting the subscription service of choice. More on that next important process next.

Apple TV market share as of march, 2016
Apple TV market share as of March, 2016. Source: comScore.

Customer Practices

And so the customer decision making, driven by cord cutting mentality if not the actual numbers, is this. 1) Be excited about modern video technologies. 2) Pick the best OTT box. 3) Select the desired subscription service(s).

Item #2 is where, I think, Apple could boost its profile. Videophiles and TV/movie enthusiasts know that there are gains to made by championing advanced video technologies such as 4K streaming, High Dynamic Range, Dolby Vision, advanced audio, and so on.

For Apple, it’s therefore important to be a visible member of the video hardware community. Convince the consumer that you have the latest state-of-the art OTT box that supports their viewing needs (and aspirations), and half the battle is won when it comes to developing a future loyalty to the Apple ecosystem and services.

One More Thing!

At WWDC 2017, Apple (finally) demonstrated its commitment to the H.265/HEVC compression algorithm needed for 4K compression and streaming. Perhaps that’s a harbinger of Apple’s intent to build a fabulous 5th generation 4K Apple TV with all the bells and whistles needed to reignite the competition with Roku.

Without a renewed commitment to the Apple TV hardware, in this 4K era, no amount of backroom dealings and skimming 15 percent from the other guys is going to keep Apple TV and tvOS in the forefront of customer minds. And stop the decline of market (and mind) share reported by the WSJ.

Apple knew what was needed to reignite the Mac at WWDC: hardware envy and enthusiasm. Now, let’s see if the company can duplicate that with new Apple TV fervor this coming holiday season. More surprise and delight is called for.

3 thoughts on “Apple Reignited the Mac, Now It’s Time to Do the Same for Apple TV

  • The main thing I love about the Apple TV 4 is mainly Bluetooth audio, so I can finally use bluetooth headphones with it. I don’t know if anyone at TMO has heard of this company which earlier this year began making bluetooth devices to turn older Bose QC25 and now QC15’s into bluetooth devices. I bought both products and its been to nice to use my Bose NC headphones with the Apple TV now.

    I am sad the Apple TV hasn’t moved along so well but I live in Canada and content is so limited here anyway. I am glad some improvements have been made like the side slider now for long movie or tv show lists like I have. I don’t have to get RSI injuries anymore tapping into infinity just to get through my lists. I still only use a 720p and 1080p tv with my Apple TV4’s. So don’t worry about 4k much for me. I just wish there were more good apps to install. I recently found the NHK World app on there and love it. It broadcasts all day and in English. I wish there were more apps like that.

  • My wife and I used to use our Apple TV to stream Netflix. Now that Netflix is built-in on of our Smart TVs, there’s little need to fire up the Apple TV unless we want to rent or watch something I’ve bought from Apple. But of course, there are other rental options available on the Smart TV -some 4k options even- as well as other free or bundled (Prime) streaming services.

    It’s getting harder and harder to even find a non-Smart TV. Even if Apple comes out with a 4K box, they are still going to have to compete with the built-in Smart TV apps, which are usually a click or two away, rather than powering on the Apple TV, switching inputs etc..

  • A couple things about that WSJ article;

    First, “people with knowledge in the matter” was somebody at one of the studios who was apparently making an educated guess (they didn’t say.) We also don’t know exactly HOW educated this guess is because apparently corroboration isn’t a thing anymore.

    Second, I’m sure iTunes initially enjoyed a huge share of the tiny streaming/download market back in the heady days of getting Netflix DVDs in the mail. Even given iTunes’ smaller (we guess) share of the current market, I imagine the volume now is ENORMOUS in comparison but we don’t know because I’m pretty sure the article didn’t even address this. Apple IS failing you know.

    Drawing conclusions founded on such limited and unsubstantiated data would seem a bit short-sighted.

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