Apple’s Attitude Towards the TV Industry Is Well-Founded

7 minute read
| Columns & Opinions

It’s a battle between two corporate giants. In one corner we have Apple. In the other corner is the networks. Neither side needs the other. Each side would like to gain, by agreement, from the other’s strengths. Neither side wants to give in much, thinking they know a lot about their own industry. How will it end? Which side is better prepared for the future?

Apple's TV future

The Particle Debris article of the week comes from Shalini Ramachandran and Daisuke Wakabayashi at the Wall Street Journal: “Apple’s Hard-Charging Tactics Hurt TV Expansion.” The article recounts, from sources, Apple’s recent history of (failed) negotiations with the various networks to deliver a streaming service.

In terms of reporting, the authors present an interesting story of how Apple’s Senior Vice President of Internet Software and Services Eddy Cue has approached and negotiated with network and cable executives over the years. Mr. Cue has sought to develop a new growth area for Apple that include streaming TV and set-top box services.

An underlying theme of this article is right up front. The authors declared that “In search of its new big thing, the company has alienated cable providers and networks with an assertive negotiating style; ‘time is on my side’.”

That editorial approach to the article and the hasty one-sidedness in favor of the networks and cable companies overlooks something important about Apple.

The Long Game for Apple

Apple is a company that is acutely tuned in to the trends in its own and closely related industries. While we often lament the rate of change, there is no doubt that Apple takes pride in both moving consumer electronics technology relentlessly forward and understanding trends. Apple almost always knows where the majority of its customers are headed. A recent example is Apple Music, a recognition of the shift from purchased to streamed music.

When a company that lives in the future confronts a well-entrenched and financially lucrative TV industry, there’s going to be some head-butting. The TV executives would argue that they’re not like the desperate, helpless music executives of the past. They’re wealthy and intend to stay that way. The WSJ authors note, with a bit of sarcasm:

For the past 15 years, Apple has barreled into industries from music to mobile phones, persuading established companies to go along with Apple’s way of seeing the world. In the early 2000s, Apple co-founder Steve Jobs muscled music labels into selling songs online for 99 cents apiece instead of CDs for $15. Apple gained huge influence in the music industry, which saw sales fall but found a way to battle the existential threat from digital piracy.

Conversely, one might argue that if AT&T’s CEO Randall Stephenson hadn’t gambled on the original iPhone, persuaded by Steve Jobs, that AT&T wouldn’t be where it is today. Plus, we’d all me using Motorola RAZR 3s and BlackBerrys.

What’s really at stake is which of these entities can move into the future the fastest with the most grace, technology and consumer appeal. Clearly, the trend is toward a different kind of TV viewer experience and character of the content. Apple, in part, drives the underlying technology. On the other hand, not many see vast technical expertise being displayed by the TV industry. Nor do many foresee a healthy future of TV delivered over coaxial cables to DVRs and mass market, mediocre content obliterated by 18 minutes of advertising per hour.

Network TV is still riding the wave of an advertising model developed in the 1950s. It’s been refined, rationalized and milked into a giant industry today.  However, it’s beginning to show signs of cracking. When customer prices are raised not because of a better product but because of an implicit tradition of showing growth on the backs of the customer, the customer rebels.

In particular, Apple wanted to freeze for several years the monthly rate per viewer it would pay to license Disney channels. TV channels usually get annual rate increases and rely on them to fuel profit growth.

For example, for a long time now, the Holy Grail of the cable TV industry was to get all monthly bills to US$100 and then go beyond that. Contrast that to many who find that $9 for a monthly Netflix subscription provides all they need. The only reason more people haven’t cut the cord is because they’ve been maneuvered into difficulties and impediments. That will change.

Apple’s Recourse

The disruption of the TV industry has started, and it isn’t going stop. Apple’s Eddy Cue knows this, and that’s why he is reported to have told some media executives:

Time is on my side.

It really is. Reading between the lines, the WSJ authors cast this remark as arrogance. But it really does reflect Apple’s approach. A related industry can move into the future along with Apple, whether engaging with iPhones, iPads, health management or music. Or Apple can figure out for itself how to navigate forward until the more backwards players finally see the handwriting on the wall.

Eddy Cue’s patience has likely worn thin. Apple has tremendous prestige, influence, technical acumen and financial resources. My money is on Apple to take us forward.

Next page: The Tech News Debris for the Week of July 25th. Are you a robot and don’t know it yet?

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wab95
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wab95

John: While you’ve provided much to choose from, the topic that resonates most with me, shockingly, is that of ‘social media and science’. This is an issue that I have dealt with, both personally and professionally. I will use vaccines as an example, but the phenomenon can be applied to other topics as well. A while back in advance of one of my peer-reviewed publications, in which we found epidemiological and clinical evidence to support a specific vaccine trial in a population hitherto untested, Nature Magazine featured that upcoming publication. Members of the anti-vaccine lobby objected to our ‘subjecting’ innocent,… Read more »

geoduck
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geoduck

Are we becoming more robotic? Is technology impacting the way we interact, making us more antisocial?
http://i.imgur.caom/WkHHpZ1.jpg

CudaBoy
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CudaBoy

I remember when cable was $12.99 a month and it included ESPN and what later was a “tier” that cost more. Over the years the source material didn’t change – only the bill went up. Oh yeah, and then they took on COMMERCIALS defeating why they were hip to begin with!! Homey don’t do commercials. After the bill went over $60 I fired Time Warner and never looked back. I get HD broadcast free via rabbit ears (about 60 channels), I use foreign servers for sports; been streaming music since way before Apple even thought about streaming music…that’s it. Cherry… Read more »

Jamie
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Jamie

For me the choice between paper books and electronic ones is based on what I need them for – it just makes sense to have some things on my devices for easy perusal anywhere and others to luxuriate over in my free time, particularly heavily image oriented books that definitely lose something in the translation to a screen. I do a lot for reading for research and educational purposes, and it’s very handy to have those on a phone or an iPad. And yes, people are definitely becoming more robotic, even binary, I would say. Unfortunately everything else about us… Read more »

Brutno
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Brutno

John, Thanks for the article, as always. I do think you underestimated the amount of time advertising comprises on TV. Here in flyover country it’s easily 22% or greater for prime time major network programming.