The streaming TV business is a hard business to break into. Customers have enormous choice in an overloaded market. Money is tight. Apple knows that.
Free is good.
Recently, we learned “Apple Hoping to Drive Original Content Interest with Free Shows.” According to the reporting, Apple customers will be able to use the TV app on their iPhone, iPad and Apple TV to access Apple original content for free. There are some extra details, but that’s the essence.
Not mentioned is how long and how much of the content will be free—if the reporting is accurate. And that’s the key issue. So there’s a lot to think about.
I first explored this subject in the article linked just below here. I dubbed Apple’s service Apple Entertainment Television (AET). The assumption then was that Apple would charge, out of the gate, for its own original content.
Apple will want to enhance its services business, but it’ll be interesting to see how the company, with modesty and charm, seeks to delight us. When you’re the new kid on the block, strong-arm bundling and platform provincialism just gives customers another reason to both complain and stay with what they know.
One thing to look at is how long Apple can burn bucketfuls of money by not charging at all. That depends on the financial basis of the content as well as whether the incremental sales of those three Apple devices would equal a recurring, paid subscription. That’s a tough calculation, best left to Apple. It might work, but I just can’t believe Apple would go the free-forever route.
My working hypothesis is that Apple will, in fact, follow the industry practice of, at some point, gently boiling the consumer frog. That is, give a service away for free until customers just can’t live without it. Build a track record. Then, eventually, start charging.
The reason I think this is because Apple is building a very profitable services business. To give original content away for free, forever, doesn’t make sense. (I could be wrong.) But free, introductory offers are tried and true.
The question is, how long will it take for Apple to start charging?
My guess is one year. My colleagues disagree with me. They’re in the 30, 60, 90 day camp. Or else the camp that some introductory episodes will be free, but not the whole series. I don’t like either of those ideas, and neither do I like the idea of making some shows free and others not. That’s just a guaranteed path to customer frustration. My own reasoning for a year-long, everything free trial goes like this:
- It’ll take longer than 90 days for the average customer to frequently visit, explore, digest, and commit to Apple’s various offerings. Make it part of their TV life.
- Apple would probably like to avoid the crass commercialism of 1) Sign up for 30 days free, 2) If you don’t cancel, Apple will bill your credit card and make it annoying to cancel. It may have worked with Apple Music, but I think people approach the TV subscriptions differently because there are so many to select from. Rather, give customers a year to appreciate what Apple has accomplished. Then pay up enthusiastically.
- 30 days is certainly not enough time to convince a customer that it makes sense to terminate a subscription to any of the other services. It’s a zero sum game. Customers only have so much money to spend on all their subscription services. Apple’s gain is everyone else’s loss.
- Play the long game. In ten years, the delayed revenue from a year-long free trial period will be long forgotten. Apple will accrue hundreds of millions of happy, paying viewers. The problem of breaking into this market will have been solved.
Of course, all this is speculation. The original reporting could be a leaked, trial balloon. The best part, however, is that the community gets a chance to digest and react to potential Apple plans. How would you like to see this all play out? Let me know in the comments.