3 Reasons Apple’s TV Subscription Service Failed

| Editorial

The Holy Grail. Over $100 and rising.

We now know that Apple has likely suspended its efforts, for the time being, to offer a TV subscription service. We don't know the intimate details of the negotiations, but it's possible to make some good guesses as to why Apple has come away empty handed.

Basically, it's all about industry growth and money.

1. Zero Sum Game. Apple's vision is to offer just the local stations and a few major cable channels that people want to pay for in a subscription package. The focus is on the customer: ease of use, low, easily cancelled payments and few if any ads. The specter here is that if Apple were to pull away several million customers from satellite and cable carriers, the total revenue pie would be decreased.

To make up for that, there were reports that the content providers wanted to be able to insert (unskippable) ads, Hulu style. Without a DVR, such a subscription, streaming service would be unappealing to most potential Apple customers. Impasse.

2. The Business Math. CBS, NBC Universal, and ABC are all part of a bigger network of shows typically provided in the satellite or cable subscription bundle. As a simple example, ABC owns ESPN (Actually both owned by DIsney now.), NBC Universal owns USA Network and SyFy. CBS owns the Smithsonian channel.

When carrier bundled packages are large, these secondary channels, even though they don't carry the same price tag, get included and paid for. There is revenue for the parent company even if subscribers never watch, say, the SyFy channel. With that larger, sometimes, $100 plus monthly bill, the carrier also gets to take a bigger slice in dollars. Even though the carriers and the content providers squabble, the content providers know that, for now, they need healthy carriers.

To make up for this potential loss to Apple, "Bloomberg said that unspecified media executives expect Apple, Amazon, and other new Internet-based distributors to pay more for their content than cable and satellite companies." Impasse.

3. Fear of Apple. Apple is famous for creating a good relationship with the customer. Its hardware is good looking, easy to use and dependable. Apple has legendary customer support and a formidable set of retail stores with friendly, helpful staff. The carriers, on the other hand, are not well loved and use contracts that have steep cancellation fees to retain subscribers. That has the virtue of keeping revenue in place, and with annual increases in monthly fees, assured growth. Apple's model threatened that.

And while the content providers don't have as big a stake as the carriers, the carriers are still important. It's not wise to damage their financial health too early in the transition to all Internet TV that's coming down the road. Impasse.

The Consumer Conundrum

As consumers, we always want to pay less. We explore technical means and also alter our viewing habits to fit our (sometimes shrinking) budgets. There emerges, as a result, a meme about how things should go that conflict with the complicated business dealings and goals of the TV industry.

So when a company like Apple comes along and threatens to settle for very minor profits as it proposes to cause a net loss in total industry revenue, the natural reaction by the entrenched players was likely, "Hey, you can have this service so long as our total revenue goes up, you don't threaten our business partners, the carriers, and we get to control the relationship with the viewer. Here are our terms for that."

That impasse probably led to the suspension of talks.

However, my prediction is that in 15 years, the satellite carriers will be gone and the cable companies will no longer be providing TV content via coaxial cables. Cable companies like Comcast that protected their future by becoming ISPs will survive and flourish. At some point in the future, it will make business sense to let Apple become one of just many Internet carriers of streaming TV — as incremental, positive growth is preserved.

We—and Apple—will just have to be patient.


Teaser image via Shutterstock

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There is another factor I don’t think the content providers or cable companies are thinking about. Let’s call it the hipster factor. In my case I am finding I just watch less and less of anything on TV. I’m more likely to watch YouTube or other Internet video sources or rent a movie from iTunes or play a game. Now I’m NOT trying to be a hipster that goes around saying I never watch TV but that IS becoming the result. I used to get home and turn it on as background noise even if I wasn’t watching it. We’d rearrange our schedules for “our shows” each night. That’s not happening any more. Last summer my wife was away for a couple of weeks and I turned the TV on exactly twice, both times to watch a rented movie. If it wasn’t for my wife’s fondness for NCIS/Bones/Castle and their ilk we’d have dropped cable already. This morning though, she said “You know, it seems like most of the new shows are so dark…” I can see her not finding new favorites on commercial TV when her current favorites reach the end of their run. At that point we would have no reason to not cut the cord. A number of our friends already have. No cable, no Apple TV, no Roku, No Amazon Prime.

The powers that be might find that while they’ve been haggling over ways to keep the cash cow going, a major part of their audience has given up dairy.

(By the way. I posted a similar note on Brian’s article on the same subject earlier today. However it wouldn’t post, it never appeared. I’m finding that happening more and more often on TMO. If your comments have been dwindling it might be because a fair number of them just go into the bit bucket.)

Lee Dronick

If it wasn’t for my wife’s fondness for NCIS/Bones/Castle and their ilk

We should form a support group smile

John Martellaro

geoduck, Lee:  NCIS/Bones/Castle - Add me to the group! But I get to add Madam Secretary and Longmire.

John Martellaro

In a good way, I meant.  Not ilk.

Lee Dronick

And let us not forget that the Christmas season started on the Hallmark Channel before the decorations went up in the shops. smile

There is some good stuff on TV, well stuff that I enjoy. 3 Scientists Walk Into a Ba, Star Talk, A Taste of History.


While the content providers and carriers are married to their cash cow and milking it even more; they have their heads stuck under the udder failing to notice ticked off customers not wanting to be fodder and leaving.

$600 to $1200 a year for hundreds of channels that will never be watched is not my idea of a business plan with a future. Per year it costs us $100 for Netflix (Murdoch Mysteries, Midsommer Murders etc.) + $50 in iTunes movie rentals + $60 in iTunes season passes (Once Upon a Time, Downton Abbey) for a total of $210. We watch what we want when we want ad free. We do have a modest library of purchased shows and movies to fill in empty times.


I’m another cord cutter who agrees with the above comments. We don’t get Over The Air reception and haven’t watched TV for 8 years or so. We use Netflix almost exclusively. We got cable briefly in 2012 for the summer Olympics, and we’re dismayed at the volume and volume of commercials—loud and constantly in your face. Wasn’t cable supposed to be mostly ad-free? We also agree on the darkness of shows—and movies—these days. (IMO Madam Secretary isn’t half the show West Wing was, and with too many dark themes.)

To me, the carriers and content-providers are engaged in massive restraint of trade that’s hurts millions of consumers financially every month. Apple’s DOJ troubles are a faint shadow of the woes TV folks would be in if similar action were taken against them. Imagine Barnes and Noble or Amazon saying you got to buy these other 19 books, of our choosing, if you wish to buy that one.

TV is just another instance where unlimited campaign contributions and constant campaigning for office—complete with awful commercials—adversely affect consumers’ lives. Sadly, most Americans have given up, either not voting, or voting for the politicians who want to keep these huge bribes as part of our political culture.

John C. Welch

It cannot have failed. Nor can it have succeeded. It never existed. A thing that was never implemented or started cannot fail, or succeed anymore than a Unicorn can lose the Kentucky Derby.

By this standard, Apple’s Television Set was an Abject failure, as was their airplane, starship, lunar mining colony and clone farm.

This is the kind of thing one expects to see from Gawker.


And I thought I was the only one watching Longmire

John Francini

The nut that streaming services have to crack to get me to cut the cord is live sports. Most of the people I know who are cord-cutters could not care less about sports, so it’s easy for them to cut. But since I like the NFL, MLB, and NHL, and I want to be able to watch them while the games are actually being played, live, I’m somewhat still stuck on cable.  Fix that and I too will be cutting the cord.


More Baby Boomers likely to cut the cord with cable, report says

About one fifth of current subscribers are thinking about cord cutting or trimming,…
  One reason is that while subscribers are paying for an average of 194 channels, they regularly watch only 17.
  And while adults 18 to 24 were 67 percent more likely to say all they needed was Netflix or Amazon Prime, the report found that people ages 50 to 59 were 78 percent more likely to be “cord nevers.”


@Jfrancini Yep, wanting to see live sports is a pretty expensive proposition. If Apple could make any inroads there, it would be fantastic.

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