Tim Cook has apparently been hovering over the services division like a nervous parent.
From Tripp Mickle’s With the iPhone Sputtering, Apple Bets Its Future on TV and News ($), posted Sunday in advance of Monday’s paper:
The original [TV] series will be delivered in a new TV app that staff have been calling a Netflix killer. It will make it easier for people to subscribe with a single click to channels such as Starz, Showtime and HBO, with which Apple has been negotiating to offer their shows to users for $9.99 a month each, people familiar with the talks said…
Mr. Cook, who had vowed earlier that year to double Apple’s services revenue by 2020, began meeting regularly with the services division.
At the monthly sessions, the 58-year-old CEO has peppered the team with detailed questions. He wanted services team members to tell him which apps were selling well, how many Apple Music subscribers stuck with the service, and how many people were signing up for iCloud storage, a costly service that required spending billions of dollars to build data centers around the U.S., according to people familiar with the meetings.
The turning point for Apple management, according Mickle, came well before its 2014 acquisition of Beats’ music streaming service:
By then, concerns had already been rising inside Apple about the iPhone’s future. The number of devices Apple sold was growing more than 20% annually as Mr. Cook pushed it into new retailers and markets, but sales executives told colleagues in 2014 they were running out of avenues for easy growth, former employees said. “They were freaked out,” one person said.
Apple executives made clear during talks with TV makers that it needed as broad a reach as possible to compete with Netflix and others. Last year, Apple announced a similar agreement with rival Amazon to bring Apple Music to Echo smart speakers.
“We made a mistake with Apple Music, thinking we could go it alone, and it took a long time to catch up. We still aren’t there yet,” the head of marketing Apple services, Jon Giselman, said during a meeting with one of the company’s partners, according to a person in attendance…
Other successful subscription apps have given away much more content at lower prices than Apple is expected to offer initially. Amazon Prime members, who pay $119 annually, get free video content and discounted music subscriptions. Some inside Apple’s services group wanted similar benefits for iPhone buyers. Mr. Cook and his leadership team have made it clear that its forthcoming services will carry a price tag.
“There’s this conflict between wanting to become a services business and acting like one,” said the person. “They haven’t solved that.”
My take: A good appetizer for Monday’s event, with more than the usual helping of original reporting—including this fun fact from within Mickle’s own shop:
The deal [with Apple News, first reported by the New York Times] will result in the Journal hiring more reporters focused on general news to help feed Apple’s product, one of the people said. The Journal sells its own subscriptions for $39 a month.
The WSJ article was an interesting read. My only quibble with the story is its opening premise “the iPhone is running out of juice.” Apple is a multi-platform enterprise with an installed base of iPhone users that is growing by the day due in part to the robust global market for pre-owned iPhones and the market for new iPhones despite the highly cyclical nature of those sales.
This massive market position, when combined with the hundreds of millions of iPads, Macs and Apple TVs in service around the world, provides the Cupertino-based company with a spectacular opportunity to transform the market for streamed media.
The context for Apple’s initiative isn’t the cycle of new iPhone sales but the implosion of the cable TV paradigm which was far more costly than anything Apple will announce tomorrow. Having “cut the cable cord” five years ago, my net savings over that time works out to about $6,000.
As an Apple TV owner, I already subscribe to select content providers mostly through iTunes. If Apple provides even more convenient access to an attractive range of content options all through one app or one service and combines it with its own original content, I’m apt to consider it a bargain and an option for even greater convenience. Apple’s well-known position on consumer privacy is a “value added” for the anticipated new service.
” The context for Apple’s initiative isn’t the cycle of new iPhone sales but the implosion of the cable TV paradigm which was far more costly than anything Apple will announce tomorrow. Having “cut the cable cord” five years ago,”
Okay. So where have they been for at least the last five years?
Watching, waiting and planning. Please remember Apple Music didn’t come together all by itself. Disney, which is planning its own streaming service to be rolled out by the end of the year, has also taken its time before venturing into streaming on its own and Disney’s available content is in a league of its own.
Disney is in a league of its own and while it “has also taken its time before venturing into streaming ON ITS OWN”, it has been actively participating in Netflix and Amazon gathering statistics to determine how well it will manage by itself and THE with its catalogue has been on its own for a few years now. Meanwhile Apple hasn’t been just watching, waiting and planning. It has actively been working to get on board. Four years ago, Apple was expected to announce a skinny bundle. Never happened. So again, what took so long. I wouldn’t doubt it’s Eddie She’s arrogance.
@ S:
Content creation and services in general are a Big Deal for Apple, which will soon be approaching a billion iOS devices in the wild. Sure, some of them are dupicates (my wife and I each own an iMac, an iPad, an iPhone, and an Apple Watch, and we share an Apple TV). But that still leaves a couple hundred million potential customers.
Speaking of Apple Watch, Apple was “slow” entering the smartwatch market too. Even so, their product wasn’t polished. But it TOOK a polish, and that’s the value of taking the time to do things as close to right as possible.
How many new Apple customers is the Apple Watch enticing into Apple’s ecosystem? Or AirPods? And so on. Apple wins when it takes the time to do things right.
“Apple wins when it takes the time to do things right. ”
You could have raised a child to a teen in that time frame. They’ve been at it longer than the iPhone or watch.
Apple’s cord-cutting TV service: What took so long? From a piece published March 17, 2015
” Apple has been trying for nearly a decade to find a way to let you watch the programs you want without having to pay for channels and services you never use.”
This fiscal year Apple’s Services revenue alone will be in the range of 3x the total revenue of Netflix. Spotify has yet to turn a profit. While Apple has also been in the business of distributing movie content for as long as I’ve owned an Apple TV, it takes time to develop and deliver original content.
As I said earlier, Apple Music didn’t create itself and while the company has also been working for years on what will be announced tomorrow, creating profitable services components takes time. I certainly won’t fault Apple for taking time to develop original content and introduce both streaming content and news distribution services as the company plans to do tomorrow.
What would you have done differently?
I would take stock of my strengths and weaknesses and recognize that a strong leader with proven success is necessary to build my catalogue not a music industry insider. . I wouldn’t have produced Planet of the apes as my first foray into video. Wouldn’t have waited so long to follow up. Like Amazon, Apple has data to show what it’s customers areas and watch. If he’s that As a basis to introduce new content and possibly give iTunes users take sneak peek to see if there is interest before committing to a series As has Amazon who now support over 100 channels, I’d build relationships and add them in to y offering. By waiting, Apple has lost the initiative to catch fans who could be satisfied with the service they have now. Netflix and Amazon have years of buzz and awards from their shows. Apple has no track record but big stars. They can bring eyeballs but if the shows aren’t good, that’s it. As for your revenue, what’s Apple’s strategy for the overseas markets The others are over there as well.
I’m far less concerned about the revenue generation of the new services than I am about Apple’s overall customer satisfaction and attachment to the platforms. Overall I’m looking for higher levels of customer engagement and a widening of the company’s economic moat.
I’m reserving judgement until after the announcements. Apple is a huge enterprise and I don’t expect everything that’s planned to be announced tomorrow. I do expect the company to reveal an impactful news distribution service and begin forays into greater streamed content distribution with original content offerings to create greater interest.
Again, I don’t expect a fast start. I do expect a credible start and the announcement of attractive original content to create interest. As of this moment I’m apt to subscribe to both services (news and streamed entertainment content). If Apple is able to bundle streaming services (especially services to which I don’t already subscribe) I’ll consider it a win for the company and for consumers.
I don’t expect a “Netflix killer” nor do I consider this an either or, zero-sum game. I doubt I’ll have cause to cancel my Netflix subscription tomorrow. But my HBO NOW subscription may be on the block following the final season of Game of Thrones and I’ll figure out what to do about Hulu Plus. I don’t mind spending more on a monthly basis for news and entertainment content. I’m looking forward to what Apple will deliver tomorrow.
If Apple approaches this the same as everyone else, it’ll grow slowly, and eventually they’ll develop a following. As long as enjoyable, quality content is available, a market will consume it. If it makes it easier to consume other’s content that is also enjoyable, quality content… well that’s when the infamous Apple steamroller will come along before the competition realizes what has squeezed their profits from them.