Contentifying the Apple TV

The opinions from people like John Siracusa, John Gruber and Marco Arment about the next Apple TV have been that Apple needs its own content ecosystem, not to be chained to someone else’s. However, I don’t think that the opportunity exists for Apple to do that, and the benefits of doing so aren’t very clear.

The music and book publishers were not providing digital versions of their content. When you wanted a song or a book on an electronic device, you either put it there yourself or you took it from a pirate. When they needed the infrastructure set up for digital sales to turn piracy into a nuisance rather than a threat, they turned to Amazon and Apple, who knew how to build digital platforms.

However, the television is an electronic device, and it already gets its content from cable companies. The problem Apple faces is that this is an industry that figured out how to survive in the digital world, and isn’t inclined to give Apple any slice of that market. Cable providers already provide TV to customers, in a way that’s significantly more convenient than piracy: turn on the TV, flip to the channel the show is on.

Sure, you can pick the time you want to see it, and Hollywood is happy to oblige - but only after the show airs live. Right now, the iTunes movie store is little more than the DVD section at Walmart in an easier-to-consume (aside from DRM) form. TV is a little improved because you can buy one episode at a time, but I’m sure they would let Walmart do that if it was practical. Beyond that, Hollywood hasn’t budged, and nothing Apple can do with ala-carte sales will improve their business.

One option to get around this would be for Apple to make the Apple TV a set-top box replacement: take in a cable stream, and otherwise be an Apple TV. That alone might work, given that the Apple TV still sells on its standalone merits. A cable provider might find that if they have free Apple TV’s bundled with their packages and their competitors don’t, then they might win more subscribers.

However, there’s another option besides ala-carte (which isn’t going to win) that might give Apple the experience it wants: TV channels as apps. That would certainly be an improvement, but I’m worried about the response cable networks would have to that. Every network is at the mercy of the cable providers to get into homes - channels disappear from negotiation disputes all the time - and to threaten the existence of cable TV directly is a good way to suddenly get cut off from your viewers.

A long time ago, maybe even a decade ago, I watched an episode of Call for Help on what was then called Tech TV. A viewer called and asked why the channel wasn’t available to watch online, and Leo Laporte responded that the network would get in trouble by becoming a provider, and being in conflict with the cable company. I can’t imagine this is different now. This is also probably why many apps like ESPN’s TV application require cable subscriptions to work, and why network TV stations such as CBS, ABC and the networks behind Hulu are able to provide content much more freely.

That being said, major league sports organizations have some kind of superpowers that allow them to do whatever they want without risking the wrath of cable companies. I wonder what the threshold is for viewership and desirability that allows a network to branch out without putting everything on the line.

Apple could still do it, but it would probably have to involve an epic exodus of channels to the Apple TV. If Apple is going to do that, they have to either get in a lot of homes first, or they would have to dole out enough cash from their war chest to networks to soften the inevitable blow of the cable blackout.

The good news for Apple is that by having a desirable device that manages to supplement rather than replace cable, they will eventually be in a position to be able to provide cable-sized viewership to networks, and the risk would be outweighed by the reward. Indeed, this might be the only point in Apple’s history where dumping short-term profits for market share might actually prove more profitable for Apple in the long run, because scale is so important in this market.