Much as I’d like to claim some prescient vision of the future, the fact that Dmitriy Malchanov and I participated in a webinar this week entitle “Pay TV’s Uncertain Future” and Apple’s re-launching of Apple TV are merely coincidental.
While many were expecting Apple to come out with a new version that would radically reshape the video consumption model, the new version of Apple TV is essentially the same as the older version with the addition of some key content partners, a reduced price and footprint. It is an innovative design–no shock there–and it definitely will appeal to Mac heads and a niche of the TV viewing audience.
However, I must diverge from an emerging thought stream including a blog from my colleague Benoit Felten that Apple has just sparked the fire that will eventually burn down the pay TV business and linear programming in the same way the iPod radically disrupted music. I’ll concede that for certain segments of the viewing audience the new Apple TV is yet another reason to rid themselves of the pay TV bill. I also will concede that in European markets where content on public broadcast stations dominant the ratings, there’s a compelling argument to be made that for those who don’t need or want to pay for live sports and are content to wait a few days for traditional linear content.
Instead I believe Apple TV is just another nudge toward a market trend of U.S. consumers reducing their overall spending on pay TV. It is not a revolution that spells the end of the linear business in large part because Apple TV or any other retail set-top box can’t replace ALL of the content that consumers want. And based on the current configuration of media ownership, it’s not likely that they’re going to get a significant amount of content on a timely basis.
Getting Fox and ABC to sell shows a day after first airing a big step. Getting Netflix is nice but the number of retail STBs and gaming consoles that don’t carry Netflix streaming is vanishing. What’s missing is the other two big networks. CBS has been reticent to provide much content outside of its own site and NBC along with a massive “cable” network lineup is about to consumed by Comcast, which is highly unlikely to give anything up to Apple that further erodes the core business. This is to say nothing of the pressure pay TV operators will put on programmers during carriage fee negotiations.
There’s also an argument to be made that a move all on-demand viewing will further consolidate media and blunt creativity as consumers only focus and pay for what they find familiar but that’s a debate for another time.
In Yankee Group’s 2010 U.S. consumer survey, 17% of respondents said they never would cancel in favor of Internet-based options. That’s dropped slightly from last year but what’s most interesting is that among that group, an overwhelming majority said they won’t let go because of the breadth of content and ease of use.
While Apple TV, other retail STBs and gaming consoles have a lot of content, they don’t have the full gamut and aren’t likely to get it for some time. And ironic as it might sound, pay TV customer service is likely to be a competitive differentiator.
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