Apple TV was written off by many but now has seemingly been rewaken from the dead! Just days ago Apple announced to spend up to 1 Billion on creating its own exclusive movie content (One, 2017) and is now hiring executives from competitors (Heisler, 2017) and striking deals with well-known producers such as Steven Spielberg. (Heater, 2017).
But why should Apple spend so much money on an unattractive market?
The TV market is already crammed with competitors. There are not only the traditional TV broadcasting networks but other companies have entered with their own internet connected TVs. There is Amazon’s Prime Video and FireTV, Netflix and various online streamers. They all are competing for consumers who only have a fixed amount of time to spend on entertainment and have a lot of substitutes and alternatives to TV: There is Gaming, Facebook or even the old-fashioned book.
Quit likely, most users interested in such a product are already locked into longer-term subscriptions, are accustomed to their current entertainment channel and have built habits that are hard to break.
The large amount of money that needs to be invested upfront already hints at the high entry barriers: The need for content. Good content. Very good content. And such comes at a very high price. Traditionally, the studios acted as the gatekeepers to content were going to charge large licensing fees. Therefore Apple first needs to create its own content that attracts consumers to buy a subscription and differentiate itself from competitors.
Currently this is simply not really an attractive market at all.
Is there any explanation why Apple is clinging on to its TV?
There might be. Adding a TV device helps to extend its current ecosystem as the TV is tightly integrated with the rest of the Apple’s offers. It also gives developers, who provide that crucial long end of the tail, now access to a TV screen to play with and to add new features. In this way this can help to increase the value of the total Apple ecosystem. Possibly, to some people it could also serve as the entry point into its ecosystem who then will stay and buy additional products and services.
Another explanation is that producing its own, exclusive content is how competitors actually can co-exist as they can differentiate on it.
Competition is going to be fierce and relentless but Apple, with >$250 billion (thats more than Amazon, Alphabet and Microsoft combined(Yourstory, 2017)), has veeeery deep pockets and can simply burry its competitors under a huge pile of cash.
Being profitable with a decent ROI after investing this much is a whole different story, though.
Heater, B. (2017, October 20). Apple hires Amazon Studios exec Morgan Wandell in push for scripted programming. Retrieved October 21, 2017, from https://techcrunch.com/2017/10/20/apple-hires-amazon-studios-exec-morgan-wandell-in-push-for-scripted-programming/
Heisler, Y. (2017, October 11). Apple is finally getting serious about original TV content. Retrieved October 21, 2017, from http://bgr.com/2017/10/11/apple-tv-shows-original-content-amazing-stories/
Ong, T. (2017, August 16). Apple is reportedly investing $1 billion in original video content. Retrieved October 21, 2017, from https://www.theverge.com/2017/8/16/16155600/apple-original-tv-content-1-billion-investment
Yourstory. (2017, May 03). With $256B in cash reserves, Apple’s war chest is larger than Microsoft, Alphabet, and Amazon combined. Retrieved October 22, 2017, from https://yourstory.com/2017/05/apple-q2-2017/
