Why an Apple TV Is Not an iPhone
The new, still-theoretical version of Apple TV won’t disrupt the TV industry. It will play by the TV industry’s rules.
Whatever, comes the response from some of Apple’s most ardent fans. That’s what they said about the iPhone five years ago, and now look what’s happened.
True enough! And we should also note that there’s a scenario where the new, still-theoretical Apple TV plays by the TV industry’s rules and does very well for Apple.
But we should also point out that a TV box is not a phone, and that the parallels fall apart in some crucial places.
The biggest difference: In the case of the phone business, Apple ended up revolutionizing the way handset manufacturers worked with the mobile carriers.
With TV, if Apple really wants to re-order things, it will eventually have to negotiate with two different industries — the pipe guys and the content guys — who are both quite happy with the status quo. Their interlocking interests are what make the TV industrial complex so successfully resistant to change.
And here’s more along those lines from a great Bernstein Research note, which teases out the implications for Apple, the cable guys, the content guys and the tech guys like Google, Netflix and Amazon.
Bernstein’s analysts believe the Apple as set-top box scenario is “perhaps the least disruptive model one can envision for Apple’s entry into Pay TV.” But even getting to that point will be a challenge, they argue:
While similar challenges have been overcome in the mobile telephony market, the challenges here are far larger and more complex.
First, the distributors in video share in the economics of the content that they deliver. Cannibalization matters.
Second, the Pay TV business has no analogous hardware subsidy model to the one that prevails in post-paid wireless.
Third, the U.S. cable industry has become accustomed to near complete control over the development of set-top box and cable modem technologies (e.g., all the MSO-sponsored Cable Labs work on DOCSIS and tru2way).
Fourth, cable MSOs are clearly advantaged over their telco and satellite competitors when it comes to distributing a device that supports both linear and Internet TV – for reasons of both scale and ability to integrate broadband –giving them disproportionate negotiating leverage.
All of these factors make it harder for any device manufacturer to strike a favorable deal with the largest MVPDs. A successful conclusion to the “talks” reported by the Wall Street Journal is by no means a foregone conclusion.