I’m skeptical of how well Apple’s upcoming streaming video service will perform. A Netflix clone with Apple-produced programming could become the HomePod of the streaming video market; Apple’s install base and marketing clout keep the service limping along but otherwise struggles for mainstream adoption.
I’m bearish on Apple’s video plans because they don’t align with the company’s strengths. Apple’s excellence in design won’t keep a streaming video service afloat. Consider the UI that powers existing services. Even with rapidly growing user bases, their interfaces are at best pedestrian (Amazon Prime), at worst an unintuitive mess (Netflix, Hulu). Frankly, most viewers don’t care; 95% of the time in-app is focused on watching, not browsing.
Apple’s top-down, detail-oriented management also may be antithetical to giving content creators creative independence. As reported in the New York Post and other outlets, Apple execs are rumored to be micromanaging show content to appeal to a broad, family-friendly audience. While this management style can work wonders for hardware design, for video content it can stifle creativity and delay releases.
Given how much of Apple’s new service will be on non-Apple devices, Apple’s hardware excellence and ecosystem connections (e.g. Airplay 2) have limited impact. Built in TV apps are slow and buggy but remain convenient and popular. There are also millions of streaming boxes Apple will want to be on to secure a broad audience. In all cases, Apple is building software on foreign hardware.
And while Apple’s usual playbook is to enter a market late and dominate, there’s fierce competition waiting for them in the video space. Both Netflix and Amazon enjoy a head start of several years. Netflix’s original content has a quantity and variety that will be difficult for Apple to match. Amazon has less but its Amazon Studios wing has landed many critically acclaimed films. Both companies, unlike Apple, have an entrepreneurial, hands-off mentality around content; they’ve proven their willingness to experiment and give creators broad leeway. And the opposition will tighten once Disney releases its own service later this year. In a space where content is king, a single service that with exclusivity on Marvel, Lucasfilm, Fox, and Disney films is a serious threat.
Granted, Apple has wiggle room to succeed. Unlike with computers, smartphones, or smart speakers, streaming video isn’t a winner take all model where buyers are obligated to stick with one brand. With cord cutting on the rise and more video services popping up in its place, it is inevitable viewers will subscribe to multiple subscription services to watch everything they want. Apple’s service doesn’t have to be a viewer’s first choice; as long as they get their subscription money, Apple is happy. And with Apple’s cash reserves and brand clout, they will bring in top tier talent, Oprah and Reese Witherspoon apparently among them. As with Apple Music, a default TV app on every iOS device generates an audience.
But subscription fatigue is real; there’s a limit to how many subscriptions viewers will pay for, and content should dictate that limit. This is another reason original content is so important. Again, Apple has an uphill climb in this department. A slick UI and integration into iOS can’t rival the next must-see TV show on Netflix or Disney+.
One underrated revenue generator for Apple could be fees for add-on services that accompany a streaming subscription. For instance, with Amazon Prime buyers can add an add-on subscription to the HBO app and watch content from both Amazon and HBO seamlessly within the same app. Amazon takes a cut from HBO as part of the process. This is where Apple can leverage its design strengths to be a differentiator; if I’m considering different services to power add-ons with the same content and price, but the integration is tighter on one — speed, hardware, UI — I’m more likely to stick with that option. A strong design drives more add-on subscriptions, which could create a snowball effect on revenue. That revenue in turn gives time for Apple to shore up original content. The existing TV app on iOS and tvOS is already a gateway around other add-on apps; I could see a revised version of the app and larger bundling deals as part of Apple’s streaming strategy.
Thanks to extensive vertical integration, Apple itself has “add-ons” within their own ecosystem: Apple Music, AppleCare, iCloud, and a rumored upcoming premium version of Apple News. An Apple-centric bundle — one flat fee for multiple Apple services — would be attractive to many existing Apple owners. It also stays in Apple’s comfort zone by keeping control in house and incentivizes buyers to stay loyal to the Apple brand.
All of these scenarios make Apple’s special event on March 25th one to watch closely. A creative and unorthodox pitch around bundles and Apple’s internal ecosystem gives room for Apple to succeed. If instead the company leans on safe, celebrity-filled original content, the more their new service will be in danger.