The Television Revolution

In an uncharacteristically long post from The Loop titled The state of Apple’s TV quest, Dave Mark made an interesting observation regarding Apple’s alleged impending entrance in to the television industry. The pertinent sentence — cited below — draws a parallel between the music industry prior to the introduction of iTunes and the television industry of today:

“Just as happened in the music space, companies like Apple act as a disruption to an existing business model.”

The Apple TV is the iPod of 2001; combined with the iTunes Store and Apple’s plans for television, I predict we will see a revolution of the television space in the very near future not unlike the one that took place circa 2001 when Apple took the music industry by storm. So rather than repeatedly posing the inane question of whether this revolution will take place or not, let us conjecture as to what it will look like when it does.

In the recent past, Apple has come out with two services I consider indicative of its burgeoning television strategy: iTunes Match and iTunes Radio.

With iTunes Match, in return for a nominal annual fee Apple gives its subscribers the ability to replace existing audio files with high-quality versions, back up their entire music library, and access that collection from a wide range of devices. A strategy derived from this portfolio could simultaneously obviate the existing market for time-shifting television viewing and greatly improve it as well. Not to discount the significance of this innovation, but even more interesting than a superior DVR service is the possibility of universal access to television content this strategy could enable, much like the cross-device access iTunes Match makes possible for music. I would love to see Apple push Time Warner Cable and HBO’s apps out of the market, their services no longer necessary in world where watching Suits proves no more difficult on my iPad than on the big screen in front of the couch.

In addition to the innovations Apple could make in the delivery of television content, iTunes Radio could indicate a possible innovation in its presentation as well. Based on the brief preview at WWDC, an iTunes Radio-like TV service may offer an ad-free tier for those willing to pay a premium. And since I’m already flying in the face of everything the television industry stands for, let me offer up another possibility: an a la carte program offering.

While you reel, let’s take a step back and look at the current lifecycle of a television series.

Sons of Anarchy premiered in September of 2008. Just shy of a year later, the entire first season came out on DVD for somewhere in the neighborhood of $40 based on the selling price of the current season. Over the life of that season, then, the producers received ad revenue during its initial run, and then $40 for every superfan who purchased the box set. On a viewer-by-viewer basis, I find it extremely hard to believe that ad sales generated more revenue than sales of the box set. Operating under that assumption, it follows that a great way to generate more revenue per viewer would be to somehow incentivize each of them to shell out $40 for the season.

Enter Apple. For a yearly fee — certainly greater than iTunes Match’s $25, but likely less than the exorbitant cable rates — subscribers gain access to a decentralized, premiere television experience. Depending on the selected tier, subscribers may or may not be subjected to intrusive ads. Offering two tiers would keep the existing ad model intact as a certain subset of users opt for the cheaper, ad-infused experience as was the case with the ad-supported Kindle device, while simultaneously satisfying the users willing to pay more for an improved experience with the added benefit of zero ads.

The chosen tier would also effect the price for channel and show subscriptions, which could range from relatively cheap for popular channels to more expensive for shows traditionally not available in America, for example. Subscribing to an individual show may also offer additional advantages such as immediate availability similar to Netflix’s House of Cards. With enough incentives, Apple could easily entice both casual viewers and superfans to shell out an extra lump sum for Downton Abbey‘s latest season, boosting the producers’ revenues by striking the balance between the millions of viewers who watch ad-supported television and the hundreds of thousands — if even that — who purchase box sets months after the final episode airs. Skewing the incentives too heavily toward individual show subscriptions could prove problematic as the a la carte model’s detractors often point out, but I am confident that Apple could strike this balance with relative ease.

Unlike most television theories concerning Apple, this one requires no iTV or dedicated hardware other than the preexisting Apple TV. Yet despite its modest hardware requirements, it possesses the potential to turn the television industry on its head. The infrastructure is already in place; the only hurdles remaining are shrewd deals and large cash expenditures, neither of which have proved particularly difficult for Apple in the past.