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Why Apple Still Doesn't Have a TV Strategy

Monday, June 7, 2010, 09:58 AM ET
posted by: Will Richmond
With the race to bring online video viewing to the TV now in full swing, I've continued to wonder why it is that Apple still doesn't have a TV strategy (or if they have one, why they haven't articulated it). More than 3 years since introducing Apple TV, its only TV-related product, Steve Jobs still routinely calls it a "hobby" and there has been virtually no innovation around it. Unsurprisingly, its sales have languished.

Asked at the D8 conference last week when Apple is going to do something in the TV arena, Jobs replied that the "problem with innovation in the TV industry is the go-to-market strategy. There's a subsidized business model that gives everybody a set-top box for free or for $10/month - and that pretty much squashes any opportunity for innovation because nobody's willing to buy a set-top box." As a result he said, "all you can do is add a box on" and that this brings "a table full of remotes, cluster of boxes and bunch of different UIs." Jobs asserted that the only way things will change is to "go back to square one and tear up the set-top box and redesign it from scratch."



Of course, there is virtually no chance that cable/satellite/telco-provided set-top boxes are going away any time soon, which, given Jobs's definition of the problem, will leave Apple on the outside looking in as consumers hunger to view online video on their TVs. From my perspective there are at least 3 reasons Apple appears stymied.

1. Apple can't meet its own high standards - What has worked so well for Apple in its other products - excellence in product design, simplicity and customer experience - with a strong opportunity for control - can't be achieved in the Pay-TV industry. When Jobs cites the central role of the set-top box, what he's really saying is that it precludes Apple's ability to create one simple product to control ALL of a viewer's TV experiences. If Apple can't do that, then it just won't play ball.  

2. Apple's focus on devices limits its options - Jobs's focus on the set-top box reflects Apple's device orientation. Given TV's realities, that might be limiting and therefore to its disadvantage. For example, faced with the same context, Google is instead pursuing an open, platform-centric approach, so that online video content that currently lives outside the set-top box's parameters can reach the TV, with rich interactivity and multi-platform potential. Plus, Google has focused on how to bring new value to the existing TV ecosystem rather than disrupting it. In short, Google's pragmatism has allowed it to see a possible way in to the TV business. It remains to be seen whether it succeeds of course, but at least they're in the game, learning as they go.  

3. The Pay TV industry doesn't want or need Apple - in both music and smartphones, for example, Apple's products held out the potential to add a huge amount of new value for incumbent players. In the Pay TV industry this isn't the case. Despite vigorous competition within the industry, virtually all participants, both operators and programming networks are doing well. Though there's plenty of speculation around cord-cutting, little has materialized. Meanwhile the industry is innovating, albeit at its own pace. In short, a game-changing approach from Apple that disrupts the current business model isn't welcome or required by any of the incumbents. No doubt Apple heard this loud and clear when it recently floated a $30/month subscription approach.

It's still very early days in the convergence space, so Apple is by no means out of the running. But until it can figure out a way to navigate the above constraints, it's unclear what Apple's TV strategy will be or when it might emerge. At this week's worldwide developer conference we might see a new $99 Apple TV device unveiled, but if rumors are accurate, it can hardly be considered a cornerstone of a TV strategy. With Apple, we've come to expect things that are breakthrough and bold. When it comes to TV, we'll have to keep waiting.

What do you think? Post a comment now (no sign-in required).

Categories: Devices

Related Analyses:
5 Reasons Why Google TV Looks Like a Winner (05/21/10)

Tags:
Apple, Apple TV, Google


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9 Comments posted

Brad
Monday, June 7, 2010, 11:28 ET
Well, you can think of the iPad is one type of TV play and by moving the playground to the mobile space they stand a much better chance to disrupt the industry along the lines you describe here
Monday, June 7, 2010, 11:51 ET
Two more options: 1. Apple simply isn't sharing any of its newest stuff, so they may very well have a strategy in development. 2. Perhaps they wait to see where the STB and its technology will go (even if they are not going away soon): into the TV (meaning Apple may become a TV manufacturer), or into some media hub device (in need of next-gen WiFi or 60 GHz conectivity).
Roger Smith
Monday, June 7, 2010, 12:14 ET
Superb, clear concise thinking on a subject of real importance. Divining Apple's reasoning is never easy, but in pay-TV their upside down strategy of "it's the hardware, stupid" simply doesn't work. Giving away the hardware and making real money from the programming is the natural way things should go, and thankfully the various forms of pay-TV haven't allowed Apple to try to dominate with its counter-intuitive (and totally self-interested) approach.
Monday, June 7, 2010, 12:26 ET
Your analysis is right on target regarding Apple's device bias and desire to tightly control the ecosystem around any of their products. The set-top box is a critical issue. But so are a number of other factors, including the impact on monetization in the entertainment industry, and managing the quality of experience across the network. What both Google TV and Apple are missing is a strategy to optimize the experience via relationships with the multitude of service providers delivering TV services. Just consider the frustrations of a significant percentage of iPhone users when it comes to the service they receive from AT&T. When all you have is a hammer (read: hardware), then you tend to see every issue as a nail.
Wednesday, June 9, 2010, 10:42 ET
Apple does have a TV strategy, it just is not ready to talk about it. When it has a product it will announce it. Also, remember Steve Jobs used to insist that no one would want to see video on an iPod, and then of course, Apple came out with video on the iPod. Any one who thinks that Apple will not seriously disrupt the TV business eventually has not been closely looking at what Apple has been doing the last 10 years. When Apple is ready, it will pounce.
Greg Poumakis
Wednesday, June 9, 2010, 10:54 ET
The next step for Apple TV has seemed to me to replace TiVo and SlingBox with a more elegant solution. That does not seem to hard and with the way they execute would be a great alternative to better than Motorola/Cisco but not great solutions in place today.
Thursday, June 10, 2010, 02:33 ET
@Chris - I agree, it very possible that Apple has a TV strategy but hasn't let on to it yet. But for the reasons I outline above, I think there's good reason to believe that Apple is genuinely stymied here. I've long thought that a company's DNA is very hard to change. Apple is a consumer device/hardware company. It wants to make a device for TV, but that puts it into conflict with the ecosystem. Will be interesting to see if/how it can navigate competing priorities...
Andrew Simms
www.tagmotion.com
Wednesday, July 28, 2010, 12:12 ET
Great analysis, Will.
A workable TV strategy will be easier for Google because advertising revenue is their DNA.
And they'll back themselves to have consumers accept advertising in return for Google's TV service.
The falling cost of bandwidth also means it's inevitable they'll be able to make the ad model work at some point.
But for Apple, TV Nirvana would be 'pay-per-view' (like iTunes with pay-per-download).
This clearly isn't going to happen given that the pay TV industry doesn't need or want Apple, as Will says. And given the seismic shift in consumer behaviour it would require for people to pay mobile content-style premiums to watch TV.
Monday, August 2, 2010, 05:46 ET
oing to happen given that the pay TV industry doesn't need or want Apple, as Will says. And given the seismic shift in consumer behaviour it would require for people to pay mobile content-style premiums to watch TV.


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