What Is Apple’s TV Plus Strategy?

After more than two years of investment and preparation, Apple CEO Tim Cook revealed the final details about the company’s upcoming Apple TV Plus subscription video-on-demand service at the company’s special event on Tuesday. Cook opened the segment proclaiming, “Our mission for Apple TV Plus is to bring you the best original stories from the most creative minds in television and film.”

That is a bold statement in the era of “Peak TV,” or the “streaming wars,” when tech and media companies are spending billions of dollars to produce exclusive original content in hopes of luring millions of paying subscribers. Now that we know the details of Apple TV Plus, it’s clear that the company has a very different strategy than its competitors in the video space. Here is what we learned at Apple’s event:

Launch date: November 1, 2019.

Price: $4.99 per month.

Devices:Apple devices (iPhone, iPad, Mac, Apple TV), web, Amazon Fire TV, select Samsung smart TVs, LG, Roku, Sony, and VIZIO platforms.

Promotion: One-year free trial with the purchase of a new iPhone, iPad, Apple TV, iPod Touch, or Mac.

After announcing the $4.99 monthly subscription fee, Cook exclaimed, “All of these originals for the price of one movie rental. That’s crazy!” Of course, this statement lacks the competitive context of Apple TV Plus launching into an increasingly crowded and disaggregated market, and is somewhat akin to promoting Apple Music as “All of this music for the price of one vinyl record!

While $4.99 will be one of the most inexpensive premium video subscriptions in the market, below even Hulu and CBS All Access’ $5.99 ad-subsidized plans, Apple TV Plus will also have only a fraction of the volume of content. Cook seemed to allude that Apple TV Plus would launch with somewhere around 12 originals series and movies on November 1, but that the catalog would continue to grow at a significant pace.

According to JustWatch, a website that scrapes and catalogs the content available on major streaming services, Apple TV Plus’ catalog of somewhere between 12–38 TV series and movies at launch would be by far the lowest volume of any premium streaming service. While content catalogs are constantly changing due to licensing deals, as of this writing Netflix’s catalog includes 5,192 TV series and 3,729 movies, Amazon Prime Video subscriptions include 2,011 TV series and 22,834 films, and even CBS All Access has 105 TV series available for subscribers.

Although there will only be a dozen or so series available at launch on November 1, Apple’s pipeline of content appears poised to at least triple in the next year or so. We’ve also learned recently that the company has increased its content investments from an original $1 billion to somewhere closer to $6 billion, in total.

Two things stand out most starkly when comparing Apple TV Plus to competitive video subscription services, besides the current lower volume of content:

  • The focus on original series, forgoing licensed library content.
  • The year-long free trial with the purchase of a new Apple hardware device.

Apple has decided to invest its entire content budget into new, original, exclusive content. Unlike Disney, WarnerMedia, NBCUniversal, and CBS / Viacom, Apple is starting from scratch and doesn’t have a vast catalog of popular library content to build its service on. Instead of licensing any third-party content — which is how Netflix, Hulu, and Amazon Prime Video originally built their subscriber bases — Apple TV Plus will only feature Apple Originals. This makes sense in 2019 since licensing costs for the best classic TV series have skyrocketed as studios claw back their distribution rights in order to build their own direct-to-consumer offerings. Studios have now realized the value of series with lasting consumer demand and many episodes, and are looking to capitalize on their old content in hopes that it brings them new success.

Apple believes that investing in new, high-quality original content (which it will own in perpetuity and use to build its consumer media brand) is a better long-term strategy than continuously renegotiating for distribution rights and receiving customer backlash when they lose content, as Netflix has seen with news that shows like Friends and The Office are leaving the service.

Perhaps the most interesting tidbit we learned about the service on Tuesday was the 1-year free trial for customers who purchase a new Apple hardware device. It’s unlikely that this promotion necessarily drives massive hardware sales — it’s a $60 value, compared to hardware which costs hundreds or thousands of dollars — but it will jump-start Apple TV Plus to millions of subscribers over the next year.

Apple’s bet is not that millions of people will want to sign up for $4.99 on November 1 for a handful of shows. Instead, the company is betting that the millions of people who purchase a new Apple device find enough value (a few TV shows that they enjoy?) to shrug at the $4.99 charge that shows up on their statement a year later, perhaps similar to many of their iCloud customers. Since Apple is launching with a low volume of content — and essentially a $0 price point — consumers will notice the increased absolute volume of content over time more so than on their other video subscriptions.

Giving away a free year of Apple TV Plus to millions of customers also gives the service’s content a better shot at hitting the zeitgeist and becoming part of the cultural conversation such as Game of Thrones or Stranger Things. If instead Apple relied solely on the segment of customers willing to pay for its small catalog, many fewer people would sample, embrace, and discuss their shows. Media and entertainment is a hits-driven industry, and the more potential consumers you have to consume and evangelize your content, the better your odds of hitting a “home run.”

There was some speculation on whether Apple TV Plus would follow a bingeable or weekly-release schedule. It appears that the answer to both is “yes.” According to Apple, some series will premiere with three episodes, followed by a new episode each week, while others will drop every episode at once. It makes sense for Apple to experiment with release schedules in the beginning, and as I’ve written about, perhaps utilize both distribution schedules depending on the specific piece and genre of content.

Of course, Apple hopes that in addition to spending $60 per year on Apple TV Plus, subscribers will become further invested in the Apple services and hardware ecosystem, whether through Apple TV ChannelsApple ArcadeApple News PlusApple MusiciCloud, or by purchasing new iPhones, iPads, Apple Watches, and computers. Apple’s $6 billion bet on Apple TV Plus at this point is still just dipping their toes in the water for a company with more than $200 billion in cash on hand. But after more than two years of speculation, we finally know what Apple TV+ will look like at launch. The only thing left to do is watch.

All Rights Reserved for  Mike Raab

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