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Apple TV+ was an Unusual Launch for Apple
Just one week after the launch of TV+, Apple’s much-anticipated streaming service, the company publicly announced that the remaining three of its four marquee launch shows (SEE, For All Mankind, and Dickinson) had been renewed for second seasons. The fourth, The Morning Show, had already been slated to run for two seasons. Apple executives were apparently “thrilled” with the launch, while critics and consumers seemed to have mixed reactions to both the content and the user interface. One thing is for certain though: Apple TV+ was an atypical launch for a company known for blockbuster product launches.
Historically, Apple’s entrance into new categories has been accompanied by step-function improvements in products or user experiences, innovations so revolutionary that they disrupted entire industries. The iPod and iTunes store not only introduced intuitive hardware and software, but also unbundled individual songs from albums for the first time, allowing consumers to purchase only the tracks they wanted for just $0.99. The iPhone revolutionized not only the telecom industry, but the world. Apple TV+, on the other hand, didn’t improve either the content or the user experience available to consumers on other streaming platforms. At least not yet.
Television represents a category that Apple has reportedly been anxious to enter for over a decade. Steve Jobs wanted to create an integrated television set, and Apple executives have been meeting with Hollywood executives for years in an attempt to find their entrance to the market, which at one point included partnerships with cable companies to offer live TV. All the way back in 2012, Tim Cook called the TV market “an area of intense interest,” before explaining “I don’t think Apple has to own a content business... ”
Content can’t be perfected.
After more than a decade of trying to partner with media and cable companies to improve the consumer television experience, Apple gave in and decided that the best way to affect change for consumers was to become entertainment industry insiders themselves, and in fact, own a content business. Instead of investing exclusively in infrastructure, hardware, and software around television like they did with music, the strategy shifted to invest in television — an expensive creative endeavor that has a historically low hit-ratio.
This strategy shift was a significant departure for a company that had previously obsessed over perfecting products prior to their launch for one important reason: content can’t be perfected. Not only are TV shows subjective, meaning there will always be an audience that does not like your shows, but they are also unlike hardware and software, which can be iterated upon, improved, and held for release until they’re just right, as media strategist and investor Matthew Ball pointed out on Twitter:
While TV+’s launch shows weren’t a step-function improvement in content, neither was the service’s user interface. Many consumers faced buffering issues, had trouble navigating the interface, or were frustrated that the web platform didn’t autoplay subsequent episodes and had issues with Chromecast.
Much of this frustration stems from the fact that nearly everyone who tried Apple TV+ was likely comparing it to their experience with Netflix, which has spent the past decade obsessing over the consumer viewing experience, much in the same way that Steve Jobs had been known for with Apple’s products. Netflix has built not only one of the most stable streaming infrastructures, but also tested and implemented innovations like autoplaying the next episode, the “Skip Intro” button, and of course, the binge-release model itself. Apple TV+ is comparatively buggy and clunky.
Given that Apple TV+ did not introduce step-function improvements in either content or user experience for consumers, why were Apple executives reportedly so “thrilled” with the launch?
To understand that, it’s important to realize that there are three layers to Apple’s TV ambitions:
- the mission that they sell to consumers
- the short-term shift from hardware to services revenue
- the long-term bundle opportunity and the grand TV vision
The first two layers of Apple’s TV ambitions have been discussed by company executives publicly. At the launch announcement in September, Tim Cook stated “Our mission for Apple TV+ is to bring you the best original stories from the most creative minds in television and film.” If this sounds hyperbolic, that’s because it is primarily a marketing statement for consumers. While Apple is investing significantly in talent and content, there’s no cornering the market on “the best original stories.” Even if there was and this was the real mission, I’d argue that the Apple TV+ launch was a failure (as would Rotten Tomatoes).
The second layer is the short-term shift of revenue share from hardware (iPhones, Macs, iPads) to services (iCloud, Apple Music, Apple News+, Apple Arcade) and the eventual Apple+ bundle that will be offered in the next year or two. Interestingly though, Apple TV+ is only available in the United States at the moment and comes with a 1-year free trial for the 75 million+ Americans who purchase new Apple devices every year, making it clear that the company’s number one priority is to sign up as many U.S. subscribers as possible in year one.
That critical mass of tens of millions of subscribers is key to the third layer and long-term mission of Apple TV+, the mission originally envisioned over a decade ago: reshaping and simplifying the entire TV experience for consumers.
Apple wants to be TV.
As Apple spent the past decade deliberating and negotiating its entrance into the TV category, the radical shift of over-the-top, direct-to-consumer streaming services was simultaneously disrupting the industry and changing the frustrations that consumers faced. As it became increasingly clear that streaming was the future and that there would be a disaggregation of the cable bundle, Apple’s goal of improving the consumer experience shifted from improving the horrible cable TV user interface to simplifying and aggregating content from the oncoming litany of new subscription services like Disney+ to HBO Max, Peacock, and current services like Hulu, Amazon Prime Video, CBS, Showtime, Starz, and maybe one day, Netflix.
Simply put, Apple wants to be TV. It sees an opportunity to be the central hub where consumers go to watch television, no matter what content they want to watch or which streaming service it is hosted on. By utilizing the high-caliber TV+ content as a top-of-funnel marketing tactic to get consumers into the Apple TV App, it hopes to build a critical mass of users who it can then leverage in a variety of ways, including re-selling other streaming services through Apple TV Channels, where the company takes a cut of revenue for each subscriber.
Think of this as the next iteration of the cable bundle. Consumers have one interface for all the TV content they want to watch, and pay one monthly bill to Apple (who then redistributes to the other streaming networks, minus its revenue share). It’s clear that this is Apple’s vision, because the company launched Apple TV+ on non-Apple devices such as Roku, Amazon Fire, and Smart TVs in another departure from Apple’s typical closed ecosystem strategy. The company prioritized driving as many Apple TV end-users as possible for leverage with other streamers, instead of only launching TV+ content on Apple devices in order to drive ecosystem loyalty.
As the “streaming wars” continue to disaggregate content across dozens of services, Apple is playing a different game than Netflix, one that is more akin to Amazon’s strategy of using content to sell sneakers. If the content from Apple TV+ can lure enough consumers to use the app as their TV hub, Apple can leverage those consumers to re-aggregate all (or most) of the content from every other streaming service. This is why Apple didn’t feel the need to license library content like Friends or The Office to launch Apple TV+. The company believes that in the long term, those programs will be available through the Apple TV App regardless.
Despite an atypical launch for Apple TV+, in which the product wasn’t a notable improvement over other products in the market, millions of consumers still used the Apple TV app in its first week (even if they didn’t pay for it), which is step one in Apple’s long term TV ambitions. Apple didn’t reinvent TV. And it didn’t make TV better. But it still just might.