Have you heard? Apple wants to get into the TV business. And the latest? The company supposedly wants to create a premium service that allows users to skip commercials. But wait, there’s more! Apple apparently thinks it can set up a revenue-sharing system that will pay programmers for the ads that viewers skip. According to former Wall Street Journal reporter Jessica Lessin and “people briefed on the conversations,” Apple is literally proposing to compensate media companies for the dollars they lose to commercial skipping technology.
There are so many oddities and possible permutations to this particular idea that I have to wonder if the media leaks are accurate. First off, there’s the premium ad-skipping service. Haven’t we had DVRs for more than a decade? What’s new? And if nothing, why would Apple need or want to negotiate some new type of payment plan to do what TiVo or other OTA DVRs already do?
Second, there’s the issue of determining the value of a skipped commercial. Is an ad worth more depending on when and where it’s skipped? If viewers increase ad-skipping behavior with other services, is the value of the ad decreased? What if a viewer sees part of an ad, but not the whole thing? How is the revenue split decided? Will Apple provide data on user behavior to programmers to validate ad-skipping fees?
Third, if Apple is willing to negotiate with programmers, why not just use the standard retransmission fee model? Sure, it sucks. But does create a compensation plan that requires complex evaluations for every commercial skipped sound any better?
Maybe Apple’s proposal to programmers is actually a modified retransmission scheme with blanket ad-skipping fees worked in. However, even that seems odd because it suggests Apple is willing to set itself up to pay more for content in order to attract licensing deals. Ultimately that move would put it at a serious disadvantage among pay-TV providers. How would Apple stay competitive?
The whole situation here sounds weird to me. The way I figure it, either the news reports are wrong, or Apple still has a lot of work to do figuring out television programming in the living room.
I’m surprised Hulu hasn’t tried an ad-free tier for more money… They’re in the best position to experiment with this. After one too many 2-minute Scientology ads, I’m probably cancelled for good. But I suspect most folks willingly put up with commercials and if Apple, Hulu, whomever offered two tiers, most wouldn’t pay the premium. By the by, perhaps Netflix is the future of television and I’ve been enjoying commercial-free Orange is the new Black this week. Better actors/acting than I’d anticipated, entertaining, and way less pretentious than HBO’s Girls which I can’t watch.
I’m pretty sure Apple has zero plans to employ any kind of ‘technology’ for skipping ads, and instead is negotiating deals for a firehose of content, sans ads.
You, the consumer, pay Apple for their service, and they do nothing but stream to you all the content you would have normally gotten with your local provider, except….there are no ad breaks. Just imagine Hulu without the ads in it, but immediate availability.
I’m an Apple fan boy, but I will be SHOCKED if Apple can work out something that makes me want to subscribe. And by that, I mean something reasonably priced. My bets are that they repackage up basically the same thing for the same price as the major cablecos.
Apple – we love you, but just because I can watch it on my AppleTV doesn’t mean squat.
Honestly, I think you’re being short sighted with this commentary. Yes, we have DVRs, but the issue is that DVRs fundamentally break the revenue model of TV: advertising. I know, I haven’t watched a TV ad in years thanks to my TiVo.
For this reason, I know the DVR’s days as we know them are numbered. I’m kind of surprised that Cable companies are still renting them out. The obvious next step is to have, instead of DVRs, a Hulu like service that allows you watch TV whenever you want, and what does Hulu have: Ads.
It would seem like an obvious next step, to have these programs provided in two ways: Ad supported and subscription supported.
So, I don’t know if Apple are going to do this, but deals like the one they have made with Time Warner show that they are willing to try to make the AppleTV a cable box replacement, and network DVR functionality (with ads), is the next logical step.
Lets see how the landscape looks in ten years. If viewers are still able to skip ads then without paying an additional fee, I’d be surprised.
Dr_LHA, most cable company On Demand services already offer similar to what you describe. Tons of content waiting around to be watched… with commercials, many of which are not skippable.
Sorry Hulu makes a profitable business from ad model. Apple better come through on promises are its shareholders and media partners will destroy them for lying!
Why doesn’t Apple just negotiate a smaller delay window and a “rental” rate for the shows that are already offered in the apple store?
If they did that on a large scale, they would effectively have “a TV subscription service with no ads”.
“The whole situation here sounds weird to me. The way I figure it, either the news reports are wrong, or Apple still has a lot of work to do figuring out television programming in the living room.”
Look, we already have the solution. Just add on the metered ad-skip featureness.
But seriously, now.
I mean, what does one expect? Eddy Cue’s best possible outcome is some variation of “stuff their mouths with gold”.
And the funny part is that that doesn’t even work here.
I mean, again, seriously now.
Apple got daft punk lucky cuz they had a nationwide Avis – we try harder – to leverage into their iPhone toehold. But in teevee land, there is no AT&T to stuff with gold. Negotiate with the content providers? Well, Comcast bought themselves a seat at that table. Negotiate with the wireline providers? Everything is Balkanized.
There is no there there. But that doesn’t mean they won’t keep generating totally true news reports.
Disregarding the complete ridiculousness of criticizing something that doesn’t even exist yet, I don’t think anyone has the whole picture yet. Why can’t the rumor that “apple may compensate cable companies for skipped ads” just be a small piece of something bigger? What if you paid a monthly subscription fee to your cableco for live tv access (delivered via ip and sans ads) on a box or tv you bought from Apple? Might was well throw in streaming to iphone and ipad as a subscription add-on and maybe an icloud dvr option.
Apple now makes most of it’s money off of phones, even though they are subsidized by the carriers. So why not apply that model to tv? Apple likes to sell premium hardware so the box/tv ends up being $500-2000+ but does a lot more than the current version (and does anyone really think $99 is normal for a non-hobby apple product?). I’ve also noticed that it seems like they have also been focusing heavily on beefing up their various “services” lately and that is really the emphasis here. All together, it starts to make sense.
Consumer benefits because they get Apple UI, live tv everywhere, and no ads. Cableco benefits because now they can reach cord cutters, are no longer confined geographically, and stem the ad revenue bleeding. Apple gets digital content sales and a new product pipeline to offset other declining lines. And of course, you could call the service iWatch…
I agree. I don’t think Apple or anyone else will be able to disrupt the current television landscape in a major way. Netflix is doing something (now with Emmy Nominations) but still hasn’t turned a profit from their streaming business. Hulu (FOX, ABC, Comcast) is okay. I think Microsoft has done about the best that can be done: HDMI pass-through and/or try to get the content to your box over IP (AT&T) or an app (Verizon, Comcast) and they’ve got forty million xbox gold members! Far more than Apples’ Whatever they try, they’ll still have to deal with Comcast as some point. They’re the largest cable distributor, ISP and a major content owner in both television (NBC) and movies (Universal). They’re also a “silent” owner of Hulu.
No, I don’t see anyone seriously disrupting the current pay tv business model within the next five to ten years…maybe never.
Things are definitely a’changing, at least in terms of distribution. But the incumbents fully intend to remain in the drivers seat and quality content is expensive. Not to mention that the cable company is often the studio and/or channel. Here’s a recent take on the possibility of (not) ‘disrupting’ the TV industry, by our pal Toeman:
http://www.livedigitally.com/2013/07/19/recipe-to-disrupt-tv/
“Things are definite a’changing, at least in terms of distribution.”
I’m not even sure about that.
The times have definitely been a-changin’ in terms of distribution in that video rental stores have been savagely disrupted. But have the times really been a-changin’ in terms of teevee distribution? I’m highly skeptical.
Sure there are cosmetic changes on the margins. But I don’t count MSO-tied OTT stuff like HBO Go or the like as disruptive in any genuine way. A few freaks like me are willing to do business directly with Lionsgate to get Mad Men in its pure form, even though I’m still stuck involuntarily paying $3/month for AMC, so again, not disruptive. The only thing even vaguely disruptive going in distribution is that Netflix has progressed from being the Albanian army to being the North Korean army – worthy of note, but quite minor. So, I’d say the appropriate theme song is less The Times They Are a-Changin’ and more The Song Remains The Same…
I want to be paid for watching ads on my Tivo. Paid 2x if I watch it twice. Do I get more $$$ to watch an unpopular ad? We should pay to watch excellent Superbowl ads, but local car ads… well, you couldn’t pay me enough to watch dem greeze balls.
The only solution that might make sense from Apple is iTunes radio for video. Basically you can watch for free or pay for ad-free (or a fee for watching and a bigger one for ad-free).
Hulu makes about 50% of its revenue from ads. Are you telling me that no one would pay twice as much to watch ad-free? ($18 vs $9). It obviously depends on how much TV you watch, but I can’t imagine valuing my time so little that I wouldn’t pay an extra $10 to watch the same content in less time.
A whole generation is coming along that doesn’t watch cable, because nearly half of them are unemployed. Many of them are buried in student load debt. They watch whatever they want online for free without commercials. How is any fee based service going to compete with this? At least apple might get the fee for the apple tv device before it is jailbroken and the content is obtained free of charge.
“The only solution that might make sense from Apple is iTunes radio for video. Basically you can watch for free or pay for ad-free (or a fee for watching and a bigger one for ad-free) … Hulu makes about 50% of its revenue from ads. Are you telling me that no one would pay twice as much to watch ad-free? ($18 vs $9)”
But there is a big difference between doubling your Hulu bill and doubling your entire cable bill, no?
And, again, even if we discount that issue, what’s in this bargain to make the MSO’s (or an improbably wide coalition of content providers, many of whom are also in the distribution business) get on-board?
iTunes Radio exists because the music industry has no leverage. The iPhone only exists because Apple was able to cut a deal with a nationwide struggling second place provider to stuff their mouth with gold, and thus force the iPhone on the first place provider. Why on earth would a balkanized coalition of MSO’s decide they wanted to let Apple get between themselves and their customers, when everything they’ve done for decades has been done with the precise opposite intent?
Eddy Cue is stuck doing a Willy Loman schtick of improbable schemes precisely because there is no probable scheme.
Exactly, the tv incumbents don’t need Apple or anyone else, right now. But with a upcoming generation used to going on the internet to get content without paying for it, their business could collapse in the coming years. This decade will be interesting to watch because I want to see how much of the television, movie and music industry will survive with the increase of piracy, along with a working middle class that’s going the way of the Dodo bird.
I don’t see what more is needed beyond what we have now with iTunes & Amazon Instant Video.
I’ve used Amazon since 2007 to buy any ‘cable’ shows I want.
With their ‘TV Pass’ I get a 15% discount per episode and they are automatically pushed down to my Tivo, commercial-free.
With the declining price of SSD storage Apple could integrate 128 or 256GB of SSD storage into each ‘AppleTV’ and offer the same service via iTunes (no DVR so as not to trash the SSD’s lifespan)
““Things are definite a’changing, at least in terms of distribution.”
I’m not even sure about that.”
Chucky,
Agree with you to about 98%. However…
There is some fraying around the edges and some hints of future disruption. Will that cable unbundling bill get through congress? Netflix is a serious option for cord cutters. OTA usage is increasing. Cable bills growing faster than inflation. Sports programming costs growing faster than that. Aereo looks like it has a decent shot at establishing an interesting precedent. People spend more time on the internet and thus have less free time for TV (I believe this despite the data), and thus may value their TV a little less. Etc, etc.
Some stuff is starting to happen. Its going to take a long time. We don’t even know precisely what the outcome is going to be yet. But its coming. Maybe it’ll take a generation. But its coming.
“Some stuff is starting to happen. Its going to take a long time. We don’t even know precisely what the outcome is going to be yet. But its coming. Maybe it’ll take a generation. But its coming.”
Well, we do have a vague outline of what things will look like in 30 years. Absent war, revolution, plague, sudden methane-burst, or some other Malthusian outcome, we’ll have FTTH and individual-cast IP-teevee replacing the multicast model. Who will own it, how it’ll be financed, what it’ll mean for content, and all the etcetera are much cloudier in the crystal ball.
But “things will be dramatically different in tech in a generation” always seems a bit of a cop-out to me, given that it’s invariably true. Hell, Apple will be bankrupt or sold for the brand-name in a generation.
I’m just sayin’ that a combo of balkanized ownership of the wires, the best possible revenue model for the content manufactures and wireline providers, and cross-ownership between the two means a combination of the cartel-like profitability of the current model, very significant medium-term technological impediments to moving off the current model, incredibly small cord-cutting numbers even in the face of an economic crisis approaching the 1930’s, Aereo (and it’s precedent’s) very limited niche potential, and Netflix’ advance from being the Albanian army to being the North Korean army mean that things aren’t really changing within a CBO projection timeframe window.
(As always the one wild-card is something along the lines of the 1948 United States v. Paramount Pictures, Inc. anti-trust case. Such a wild-card would be highly salutary, IMHO, and a game-changer. But I just find it immensely unlikely to see something like that proceeding in our current political era. An ILEC/CLEC-like virtual-MSO bit of legislation would be an equally salutary game-changer, but seems just as immensely unlikely to me.)
Apple’s Ad Skipping Service is NOT a Dumb idea, because Apple does not have an Ad skipping service. When was the last time one of these leaks have been accurate? It’s going on 3 years now since people have been saying this is the year we see the Apple television. No one’s calling out anyone who said “my sources guarantee”. I’m looking at you wall street, cnet, fanboy blogs etc. Now it’s morphed into an ad skipping service. Please stop, at this point your embarrassing yourselves.
What the commentary doesn’t mention is that Apple now holds a patent to swap one content for another – like music for commercials – which means that this hypothetical service would not really work like a DVR, because we would be skipping ads, but not ahead in time. This also gives a pretty good idea of how Apple would be able to cover the ad-skipping fee.