Apple's Plan To Rethink Television

By Neil Cybart :

Television is broken. The era of smartphones and tablets continues to alter the way we consume and interact with video content. While video watching was once a sedentary behavior with little in the way of third-party distraction, video is now increasingly consumed throughout the day across multiple screens. This week, the WSJ reported that Apple ( AAPL ) is looking to launch a service that repackages a certain amount of television channel programming into a more appropriate form for the mobile era. Apple has likely earned the benefit of the doubt that such a service would be worth people's time and money. However, ultimate success with rethinking television will be dependent on ignoring the mirage of simply getting television content broken out into a more granular form sent over the internet. Apple will likely head in a new direction where all video creation is embraced and distributed through curation and personalization.

The primary issue concerning television isn't that there's too much content being delivered to our homes. Instead, televisions's fundamental problem is that it doesn't include the wide variety of new content born out of mobile. While our smartphones may have changed the way we consume content, the ability to record and capture almost anything in the world with little in the way of time or money commitment has changed the way content is created. Channel surfing on a large screen television has been replaced by YouTube surfing on a computer or smartphone as well as consuming video content from shared links on Twitter and Facebook. Short video clips, which at first seemed more like a gimmick, are increasingly containing more in the way of news and information than many would never have imagined. "I saw it on Vine" is increasingly becoming a more common phrase than "I saw it on CNN." Such a shift in content consumption and creation from many of the "old" players to a new breed of content companies reinforces the need for Apple (and any competing service interested in rethinking video) to start anew and build a service that combines both the old and new content creators. The strategy would be strengthened by the concepts of mobile, decentralization and differentiation.

A truly revolutionary video streaming service would include all video content, relying on curation and personalization to deliver an engaging user experience.

It is reported that Apple's Plan A for rethinking television was to take a page from the iPhone playbook and work with a key partner, in this case, Comcast ( CMCSA ) ( CMCSK ). In such a scenario, there would be room for both parties to win as consumers ultimately pay more for a better product. However, due to continuing setbacks and roadblocks, Apple may indeed be looking now at Plan B, a more hostile plan involving TV programmers including ABC, CBS and Fox. It's not hard to see Apple's ultimate goal to create a service that includes various "channels," or maybe a better word would be "video lengths," that provides easy access to different video content mediums. Getting the "old" players involved would be the first step on a long journey. All of this may indeed be too utopian as various parties may not want to go down the iTunes/music industry path where Apple holds too much control.

Apple's rumored scaled back TV network bundle would reportedly cost $30-$40 a month. Add this cost to Netflix's ( NFLX ) or Hulu Plus' monthly rate and a user's monthly bill is once again approaching $50 a month for what essentially comes down to traditional cable, repackaged. A whole other side of the video equation is still missing: the new players. While apps on an Apple TV may suffice for some, a suboptimal user interface and the much bigger implication on video consumption behavior stand out as barriers that would need to be overcome. Unsurprisingly, cable companies aren't as clueless as many think and are in a great position to begin increasing internet-only prices following a customer's awkward "I no longer want to pay for cable" call to customer service. In addition, companies such as Netflix and Amazon ( AMZN ) are using video content as bargaining tools to enrich their own platforms and sales pitch to consumers in an ultimate desire to buy relevancy in people's lives, no matter how small the window (or screen) may be. Walled gardens built around established social networks don't scream ease of use and interconnectivity either.

In a perfect world, I would use a streaming video content service that has had some element of curation applied, resulting in a completely new experience that would be the linchpin of dropping my cable plan. Add elements of search, discovery and social media and this hypothetical video service would combine elements of yesterday in the form of push content such as live sports, news and tentpole events like the Oscars and in addition have the ability to pull content from vast libraries, similar to what can be found on Hulu. Some type of classification and delivery system based on video length and subject matter represents interesting possibilities for how a smartphone user can consume a wide selection of video content. Apple's role in such a product would be to serve as a gatekeeper, providing differentiation through curation and discoverability. If this sounds similar to the music streaming strategy Apple will likely utilize , it is because they both would rely on the same themes of providing a better user experience through the way content is consumed by the end user. The entire iOS ecosystem is involved in taking advantage of streaming content services.

The most challenging barrier to overcome before seeing this new video era is related to business and economics. Combining content built on a very specific method of revenue (fees and advertisements) with new era content that may not have set parameters around monetization makes it that much more difficult to truly combine everything into an easy, digestible format. Not to mention, the sheer number of licenses and rights that would need to be obtained would make the weak of heart feel overwhelmed. Add in complexities of international expansion, and bringing services like Apple Pay to additional countries would look like a walk in the park.

An Apple streaming video service would do more to increase the value obtained from iOS devices that truly represent mobile, including iPhone and Apple Watch.

What may have initially been considered another leg on the stool, rethinking television for Apple is increasingly looking more like a much broader video service with the goal of increasing the value of the Apple ecosystem, similar to Apple Pay and Apple's upcoming music streaming service. By building additional functionality and usage into the ecosystem, Apple is continuing to go down the path of addressing key elements of our life that can be controlled, or improved, by iOS devices.

While there's no doubt that Apple has various sizes of glass in the labs, including large screens bigger than an iMac, the value from a video service may inherently be found in smaller screens and devices, including iPhone and Apple Watch. To truly rethink television, Apple needs to address the much harder task of figuring out the best way to consume content born from the modern day video renaissance.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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