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by Jason Snell & Dan Moren

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By Jason Snell

Ten burning questions about Apple’s forthcoming video service

Apple’s made its first major TV acquisition, as the Wall Street Journal reported Tuesday that it’s got a deal with Steven Spielberg and Universal to make a new “Amazing Stories.” This wasn’t an unexpected development, and I wrote a story about the deal yesterday that you should check out.

But even with all that (virtual) ink spilled, there’s still a whole lot more to ponder here. So let me present my current list of unanswered questions about Apple’s foray into video programming.

Is this just another Planet of the Apps or Carpool Karaoke?

It’s an easy joke to make—Planet of the Apps and Carpool Karaoke were examples of Apple dipping its toe in the water, paying for programming they could provide to Apple Music subscribers while getting to know how the TV business works.

But that approach ended on June 16, when Apple hired respected TV industry execs Zack Van Amburg and Jamie Erlicht to run its video efforts. Jokes about Planet of the Apps are four months out of date. Apple hiring Van Amburg and Erlicht was the moment everything changed, because you don’t hire those guys (and they’ve since brought even more talent into Apple’s L.A. branch) unless you are absolutely serious about programming your own streaming service.

The training wheels are off. The Wall Street Journal says that Apple’s TV efforts have a $1 billion annual budget to start. That’s a fraction of the $7 billion Netflix expects to spend in the next year, but… baby steps.

Is this all going to be in Apple Music?

Apple’s already got a subscription-based digital media service up and running, and it’s Apple Music. That’s where its premium video content has gone so far, so it’s fair to ask if Apple’s TV efforts will simply be added to the existing Apple Music subscription. It would certainly be cleaner and easier if Apple kept adding things to Apple Music and continued trying to grow the Apple Music subscriber base.

But I’m skeptical about this, because Apple’s got a stated goal of growing services revenue, and most of its competitors in the video and music spaces offer individual services, not a single combined one. (Google is reportedly rolling Google Play Music and YouTube Red together into a single service, which would be a combined subscription service. Amazon offers Prime members a limited catalog of streaming music, but you have to pay an additional monthly fee to get access to the whole catalog.)

Throwing original TV series and movies into Apple Music also confuses the brand. Is Apple ready to blow up the Apple Music name and replace it with something new? How would Apple sell a TV-and-music streaming service combo to people who already have a music service they like? Could Apple price a two-for-one service competitively, given all the media costs?

If it’s not Apple Music, would there be a bundle?

If Apple doesn’t roll its video content into Apple Music, it might do well to offer users a discount if they subscribe to both of them. That might be a way to encourage people to go all-in on the Apple ecosystem without forcing everyone to subscribe to a single service.

Even more intriguing is the idea that Apple might create an uber-bundle, something more like Amazon Prime. I have a hard time envisioning exactly what would go in that service: video and music, okay, but what else would Apple have to offer to club members? Free shipping on store orders? Genius Bar priority? Discounts on AppleCare? The ability to jump to the head of the line for pre-orders?

This seems like a wild idea that’s unlikely to happen, but I’d be shocked if Apple executives hadn’t at least debated the merits of going all-in on a membership and loyalty program rather than just offering individual subscription plans.

What would Apple’s video service cost?

Going rate for most video services is $10 per month, so I’d expect Apple to offer something in that ballpark. Apple Music shows that Apple understands what the going rate for streaming services is, and is inclined to follow it.

What would be on Apple’s video service?

If Apple’s video team does indeed have a $1 billion budget, they can buy a lot. That’s 20 original series at a cost of roughly $50 million per season, or 10 original series with half a billion left over to buy a catalog of other content—old TV shows and movies—to fill in the service and provide better value.

My gut feeling is that Apple will be taking the HBO approach with this service, offering a dozen original series and a curated collection of films and classic TV shows. If Apple wants to be Netflix it will need to ramp up its content budget way beyond $1 billion. Like I said, baby steps. A billion dollars of baby steps.

Would Apple buy a streaming service?

Apple bought Beats and turned Beats Music into Apple Music. Could it do the same with an existing streaming service, as a way to quickly acquire a streaming infrastructure and a collection of content deals? Tim Goodman, my TV Talk Machine podcast partner and chief TV critic at the Hollywood Reporter, seems to think so.

There are numerous video streaming services out there—more, it seems, with every day—and so there are certainly companies that could be bought if Apple wanted to take a quick leap. Goodman thinks Hulu, which is currently owned by major media companies including three TV networks, might be a good target. It’s popular, with a large subscriber base and a big catalog, and it’s an open question about whether its owners really love it.

I think it’s unlikely that Apple would spend $25 billion to buy Hulu. (If Apple had wanted to buy an existing service with its own programming, it wouldn’t have needed to hire Van Amburg and Erlicht.) But it’s not impossible.

Would anyone subscribe to an Apple streaming service?

People are already getting streaming-service fatigue. Netflix, Amazon Prime, HBO Now, Hulu, Acorn, BritBox, and CBS All Access are already here, and many more new subscription services have been announced. Apple would be another one. How many $10 services do we need?

The truth is, we are about to enter an era where there are perhaps dozens of these $10/month streaming services. And no, there’s almost no way that the market will be able to support them all. Some will fail, some will consolidate… and some will end up profitable by serving a massive audience (Netflix) or a profitable niche (like Shudder, which specializes in horror).

The ultimate goal is to be left standing as one of the successful video services. You can’t win if you don’t play—so Apple is going to play, and play to win. In the end, it seems like it has the cash to invest to make it to the end of the game.

What would this service be called?

Wow, I have no idea on this one. Two really good names — Apple TV and Apple Watch — are already taken. (Apple could get away with calling it Apple TV if it wanted, but it would be confusing.) Apple Play? Apple Stream? Apple Broadcast? Apple Live? Apple Direct? Apple Screen?

Your guess is as good as mine. Better, probably.

Where will this service be available?

A big question is, will Apple try to maximize the subscription revenue of a TV service by making it available on devices not made by Apple? iTunes is accessible on Windows PCs, and Apple Music is on Android. Would an Apple video service appear on Amazon Fire TV or Roku?

It’s hard to imagine that, isn’t it? I have to believe that while Apple wants to maximize its subscription revenue, it wants to do so by increasing the average revenue it generates from its existing hardware customers. That means you’d need to buy an Apple TV to see, er, “Apple TV.” (Of course they’ll offer a free trial when you activate the box.)

That approach would limit the potential audience for Apple’s TV efforts, but I’m not sure that would matter to Apple. It would trade some level of subscription sales for sales of Apple TV boxes. Not everyone will rush out and buy an Apple TV once Apple launches this service, but if there’s a buzzworthy show from a major writer, director, or star, you know that Apple will sell a bunch of Apple TV boxes. And if you’d rather watch on your iPad or iPhone, sure, that will work too.

When will this service launch?

TV takes a long time to make. A very, very long time, from concept to writing to casting to set design to production to post-production. Van Amburg and Erlicht will undoubtedly be active in buying projects this fall and winter, but unless Apple goes out and buys an existing streaming service, it’s hard to imagine that there will be enough programming to populate a paid service before the second half of 2018.

Apple could launch the service with a smaller amount of content and an extended free trial, as it did with Apple Music. That would allow the service to launch before the entire catalog is populated. In the next few months we’re going to hear about all sorts of deals like the one with Spielberg—but the service itself will take a bit longer to come together.

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