Comment by Tloewald | Hacker News Reader

Comment by Tloewald | Hacker News Reader

Parent Full thread

It's not low-hanging fruit.

On the technology side Apple has actually built everything necessary (AppleTV + iTunes streaming) but the problem is dealing with the content silos.

If Apple could it would simply license all the content and stream it to customers either for a standard price (e.g. $1.99 per episode of 480p programming, $2.99 per episode of 1080p) or via subscription (e.g. MLB/Netflix) or ad-supported (e.g. Hulu Plus).

The only reason AppleTV isn't TV nirvana (at least in the US) is licensing issues. (BTW you can program an AppleTV to recognize any remote, so you can seamlessly make you TV remote also control your AppleTV, without even switching modes).

In case you're wondering, the basic problem right now is that TV networks get paid about $2 (I did a bunch of back of envelope calculations, so I may be significantly off, but it's in this ballpark) in advertising per viewer-hour, so if a family of four watches an hour of TV, then the network gets about $8 in ad revenue. Apple is offering $1.40/h, and it's also messing with DVD sales and syndication so there's a big gap there.

Now, I seriously doubt that the production company that makes the content gets much of that $8, so if Apple could deal with content producers directly...

If Apple can convince the networks that they will be better off with Apple than with the local cable company, then Apple can win. I can't help but think that if Steve were still here, he could get it done (much like he did with the music companies for iTunes and the original iPod). I'm not so sure that the current crew at Apple has the right stuff. What I mean is, Steve would have said "this way is better. You can give me a bunch of reasons why you don't think it will happen, or you don't think it ought to happen, but I'm telling you that it is going to happen, and I am making it happen. Now are you with me or shall I run you over?" There were a million reasons why iTunes could never work. He made it work. I understand the reasons you list for why TV is not going to work. I just wish Steve were here to make it work.

Steve was good, but not magic. One thing counting against this deal is that people have seen what happened to the music companies and the phone carriers. Carriers still hate the iPhone, they don't make much money from it, but are in a position where they have to sell it to remain competitive due to consumer demand.

There's a pretty strong argument that the telcos love iPhone (see Horace Dedieu's analyses, e.g. http://www.asymco.com/2013/04/23/the-job-the-iphone-is-hired...). The music companies may despise Apple but they're kind of being stupid. It's not Apple's fault that the bottom dropped out of their nice little business of selling people CDs with 10 tracks they didn't want to get 1-2 tracks they did AND selling people CDs of music they'd already bought as LPs.

The TV channels are a different matter. They are, today, right now, happily making $2 per viewer hour, and Apple is offering them effectively $0.70 or so (let's say the average TV show is watched by two people in a household; even if it's only one, that's $2.00 vs. $1.40.) The TV networks aren't threatened by a Napster equivalent. And the people who really might benefit from Apple's business model -- content producers -- are tied up in an existing business model that's hard to wean off of.

It seems to me that it will taken people like Joss Whedon or Rob Thomas (Veronica Mars) -- the kinds of people who could Kickstart a movie or TV season -- to try their luck at selling content direct to consumers (through Apple, Amazon, etc.) to convince rightly skeptical content producers to ditch the useless middlemen.

"content producers -- are tied up in an existing business model that's hard to wean off of."

eventually Apple will convince content producers to ditch the middlemen and go with Apple

I think to do that they would have to somehow leverage the existing userbase of their mobile devices.

If Apple could it would simply license all the content

Sure, but that won't work: the content is paid for by the cable companies.

It's, what, $30 billion per year going to content creators straight from the cable companies, up front? The content creators absolutely need the cable companies today, there's no other way for them to operate. They don't self-fund, period.

So Apple would need to pony up. If they came to the content creators and said look, we want to do this thing, here's $100 billion for the first three year, up front—it'd happen. Money talks in Hollywood. It might be the only thing that does.

Sadly, there's no way in hell Tim Cook could (or would) make that happen. He's way too conservative. Hell, he couldn't even handle Scott Forstall.

Apple certainly has the money and doesn't know what to do with it other than buy their own stock. Well, that's what they could do with it. $100 billion and you own cable television.

It looks more like Apple will likely partner with a couple of satellite or cable companies and offer to recreate their TV/settop experience for them. Basically, replace Cisco and TiVO, and change the whole customer experience model to be on the set top box, no more calling in to add channels, deal with PPV issues, etc.

I would also bet they're going to try to find a way to make 4K video distribution work to have a reason to switch, perhaps building a dedicated high-speed VPN from the iTunes Store through the cable company's network where they get a cut of the price - since there's no way you could stream 4K over a wide area without dedicated QoS,.

The question is who will bite. Clearly the wireless carriers have benefitted a lot from Apple's presence - more data usage == more dollars. If Apple can do this with cable companies, they'll have a massive and eager channel to sell shiny 4K TVs and boxes through (and more iTunes content), and Cable companies will have incentive to experiment with a new a-la-carte vs. subscription content pricing model for 4K.

I'm curious about the $30B figure. How did you arrive at that?

I didn't arrive at it, it's a well-known industry figure, I'm not sure where I heard it first. (I live in Los Angeles and lived in Hollywood for years, working mostly on the film side, but I know a lot of people in TV, too.)

Here's an article for consumers on unbundling[1] I found after one Google search that says that ESPN alone receives $7.2 billion per year from US cable companies, which sounds about right to me. (They also earn money for ads, I don't know if any of that is kicked back to the cable companies. I doubt it...)

It shouldn't be surprising even if you crunch the numbers yourself. There's ~100 million cable subscribers, and the average combined bill (Internet/Cable/Phone) was $128/month in 2011.[2] So that's $153.6 billion per year. It's not hard to imagine that ~20% of that goes to the people making the content that's playing on cable. If anything, it'd be surprising if it were lower than that.

[1] http://money.cnn.com/2013/08/02/technology/cable-a-la-carte/...

[2] http://online.wsj.com/article/SB1000142405297020347910457712...

Reply on news.ycombinator.com