Apple TV Streaming Service: 5 Must-Know Rumors

Source: Kevork Djansezian/Getty Images

Source: Kevork Djansezian/Getty Images

Apple has held talks with a number of television groups to offer an Internet-based TV service for the iPhone, iPad, and Apple TV set-top box, according to The New York Times, which cites people familiar with the company’s plans. The service, which could be announced later this year, would offer a bundle of channels that would be smaller and cheaper than the offerings of a typical cable subscription.

One source told the Times that Apple will heavily market its streaming service, which the company has reportedly pitched to networks as “better than the best-of-class cable products.” The service could include on-demand functionality and the ability to stream live and on-demand TV to a variety of devices. The service could offer networks that are owned by Disney, Fox, CBS, and Discovery, which could include ABC, CBS, and Fox, along with networks like ESPN and the Discovery Channel. Apple reportedly won’t include all of the networks owned by each of the television groups, though definitive deals have yet to be reached.

Along with the channel lineup, pricing details remain unclear. One source said the subscription would likely cost between $20 and $25, while another said it would be in the range of $30. Some media executives told the Wall Street Journal that they believed Apple is aiming to price the service between $30 to $40 a month. The final price will likely depend on negotiations with the television groups. Apple is reportedly aiming to announce the service in June and launch it in September.

Media, tech, and telecom companies are increasingly introducing digital TV services to appeal to a generation of viewers who don’t want to purchase traditional cable subscriptions. Dish Network recently unveiled a web-based service called Sling TV, which bundles ESPN and popular cable networks for $20 per month. CBS and Sony are launching Internet-only subscription plans, and news of Apple’s plans for a TV service follow an announcement that the company had formed a partnership with HBO to offer the network’s new digital service, HBO Now.

According to Business Insider, a Baird Equity Research note posits that if Apple’s subscription service could reach 10% of U.S. broadband households, it “could generate $4 billion of annual service revenue, though we suspect the penetration could go much higher, with a significant global opportunity as well.” Globally, Apple could eventually generate $30 billion of annual revenue if the service can capture 10% of the approximately 90 million broadband households.

Read on for five must-know rumors about Apple’s subscription TV service to find out more about whom it could include, how cable companies might react, and how the company will get advertisers and content providers interested in the platform.

Source: Joe Raedle/Getty Images

Source: Joe Raedle/Getty Images

1. No NBC?

The Wall Street Journal recently reported that Apple’s service will offer a “slimmed-down” bundle of about 25 TV channels, anchored by ABC, CBS, and Fox. The idea is to offer a “skinny” bundle of well-known channels, while leaving out many of the smaller networks in the standard cable package. But the Journal notes that it could prove difficult for Apple to get the rights to all the programming it’s asking for, including full seasons of shows.

The talks so far don’t involve NBCUniversal because of a falling out between Apple and NBCUniversal parent company Comcast. If Apple and Comcast don’t agree to a deal, the service won’t include NBC or the networks it owns, like Bravo and Syfy. But The New York Times points out that Comcast could be forced to come to a deal with Apple because of the conditions it agreed to with regulators upon its acquisition of NBCUniversal in 2011. Those agreements specify that an online video provider like Apple could demand that NBCUniversal make its programming available if Apple has signed deals with other television groups.

Source: iStock

Source: iStock

2. Cable company rebellion

Along with tough negotiations with content providers, Apple could run into resistance from cable companies who don’t take kindly to its subscription service’s ability to replace a traditional cable TV package. BGR posits that cable providers “have a lot of tricks up their sleeves” to slow down Apple and any other companies building online streaming services. According to Brad Reed, they will try to limit Apple’s ability to get exclusive content, and could try to keep Apple from acquiring exclusive or preferred rights in order to eliminate the danger that they’d face a more dangerous rival than Netflix, which has gained critical acclaim for original shows like House of Cards and Orange Is the New Black.

Reed thinks that cable companies could also try to implement a data cap system for home Internet services (though it’s unlikely that they’d succeed in doing so), so that they can charge users extra fees and charge content providers to “sponsor” their data so that it doesn’t count against the cap. Another tactic the companies could take is to raise broadband prices if too many people cut the cord and get rid of their cable TV subscriptions.

Source: Thinkstock

Source: Thinkstock

3. More data for programmers

According to The New York Post, Apple is offering to share data with programming partners to get them on board with its subscription service. The company is reportedly willing to share details on who its viewers are, what they watch, and when they watch. That kind of information could help programmers better target shows to viewers and advertisers. Additionally, Apple is said to be taking an unusually “hands-off” approach with programmers, and will, for instance, let them decide whether they want to air ads.

But by offering up the prospect of valuable user data, Apple is providing something that cable companies, Amazon, and Netflix have refused to share with programmers. Many of them have pursued their own a la carte streaming options to build a more direct relationship with the consumer. (For example, CBS has launched its own $5-per-month streaming app, called CBS All Access.)

Apple iAd

Source: Advertising.apple.com

4. The renaissance of iAd?

Business Insider thinks that the rumors about Apple’s subscription TV service are exciting not only for television executives, but advertising executives, as well. Lara O’Reilly says that the service has the potential to be “the shot in the arm” to reinvigorate Apple’s mostly-dormant iAd business.

Apple launched iAd, its mobile ad sales division, in 2010, and at the time, Steve Jobs hoped that it would capture 50% of the mobile advertising market. According to eMarketer, it has just 2.6% of the U.S. mobile ad market, and globally iAd doesn’t register within eMarketer’s top 10 mobile advertising companies by revenue.

However, the momentum behind iAd has been building. Apple recently announced that it would venture into programmatic advertising by partnering with companies like Rubicon Project, MediaMath, Accordant, Adelphic, and AdRoll. It will soon enable third-party advertising tech firms to help advertisers target specific customers by matching phone numbers, emails, and other data, in an offering similar to what Facebook provides. And the iAd division is undergoing an expansion that will bring the number of companies it operates in to 95.

O’Reilly posits that if Apple were to pair iAd with Apple TV, the results could be transformative for the advertising industry. Such a pairing would enable advertisers to leverage the linking of the targeted, measurable world of online advertising with the reach and scale of television.

Source: Thinkstock

Source: Thinkstock

5. Finally an Apple TV set?

The Verge reports that Gene Munster has linked the rumors about Apple’s subscription TV service to actual television hardware. The Piper Jaffray analyst has repeatedly predicted that Apple will release a smart television set, each time saying he expects it to hit the market the following year.

In a note to investors, Munster wrote, “We believe that this possible content package would remove a significant hurdle to Apple launching a standalone television.” He added, “While recent media reports question Apple’s interest in an actual television, we continue to believe it is the most logical next area of focus.”

Munster has repeatedly predicted that Apple would launch a television set, which would essentially be comprised of an integrated television and Apple TV set-top box. But as The Verge points out, the company does not seem to have made any moves into the television hardware business, and there are no indications from the “notoriously leaky” supply chain to support Munster’s claims. And it’s become a repeated occurrence on Apple’s quarterly investor calls for chief executive Tim Cook to chuckle as Munster asks his infamous question about the hypothetical Apple TV set.

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