Interviews with Digital Media Thought Leaders
Apple Service Might be a “Game Changer”
Podcast Audio | Posted by Phil Leigh on January 18, 2010
Phil Leigh
It’s become obvious over the past seven years that Apple can develop innovative products that revolutionize both emerging and established industries. An example of the first is the iPod. When it hit the market about seven years ago it was the first portable MP3 player with enough capacity to enable most of us to carry our entire music collection around with us. An example of the second is the iPhone which forever changed our concept of what a mobile phone should be able to do. In short, it combined voice telephony with unlimited Internet access.
Now, speculation is rife that Apple is at the threshold of introducing not only a new product but a new service as well.
First, it’s been widely reported that Apple arranged to rent San Francisco’s Yerba Buena Center for Wednesday, January 27th. They’ve used the center before, as recently as last September, for important product introductions and updates. The consensus viewpoint is that they’ll introduce a tablet computer this time.
Second, in recent months sources generally thought to be reliable report that Apple has been in discussion with media companies to provide a subscription service of TV shows and other content. Although Apple typically declines to comment it’s evident they had to approach a large number of potential content providers. Thus, the unconfirmed reports apparently underscore Benjamin Franklin’s wisdom that “Any three people can keep a secret as long as two of them are dead.”
In our analysis, if Apple were to introduce such a service there are five reasons why it could be a “game changer” too.
First, Apple is unlikely to introduce a service unless it’s economically priced. They were firm on this point when the iTunes music store was launched almost seven years ago. Apple allocated a large portion of the sales price to the record labels and accepted low margins for itself in order to insure that the consumer received good economic value. Similarly, an affordable $30 monthly subscription price for the contemplated new service has been discussed in the press.
Second, the proposed service could provide a mix of content including TV shows, movies, music, and print. In short, it would transcend our prior concepts of subscription. Instead of paying for newspapers, music, CATV service, and movie rentals separately, we’d get them all for one monthly fee.
At $30 monthly some subscribers could justify discontinuing CATV service altogether. Much like many of us currently not subscribing to premium channels such as HBO limit our TV watching to whatever is offered by the service tier we’re currently getting, some consumers might be satisfied to largely restrict their video-watching to whatever Apple provides.
While it’s unlikely that Apple could get popular live sporting events, consumers who discontinue CATV service can watch them in community settings. Examples might be sports bars or the homes of friends with similar sports team loyalties. Such group watching is more fun anyway.
Third, since Apple’s hypothetical multimedia service would be available on three screens it would change our concept of subscriptions in a second way. For example, we would no longer think of TV shows as being available only on our televisions. We could watch them on our iPhones and computers as well. Perhaps when traveling we could even play them through hotel TVs via our iPhone or laptop.
Fourth, Apple’s acquisition of Lala.com suggests that the service could be used to stimulate demand for new record releases. Historically, record labels have been dependent upon radio broadcasters to popularize new releases. As radio audiences have tuned-out, the labels have been adversely affected. Lala.com has an arrangement with Google that lets users who search for a song actually listen to it once for no charge. Those who like it can buy it online via a Lala hyperlink.
Fifth, a simultaneous launch of a cloud-centric tablet computer would stimulate demand for a content subscription service. By consensus, most industry observers expect such a product announcement on January 27th.
In sum, there’s no denying that we cannot be certain what Apple will announce on the 27th. However, the natural technical and business-model evolution of the Digital Media industry implies widespread adoption of (1) subscription services and (2) cloud-centric tablet computers. Apple seems the most likely candidate to lead such adoption.
To learn more about how your business can exploit or adapt to such changes, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.
Categories: Podcast Audio
Tags: Apple, CBS, digital-media, Disney, Internet-video, iSlate, Phil-Leigh, Steve-Jobs, subscription service, tablet computer, Yerba Buena Center
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