The WSJ has an article on Apple getting some interest in their video subscription service. Given the perils of online advertising, studios might find it more appealing to have a constant revenue stream. But can Apple pull it off?
The details of the subscription service will be what makes or breaks the deal for consumers. You can break down the sucess or failure of the subscription service into three parts…
Ability to replace cable. Apple’s subscription service will have a very small niche if they can’t be looked at as a credible way to replace your cable box – those who never wanted cable in the first place and have fast internet connections. This means both having enough content as well as consumer-friendly features (DVR-like services, viewing older shows, etc). Having enough content means all four major networks, plus PBS, along with a few Viacom (MTV and Comedy Central), Discovery (Discovery Channel, TLC), and Scripps (HGTV, Food Network) channels. Also, users wont be very happy if the networks are missing shows – if they see the “ABC” name, they expect all the shows that are shown on ABC. If they don’t get all the shows they wont keep the service for very long.
Price. The supposed $30 price point (plus a up front price for a set top box) could be a huge way to threaten the cable industry. Most cable companies are charging $50-60 per month for 60-70 cable channels, and about $10 per 15-20 channel block after that (digital cable tiers). Apple would have a hard time matching the channel count if they’re going to be paying $2-4 per channel per month, plus pay for bandwidth, storage and overhead – they’re likely to have about 12-15 channels. If they manage to pick the right channels (the popular ones), they’ll stand a better chance to steal a swath of viewers from cable TV.
There are downsides however, the real cost of the plan would probably be $40/mo – the extra $10 comes from the discount most people get by having both cable TV and Internet services. Without cable, the price of internet services usually goes up $10/mo.
Live Events. Live broadcasts like your local newscast, American Idol and the Superbowl are something a lot of people couldn’t go without. Apple has two possible approaches when it comes to these situations – for major events they can stream it live, however that could consume a lot of bandwidth. Second is include an over-the-air tuner in a revised AppleTV device and come up with some sort of nice looking (possibly amplified) antenna for local TV reception.
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There is significant demand, especially during the downturn, for families to cut costs. Personally, I don’t even watch that much cable TV, what I do watch is available over the air or I already have on DVD, and I certainly wouldn’t mind ditching the $85/mo I pay for cable TV, digital cable, cable card, and two TiVo subscriptions. I’m open to replacing that with a $30 (or even $45 for more channels) subscription plus paying up front for three set top boxes (which Apple does need to bring the price down on – $150 per box max).
(As to why I’m not bringing up a la carte cable as a solution to cheaper cable rates, read this)
In short, there are lots of ways for the studios or Apple to screw it up and kill consumer adoption. Apple has the spine to make sure that the studios do what is necessary to make it a success – but will the studios go along with it…
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