Apple TV wants viewers to change channel

Apple made its first steps into two huge new markets in 2007. One product would go on to reshape the technology industry, bringing entrenched rivals to their knees and propelling Apple to become the world’s most valuable company. The other has failed to revolutionise much of anything, despite a reboot in 2010.

The contrasting fortunes of the iPhone and Apple TV were brought into focus on Wednesday by chief executive Tim Cook himself, as he insisted that — this time — Apple really was serious about transforming television.

“The television experience has been virtually standing still while innovation has been thriving in the mobile space,” he said at Apple’s launch event in San Francisco. 

Mr Cook is hoping that Apple can use the iPhone’s playbook of apps, games and Siri to repeat the success of its smartphone. “Our vision for TV is simple, and perhaps a little provocative. We believe the future of television is apps,” he said.

For some, this future has been a long time coming. It is four years since Steve Jobs, Apple’s co-founder, told his biographer Walter Isaacson that he had “finally cracked it” with an easy-to-use, cloud-connected television set. Even Mr Cook acknowledged that Apple had been working “really hard — and really long — to bring all these things together”.

“Because of the long wait and because we didn’t talk about content today, it felt like the audience wasn’t as excited about Apple TV as some of the other announcements,” says Carolina Milanesi, chief of research at Kantar Worldpanel ComTech.

But for others in the media industry, Apple’s arrival brings mixed feelings. “I’d say a little more exciting than terrifying but terrifying if you want to worry about it ... I try to look on the bright side,” said Josh Sapan, chief executive of AMC Networks, told Recode on Wednesday.

Apple’s clear statement of its ambitions may be more important than the technology it unveiled on Wednesday.

In its features and functions, the new product largely sees the iPhone maker playing catch-up with the gaming, search and voice-control capabilities already available on competitors’ boxes such as Amazon’s Fire TV and the Android-based Nvidia Shield.

The motion-sensitive remote control bears a strong resemblance to the Nintendo Wii gaming system, which was released a year before Apple made its first foray into the living room.

That makes Mr Cook’s statement of intent all the more important.

“We believe that the industry is facing a perfect storm: apps, App Stores and Apple,” says Simon Khalaf, senior vice-president at Yahoo, which acquired his mobile analytics company Flurry last year. Wednesday’s event sent a “warning shot at the cable industry in particular and the media industry in general”. 

Comparing Flurry’s analytics with US government figures on TV viewing, he says Americans spent an average of 198 minutes using apps every day in the second quarter, overtaking the typical 168 minutes watching TV. 

“If the content continues to move to apps and streamed over the wire, the cable industry will simply be squeezed and will lose its exclusive position as the sole distribution channel between media companies and US consumers,” Mr Khalaf said in blogpost.

The opportunity for Apple is not just in traditional programming. As a box focused on the online world rather than the traditional broadcast one, Apple TV could become the ideal platform for YouTube stars. 

Frank Sinton, chief executive of Beachfront Media, says a number of YouTube “influencers” have contacted him about setting up their own Apple TV app in the run-up to the launch. Beachfront creates apps on platforms such as Amazon Fire for individual video creators such as fashion star Michelle Phan, who have built their followings on YouTube and then want to take their most loyal fans with them on to other platforms. 

“That is the major shift: users consume TV by launching an app, not flipping a channel,” he says, adding that this allows for a richer and more interactive user experience. 

Mr Sinton praises Apple for doing what “every smart TV has been trying to do for five years” by creating a simple and robust App Store. By contrast, he says smart TV makers such as Samsung and LG had created “very cumbersome” platforms for developers, with app stores where it was very difficult to get approval for new apps. 

But media observers were sceptical that the revamped Apple TV would have a big impact on the sector.

“The television industry as it is structured today is incredibly profitable and works well for content companies,” says Michael Nathanson, an analyst with MoffettNathanson. 

“I don’t know how you go from an economic model that has created billions of dollars in value — and that is based on a bundle — to an a la carte app model. There’s no incentive for companies like Fox, Disney and Time Warner that have made money bundling their channels to move to an app-driven world.” 

The revamped Apple TV offers improved search and discovery functions. But consumers will need a subscription to some of the many streaming services available — or buy programmes individually from iTunes — to take full advantage of this functionality. 

“If you don’t have a subscription you get to look at a whole lot of nothing,” says one industry observer. 

The real inflection point for Apple may lie ahead. The company has been in discussions with cable networks and other content owners about offering a streaming subscription service similar to the bundles provided by cable and satellite operators, according to people close to the negotiations. 

Such a service would compete directly with companies such as Comcast and Time Warner Cable, the leading pay-TV operators in the US, as well as Sling TV from Dish Networks and Sony’s PlayStation Vue. 

Analysts say an Apple channel bundle would have to be competitively priced to consumers and offer sufficient incentives to channel owners to make their content available. “The content owners have to be incentivised to move to that kind of model,” says Mr Nathanson. “The transition is going to take a while.”