[opendtv] Apple TV 'skinny' package likely to accelerate cord cutting - San Jose Mercury News
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Sun, 29 Mar 2015 09:53:11 -0400
This L.A. Times story may give Bert heartburn.
Could Apple help accelerate Bert's vision of the future?
Regards
Craig
http://www.mercurynews.com/business/ci_27799019/apple-tv-skinny-package-likely-accelerate-cord-cutting
Apple TV 'skinny' package likely to accelerate cord cutting
Apple's ambition to be a dominant player in television is expected to
accelerate the unraveling of the pay-TV bundle.
The tech giant is in negotiations with major television companies to offer a
"skinny" package of channels that would include ABC, CBS and Fox Broadcasting,
according to people familiar with the matter who were not authorized to speak
publicly. Apple wants to roll out the service in time for the new fall shows in
September.
The proposed streaming service takes aim at the 10 million homes that have
high-speed Internet and no pay television programming, along with customers who
are fed up with high cable fees. Apple's cachet and legions of loyal fans could
make it one of the biggest threats yet to cable and satellite operators.
"Apple remains one of the few companies in the world that has the potential to
transform the TV industry, and we believe consumers are ready for a change,"
Cantor Fitzgerald analyst Brian White wrote recently in a research report.
The company is the latest to stake its claim in the fast-growing market of
Internet television services.
Netflix and Amazon.com already offer subscription services, and Sony plans to
launch its own TV offering for its PlayStation game console. Dish Network last
month rolled out its Internet-delivered service called Sling TV that starts at
$20 a month.
Apple this month unveiled its deal to offer HBO Now, a $14.99-a-month Internet
streaming service on Apple devices beginning next month. Its planned Web TV
subscription service would cost customers about $30 a month, the people said.
Any new subscription service ultimately would be designed to spur sales of the
company's Apple TV device, which some consumers could use to replace their
cable box. Last week, Apple Chief Executive Tim Cook slashed the price of the
device to $69 from $99.
The recent moves should help prompt cable and satellite TV providers to offer
their customers smaller packages of services at lower price points to remain
competitive. Consumers for years have been grousing about the high cost of
subscriptions that include hundreds of channels they never watch.
"The floodgate is now open," CBS Chief Executive Leslie Moonves said during a
recent investor conference. "Clearly the bundle is changing. ... The days of
the 500-channel universe are over."
After years of false starts, Apple finally is getting traction with programmers
that previously rebuffed its overtures. These programmers, including CBS and
Fox, don't want to get left behind as consumers find ways to cut through the
cable clutter.
Apple is willing to pay up to provide the channels -- and that makes business
sense for the programmers in an era of declining ratings and ad revenue.
Apple, CBS, ABC and Fox declined to comment on discussions, which were first
reported by the Wall Street Journal.
It was unclear exactly which TV networks would be included in the proposed
Apple service. Apple is said to be focusing on deals with companies such as
21st Century Fox that own both a major broadcast network and cable channels.
NBC is not in discussions with Apple. However, as part of a 2011 agreement with
the federal government, NBC's parent company, Comcast, is legally obligated to
provide its programming to Internet services if NBC's rivals also participate.
The new service also might not include regional sports channels, which have
helped drive up the cost of pay TV in recent years.
But analysts are not ready to write the obituary for the pay-TV industry just
yet.
"We are going to see an increase in cord cutting, but it's not going to be
dramatic," predicted James McQuivey, an analyst with Forrester Research. "The
main reason it won't be dramatic is there is no way to cut the cord and still
get everything you want."
For example, Dish's Internet streaming service, Sling TV, offers ESPN, ABC
Family, Cartoon Network and Food Network -- but not ABC and CBS.
Dish introduced the service last month to appeal to budget-conscious consumers
and apartment dwellers unable to install an antenna on their roof. Sling TV,
which starts at $20, allows consumers to add packages like sports and lifestyle
programming for an additional $5 a month.
Analysts point out that the low cost might be deceiving.
People still would have to turn to cable and phone companies for their Internet
service, some of which tack on fees if users exceed established data caps. This
could be easy to do when users are spending hours streaming TV shows and movies.
Cable TV distributors also are expected to fight back by making their bundles
of Internet and TV channels "economically attractive as a way to retain
consumers," Nomura Securities analyst Anthony DiClemente said.
Switching to a broadband-only package might save customers about $30 to $50 a
month at current promotional rates, but adding Apple's Web TV Service, Netflix
and HBO Now "quickly erodes those savings," DiClemente said.
Cable companies already have gotten the memo.
For example, Comcast has a promotional Internet service plus TV package for
about $40 a month. The slimmed-down package has 25 channels, including ABC,
CBS, NBC, PBS and HBO.
Cox Communications, which provides cable service in Orange County, has a
low-cost option that includes high-speed Internet, basic TV channels and
premium networks HBO and Starz at a promotional rate as low as $69 a month.
Apple has had a slow march into TV. When it was launched in 2007, the Apple TV
box was billed as a way to purchase movies and TV shows from iTunes and display
it on a television set. At the time, broadcasters showed little interest,
objecting to the a la carte nature.
But now, ESPN, Bloomberg TV and others offer content that can be seen live
through Apple TV apps.
Despite persistent rumors about manufacturers in Apple's Asian supply chain
revving up Apple-branded television sets, neither a display nor a newly
designed Apple TV streaming box has appeared on the shelves.
The current Apple TV device is capable of streaming dozens of channels, but the
recent price cut for the box has stoked speculation that a new version could
debut later this year.
A newer box might handle ultra-high-definition resolution, which provides a
step up in picture quality. Experts think that Apple's advantage comes from its
strong track record of developing products that have clean and user-friendly
designs.
"They do have this very loyal fan base and a great usability that's not
possible in the more fractured environments of other devices," said Field
Garthwaite, chief executive of Iris.TV, a Los Angeles startup that builds video
recommendation technology.
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