Apple News, Analysis and Podcasts

Is Apple Playing Hardball With The Networks?

August 30, 2011 08:26 by: Mark Reschke   0 Comments

Categories: Apple TV , News , Predictions , Rumors

Is Apple going all-out in an effort to acquire the type of contracts that will set their Apple TV and forthcoming HDTV sales on fire? Likely so.

But let's not have back room deals get in the way of a nice gloss job. Apple spokesman Tom Neumayr told AllThingsDigital, “iTunes customers have shown they overwhelmingly prefer buying TV shows.” Really? And I'm sure Tom is willing to show us Apple's books revealing how many are users are renting shows vs purchasing them, right?

A key feature of Apple TV was having the ability to instantly watch commercial-free, HD, TV shows for only $.99. It represented a great value and was a key reason Apple TV sales were on the rise. But we have been told that networks saw no value in the $.99 content rentals, and much preferred the over-priced $2.99 purchase model.

Disinterest in $.99 rentals from the networks may be true, but it's only half the story. The option to rent a TV show vs purchasing them was likely to be an attractive option for buyers of Apple TV's, and pulling a key feature that sells products isn't something Apple would be keen on doing with sales seeing continued northerly momentum.

The other undisclosed side of the coin is that Apple has begun playing hard-ball with the networks, as Apple isn't getting the deals they want for their forthcoming Apple HDTV. The removal of rentals sends a clear statement that Cook and company are dead serious about their negotiations, and there's no softening of Apple negotiations due to Jobs stepping down.

If Apple doesn't get what they're looking for, rentals may not be the only change we'll be seeing with Apple TV and iTunes. Entire network programming may simply vanish from iTunes and Apple TV, or only legacy seasons may become the only options available. Simply put, Apple's going to do what it takes to win the big prize – Direct to consumer a la carte network purchasing.

It is absolutely stunning to look back and see how long cable companies have been able to defy alternate content models. Cable providers are simply not prepared to compete against non-bundled network offerings. A' la carte choice would be the cable provider's worst nightmare. Apple knows this all too well, and it's exactly what they're after.

The big problem in getting deals done for Apple comes in the form of their business philosophy. Networks view themselves as distributors, controlling the content, advertising and pricing models they provide. But Apple also views themself as the distributor via iTunes and Apple TV, wanting to utilize an all-new iAd model with network programming. 

Apple's desire to inject themselves in the advertising stream irritates networks like nothing else. The heart of cable networks like TNT, USA network, ESPN or any other, is how they sell and control their advertising. Simply handing the control and user experience over to Apple isn't a move any network is comfortable with, or even willing to discuss, and thus the standstill.

The good news is Apple is going to invoke change one way or another. The ability to stream live TV and give the consumer the ability to cherry-pick the networks they want via Apple TV and Apple's forthcoming HDTV's is gong to happen. Yet to be resolved is what will the advertising solution and monthly costs look like, and will cable companies be able to jack up their internet only prices to counter their flawed bundling promotions? January 2012 looks to be the witching hour which for cable providers, while customers everywhere will be free to choose, and it will finally mark the end of hobby status for Apple TV.

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