Apple TV Needs To Get Off The Couch

Earlier this month Apple poached Timothy Twerdahl from Amazon, where he had headed up the Fire TV unit, to serve as VP in charge of Apple TV product marketing, raising hopes that Apple is gearing up for another try at transforming Apple TV from a hobby into a meaningful product line. But if so the transformation won’t be immediate.

Apple is reportedly testing the next iteration of the Apple TV set-top box, which could be released later this year. But early indications are that it will be another study in incrementalism, adding support for 4K streaming but no groundbreaking new functionality.

Apple is also rolling out two new original TV series, a long-form version of James Corden’s Carpool Karaoke segments from the “Late Late Show,” and reality TV-type series called “Planet of the Apps.” But neither series is being launched under the Apple TV banner. Instead, as Apple content chief Eddy Cue explained at the Code Media conference this week, both will be made available through Apple Music in a bid to boost subscriptions to the music streaming service.

If there’s a strategy here it’s well disguised.

The problem starts with Apple’s device-centric approach. Ever since Steve Jobs introduced his “hobby,” Apple has tried to re-engineer the TV viewing experience through better hardware. Over the years it has held talkswith pay-TV operators about replacing their own set-top boxes with Apple TVs and letting Apple redesign their UIs. When those talks foundered on operators’ fear of letting Apple get between them and their subscribers Apple held talks with media companies about assembling its own, skinny subscription bundle of channels for Apple TV. When those talks stalled over disagreements on price and the configuration of the bundle Apple declared that apps are the future of TV and added an app store and Siri-like voice control to Apple TV, essentially turning the set-top box into an oversize iPhone tethered to a big-screen television.

Meanwhile, the television ecosystem has been evolving away from fixed platforms and tethered devices.

Netflix proved that you can build a TV empire on the backs of other people’s devices, to the point where the incumbent pay-TV operators eventually feel compelled to integrate with your own delivery platform.  Amazon is building its TV empire on a combination of its own devices and others’ and bundling it with other services.

Any hope Apple may have held out for getting help from the government died last month when Ajit Pai was named chairman of the Federal Communications Commission and moved immediately to kill his predecessor’s plan to force pay-TV operators to “unlock” the set-top box and allow third-party device makers like Apple to gain access to their content, as Apple had once tried to negotiate on its own.

The biggest threat to Apple’s long-term TV ambitions, however, assuming it really has them, is from the wireless carriers, the very service providers Apple once shoved aside by establishing its own billing relationship with iPhone users.

As discussed here in a previous post, AT&T, Verizon, and T-Mobile are all building out mobile-first video and TV platforms, bundled with data, in anticipation of the day when 5G technology allows them to deliver robust TV service wirelessly into the home.

As I’ve argued before, mobility and wireless delivery are the keys to overturning TV’s ancien regime. And Apple, ironically, should be well-positioned to storm the castle. It owns one of the two dominant mobile computing platforms in the U.S. in iOS.

The current generation of Apple TV even runs a version of iOS called TVOS, which at first appeared to be effort to turn Apple TV into merely the in-home outpost of a mobile-first video platform. But Apple has done relatively little since then to encourage programmers and developers to create the sort of integrated experiences that might have differentiated Apple TV from Roku boxes, game consoles, Amazon Fire, or any of the myriad other ways consumers can stream content to the TV.

Instead, to the extent Apple has focused on Apple TV at all it has stuck stubbornly to trying to engineer a new TV experience into the hardware itself. They may fit Apple’s hardware-centric business model. But it isn’t likely to be a winning strategy in the wireless, cloud-based, and mobile-driven future of TV.

Have Netflix, Will Travel: EU Digital Single Market Inches Closer

Negotiators for the European Commission, the European Parliament, and European Union member countries this week reached agreement on new rules that will allow citizens from one EU country to access digital services they subscribe to, such as Netflix, Spotify, and sports live streams, when traveling in another EU country starting in 2018.

Up to now, exclusive territorial licenses between rights owners and online services, as well as other rules, have generally prevented services from granting access to subscribers from outside their home country.

“Today’s agreement will bring concrete benefits to Europeans. People who have subscribed to their favourite series, music and sports events at home will be able to enjoy them when they travel in Europe,” EU vice-president in charge of the Digital Single Market Andrus Ansip said in a statement. Read More »

The Great Re-bundling: The Wireless Future of Music and Video

Bundled media services are becoming table stakes in the wireless business. With plain old wireless service (POWS?) at or close to the saturation point in the U.S., wireless operators are increasingly fighting over slices of a fixed pie, and feel a growing need to differentiate from their competitors in pursuit of market share.

With the costly build-out of 5G networks looming, operators also need to increase ARPU by adding services.

Thus, it was no big surprise this week when Softbank-owned Sprint snapped up a 33 percent stake in Jay-Z’s Tidal music streaming service. Sprint already had a partnership with Tidal, but as MIDiA Research analyst Mark Mulligan noted in a blog post,  the bundling game has changed for wireless operators, and meaningful differentiation increasingly means having your own skin in it.

“The original thinking behind telco bundles was differentiation, but when every telco has got a music bundle there’s no differentiation anymore,” he wrote. “Additionally, if you are a top tier telco and you haven’t got Apple or Spotify, then partnering with one of the rest risks brand damage by appearing to be stuck with an also-ran. By making a high profile investment in Tidal, Sprint has thus transformed its forthcoming bundle from this scenario into something it can build real differentiation around.” Read More »

Netflix Ponders Life Without Net Neutrality

Netflix CEO Reed Hastings did as much as anyone to shape the Federal Communications Commission’s net neutrality rules. CEO Reed Hastings’ aggressive public lobbying for what he termed “strong” net neutrality, after Comcast and AT&T successfully forced Netflix to pay for access to their last-mile networks, was largely responsible for putting interconnection arrangements between ISPs and edge providers at the center of the debate and helped persuade former FCC chairman Tom Wheeler to push through reclassification of broadband access as a Title II telecommunications service, which gave the commission jurisdiction over those deals.

Yet, as Republicans in Congress and on the commission sharpen their knives to disembowel Wheeler’s hard-won rules Netflix says it no longer needs the protection.

“Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable,” Hastings said in his Q4 letter to shareholders this week.

Translation: we’re too big now even for Comcast to push around, a point Comcast itself obliquely acknowledged in November by integrating Netflix into its flagship X1 set-top box. Read More »

Apple Tip-Toes Into Original Video

The Wall Street Journal reported this week that Apple has begun talks with producers in Hollywood about buy rights to original TV series and movies. If true it would represent at least the third attempt by the iPhone maker to crack the TV code, so far without notable success, although its strategy this time appears to be different from its previous efforts.

I say “appears” because, according to the Journal, Apple itself  “is still working out details of its business strategy built around original content.”

The new shows, which could begin appearing by the end of this year, will reportedly be made available to subscribers of Apple Music, suggesting this isn’t an attempt (yet) to build a direct competitor to Netflix and Amazon Prime. The fact that Apple is targeting individual movies and TV series rather than networks suggests this is also not some sort of skinny bundle play to compete with Sling TV and the new Hulu service. Read More »

Talking Back to the TV

TV manufacturers, set-top box makers and smart TV software developers have tried for years to get rid of the old D-pad remote control and on-screen programming grid for search and navigation. They’ve tried motion control, Bluetooth qwerty keyboards, touch pads, and casting from mobile devices. With the exception of casting, most have proved pretty kludgey.

At the International CES underway in Las Vegas this week, voice activation has emerged as the TV interface flavor of the month. Amazon announced that it has licensed its Fire TV interface — complete with its Alexa voice-controlled digital assistant — for use in a trio of low-end 4K TV brands based in China.

Display sizes will range from 43 to 65 inches and device will come with 3GB of RAM, 16GB internal memory for apps, and a remote control with integrated microphone for talking to Alexa.

Not to be outdone, Google announced it will bring Google Assistant to all TVs and set-top boxes running Android TV, including Sony’s Bravia models and Sharp’s Aquos line. Read More »

Copyright Makes Strange Bedfellows

It’s probably fair to say that Donald Trump was not the first choice for president among the majority of those within the media and entertainment industries. Since his election last month, however, their official industry representatives have wasted little time trying to ingratiate themselves with the incoming administration and to press the industries’ policy agenda.

“So much of what you wrote in your platform this summer about intellectual property and private property rights resonated with many of us, including: ‘Intellectual property is a driving force in today’s global economy of constant innovation,'” a consortium of music industry trade associations wrote to Trump this week. “‘It is the wellspring of American economic growth and job creation. With the rise of the digital economy, it has become even more critical that we protect intellectual property rights and preserve freedom of contract rather than create regulatory barriers to creativity, growth, and innovation.’

“As partners, many in the technology and corporate community should be commended for doing their part to help value creators and their content,” the groups added. “Some have developed systems to promote a healthy market for music and deter theft. However, much more needs to be done…[T]here is a massive ‘value grab’ as some of these corporations weaken intellectual property rights for America’s creators by exploiting legal loopholes never intended for them – perversely abusing U.S. law to underpay music creators, thus harming one of America’s economic and job engines.” Read More »

Autumn Of The A&R Man

The International Federation of Phonographic Industry (IFPI) this week released its biannual Investing in Music report and the numbers raised quite a few eyebrows. According to the report, record labels worldwide invested U.S. $4.5 billion last year in A&R ($2.8 billion) and marketing, ($1.7 billion), representing 27 percent of their total revenue, more than the pharmaceutical, aerospace, or technology industry spends on R&D in percentage terms.

His_Master's_VoiceThat represents an increase of 12 percent and 6 percent, respectively, over 2013.

Particularly eye-opening was the report’s claim that it costs a label anywhere from $500,00 to $2 million to “break” a new artist in a major market like the U.S. or U.K., factoring in the “upfront” costs of artist advances, recording, music video production, tour support, and marketing and promotion.

The report is clearly meant to bolster the case for the continued relevance of traditional record companies amid the simmering industry debate over whether artists still need a label deal, given the availability of cheap, DIY recording technology and the myriad independent distributors, aggregators, marketers and other service providers offering to help artists bring their music to market. Read More »

Unsafe Harbors: Fake News Is Part Of a Larger Problem For Facebook

Faced with mounting criticism over the proliferation of fake “news” stories on Facebook, and their alleged role in tipping the outcome of the presidential election, CEO Mark Zuckerberg has fallen back on a familiar formulation: Facebook is a technology company, Zuckerberg insists, not a media company. It merely provides a platform where users can post, share, and respond to content posted and shared by others.

“Our goal is to give every person a voice,” Zuckerberg wrote in a somewhat plaintive blog post over the weekend. “We believe deeply in people. Assuming that people understand what is important in their lives and that they can express those views has driven not only our community, but democracy overall. Sometimes when people use their voice though, they say things that seem wrong and they support people you disagree with.”

BN-QU803_1115te_GR_20161115083039The clear and intended implication is that Facebook is not liable for what its users post, and has very circumscribed responsibility to police false, misleading, and tendentious content on its platform. While Facebook and other social media platforms are now taking some modest steps to discourage the spread of fake news content, they’re stopping well short of accepting editorial accountability.

“This is an area where I believe we must proceed very carefully,” Zuckerberg wrote. “Identifying the ‘truth’ is complicated. ..I am confident we can find ways for our community to tell us what content is most meaningful, but I believe we must be extremely cautious about becoming arbiters of truth ourselves.” Read More »

America Exits The World

For all intents and purposes, Donald J. Trump will assume the presidency in January with no discernable policy agenda. Apart from a few signature flights of fancy, such as building a wall along 1,500 miles of southern border and rounding up 11 million immigrants for summary deportation, his policy pronouncements consisted largely of an ever-shifting farrago of ignorance, indifference, truculence, and personal animus boiled down into 140-character outbursts. As a general matter, we simply do not know what the Trump administration might do.

trumpGiven the enormity his election represents, speculating on the fallout for any particular industry could seem petty, if not beside the point entirely. But for what it’s worth, the media and technology industries may be among the first to feel the impact.

As a near-term matter, Trump said on the campaign trail that he would block AT&T’s pending merger with Time Warner and would look to undo already done media mergers, including Comcast’s acquisition of NBCUniversal. Setting aside the question of whether the Justice Department would have legal grounds to do either (and the perhaps more interesting question of whether a Trump Justice Department would feel constrained by established law and precedent), Trump’s rhetoric could cast a pall over M&A activity, just as the media industry seems poised for another round of it in the wake of AT&T-Time Warner. Read More »

While FCC Dithers, Google Ditches The Box

To hear the pay-TV industry tell it, FCC chairman Tom Wheeler’s original proposal to “unlock” the set-top box was essentially a sop to Google, a company many in the industry see as having effectively captured the agency, if not the entire Obama administration, and as coveting the incumbent operators’ position in the TV business.

Those suspicions were only strengthened when Google began offering members of Congress demos of a set-top box that fit remarkably with the sort of navigation device envisioned by Wheeler’s proposal, just days after the proposal was unveiled.

fccwheelergettyoffledeAlarmed, cable operators rushed out its own proposal to “ditch” the set-top box altogether and make their services available, essentially as is, via apps that could run on third-party devices — an idea Google opposed because it would leave the cable operators in control of the user interface and the bundling of channels.

The industry’s move was effective, inasmuch as it forced Wheeler to retreat from his original proposal, and come up with a new plan loosely modeled on the industry’s app-based approach. While Google said it could live with the new proposal, the industry still found much not to like, and an all-out lobby blitz again forced Wheeler to postpone a planned vote on the measure. Read More »

Music For The Masses

Music streaming has brought a lot of personalization to the experience of listening to music. Faced with the challenge of differentiating their service from competitors featuring substantially the same catalog of music, at a de facto standard price point, streaming services have focused on developing ever-more precise tools for personalizing the listening experience in the hope of keeping users engaged. So, Spotify has its playlists, Apple has its curators, Pandora has its music DNA project.

His_Master's_VoiceMusic rights owners too, in their approach to the streaming business, have also encouraged personalization. Burned badly by free music “sharing” sites, the record labels have been more than happy to reinforce the streaming services’ efforts to turn listening into a personal — and solitary — experience, such as by curating their own Spotify and Apple playlists.

Digital technology itself has also contributed to the bias toward personalization. Use of streaming services is heavily weighted toward mobile devices, particularly phones, which by design are personal, and in general highly personalized devices. Digital distribution also generates the sort of highly granular usage data on which personalization tools rely.

All that personalization has come at a price, however. With everyone cocooned inside their own playlists and cut off from the outside world by earbuds, the communal experience of listening to recorded music with friends or family has become a rarity. Read More »

The Coming Wireless Video Wars

Having dropped $48 billion and change last year to acquire DirecTV, AT&T is now earmarking tens of billions more over the next 3 to 5 years to acquire media companies, according to a report this week by Bloomberg. Citing “people familiar with the plans,” the report said AT&T is targeting acquisitions ranging from $2 billion to $50 billion, with an eye toward “owning some of the content it distributes.”

It likely won’t be distributing it through DirecTV, however, at least not via satellite. According to an earlier Bloomberg report, AT&T will begin phasing out DirecTV’s randallstephensonsatellite platform within the same 3 to 5-year window, with any eye toward making internet streaming its primary TV platform by 2020. The company has lately been lining up carriage deals ahead of its planned launch of its DirecTV Now over-the-top service later this year. And it has been aggressively steering its wireless customers toward DirecTV by bundling unlimited wireless data plans with a DirecTV subscription, which so far has been taken up by some 5 million of its wireless subscribers.

DirecTV Now will also be “zero-rated” for AT&T wireless customers, meaning it won’t count against their monthly data cap. Read More »

For Music Biz, First-Half Results Are A Glass Half Full

The Recording Industry Association of America this week reported that U.S. music sales through the first half of 2012 were up 8.1 percent over the first half of 2015, to $3.4 billion, the industry’s strongest rate of growth in more than a decade.

iphone-artist-spotifyThe surge was due almost entirely to a whopping 112 percent increase in revenue from paid streaming services such as Spotify, Apple Music, and Tidal which more than offset a 17 percent decline in digital downloads (including albums, single tracks, and kiosks), and a 16 percent decline in sales of physical formats (CDs and vinyl).

Revenue from free interactive streaming, such as Spotify’s ad-supported tier, YouTube and Vevo, grew 24 percent but remained a tiny slice (5.9 percent) of the overall revenue pie. Revenue from non-interactive streaming services, primarily Pandora, was up 4 percent.

“Streaming in all its forms accounted for almost half of all recorded music revenues in the first half of 2016,” RIAA CEO Carey Sherman wrote in a post on Medium. “This represents a remarkable transformation and reinvention by a business that was principally physical products just six years ago.” Read More »