This is my third try writing this week’s column. Apple TV+ is clearly the “most important story” this week since it’s Apple’s entry into the streaming wars. That’s like the United States entering World War II. What did my first two takes look like?
Attempt 1: An article about “ecosystems”, since that was the explanation du jour of the week. I wrote too much for this column.
Attempt 2: Really calling folks out for not digging into Apple’s financials. But that required me to do them too, which took too long for this week’s column. That’s an analysis article.
Still, I had so many thoughts on Apple that we’ll have enough for thoughts on Apple TV+/Channels today and in the future. Don’t worry.
(Programming note: I’m traveling for a music festival—Kaaboo 2019, the film festival for the middle-aged. Seriously, that’s how the bill it—so if I make any mistakes, I was rushed. And I’ll have my newsletter next week! Sign up now!)
Most Important Story of the Week – Debunking Some Apple TV+ Myths
Reading the coverage of Apple TV+’s pricing announcement, the media ecosystem swung from “$10 is way too expensive” to “$5 wins the content wars” immediately. That sort of surprised me. Bit of an overreaction, wouldn’t you say? Along the way, too, I noticed a lot of observers leveraging a lot of the same explanations and even numbers to explain the news.
Let’s debunk a couple of those. Plus, I’ll add in the strategic risks for Apple implied by these mistakes. First, though, a new product that actually does make sense.
Apple Arcade Solves a Customer Problem: No in-app purchases
I play a few more iPad games then I probably want to admit. I loath pay-to-play, though. Just not how I was brought up to play games and the best games don’t feature this mechanic, in my opinion. Apple Arcade, their subscription video game service, solves this problem. Potentially. Right now, they probably don’t have enough games to warrant a subscription, but like all new businesses it will grow. And I hate subscription biz models anyways (for customers). So we’ll see.
However, compared to Apple TV+, at least Arcade solves a customer need. Now how many customers are like me–which is market sizing–is a future question. But at least it solves a problem; it isn’t clear that folks were clamoring for more TV to subscribe to.
Debunking One: Apple TV+ is free.
This is kind of true, in that yes, if you buy an Apple device, the service is free. But I saw tons of folks saying this free first year meant that Apple made it essentially free. That’s too far.
After a year, customers will need to start paying. I assume some others assumed that if customers buy multiple devices, they can keep stacking on year long free trials, but that doesn’t sound like any free trial I’ve ever seen. Most likely, after a year, the device that logged the free 12 months will have to start paying. And that, my friends, is where the true test of a business starts.
Strategic Risk for Apple: The Promotional Carousel Is Hard to Get Off.
Ask DirecTV or Hulu how offering ridiculously low prices worked for customer churn. Even if Apple doesn’t report subscriber numbers—they probably won’t—we’ll be able to tell by the discounts Apple does or doesn’t offer whether or not churn is happening.
Debunking Two: Apple will have 250 million potential customers.
This number is in fact true. It’s roughly how many iOS devices Apple sells per year. Roughly. The implications are not.
But is number of devices really the potential market? Consider two things. First, many families are on Apple’ plans. Which means even if the family owns four devices, or bought four, they’re still only subscribing once. More critically, look at this chart from Business Insider on iPhone sales.
Huh. So the US portion is really 70 million phones per year, with another chunk of iPad and laptops, which I didn’t see reported anywhere. Everyone breathlessly went with the 250 million. Sure, Apple TV+ is launching in 100 countries, does that include China? It’s notoriously hard to launch content in China, and Netflix and Amazon aren’t there. So I’m skeptical. Overall, if you’re discussing Apple’s plans, be very careful about mixing up US-focused strategies and global numbers.