The prospect of a shiny new Apple TV product makes everyone think of a radical new Apple TV box with crazy new user interface options, or an actual Apple TV set, both of which people have been predicting for years.
And then that Scrooge MG Siegler comes along to say he’s hearing that the Big Apple TV Update has been delayed, and that maybe there will be a minor update to the existing product.
Whether something grander has been delayed or not, I think TV will be the most interesting product at the Tuesday announcement — not because of hardware, but because of a new software interface and new deals I think Apple will announce.
Apple TV’s Selling Point: ‘Coverage’
Apple’s tagline for the Tuesday event is: “We still have a lot to cover.” I believe this will turn out to be a reference to television coverage.
Specifically, I think Apple will announce a new software interface and service that integrates much more cable programming.
A couple of months ago, word on the street was that Apple was negotiating directly with production studios and TV networks, including Comedy Central, ESPN, HBO and Viacom. In June, Apple added HBO Go and WatchESPN apps to Apple TV, as well as others. (Note that subscriptions to those cable services is required in order to view them.)
Around that time, Apple also poached Pete Distad, the former SVP of Marketing and Distribution at Hulu, to lead its negotiations with the content and cable companies.
Then, in late August, Apple added live programming from the Disney Channel and Disney XD, the Weather Channel, Vevo and Smithsonian.
I believe Apple will announce Tuesday more content partners, including parity with Xbox 360 on Time Warner Cable programming, which would bring _Mad Men_ and other AMC programs to Apple TV live, as well as CNN and 300 other channels.
I think there will probably be a few content partnership surprises as well.
How Apple Will Slowly Change the Channel on TV
The first phase of Apple’s larger plan will be rolled out at Tuesday’s announcement, during which I believe Apple will unveil a new interface for Apple TV that integrates all these new programming channels seamlessly into a new Apple TV experience.
The interface for getting at, say, AMC programs or ESPN programs will be way, way better than what cable boxes offer for programming guides, which are hideous.
The result will become that for high-end TV enthusiasts, the Apple TV experience will become “indispensable,” while individual cable subscriptions will be “dispensable.”
I believe Apple’s short-term approach is that participating cable providers will pay Apple a fee to be included in their service using a new software interface to be announced this week. Content providers will increasingly pay this fee, because Apple TV users will increasingly refuse to leave the comfort and safety of the Apple TV interface.
The long-term play, I also believe, will be for Apple to flip that — Apple will eventually charge a cable subscription to customers, then pay the cable companies a cut — essentially Apple’s “agency” model applied to TV cable subscriptions. And that model may require a radical new box, because the Apple TV itself would be able to function and access cable TV programming (including live programming) without the presence of any other box attached to the TV, with the programming coming over the Internet.
Apple as a cable company would be the beginning of the end for regular cable companies, aided and abetted by its tech peers Google and Microsoft, who I believe will also become virtual cable companies.
All Apple needs to do is provide a cable subscription service good enough for a large number of its users to choose instead of alternative cable companies or services. Then, as cable companies struggle in the months and years ahead against the tide of Internet-based content, the cord-cutting movement, casual torrent piracy and the Silicon Valley virtual cable companies, they’ll be incentivized to ink deals with Apple on Apple’s terms.
Just as a snowball gets bigger as it rolls downhill, Apple will gain more programming. The more it gains, the more power it has to gain still more.
So far, Apple has sold 13 million Apple TV boxes or so. With compelling enough content offerings, that number could triple by the end of next year.
And as with smartphone handset pricing, I believe Apple will continue to sell premium (high-quality HD) content at a premium price, which will cement Apple’s roll as the place to turn when the financial going gets touch for the cable companies. As everyone races each other to the bottom of TV content pricing, Apple will offer a superior experience for TV while holding the line on pricing, eventually becoming the last place where content creators can actually made money from subscription service.
Hardware Is Nice, but Not Essential
Yes, awesome new user interfaces are coming to Apple TV, including probably voice and in-air gesture control. And, yes, Apple may build a TV set.
But for now, who cares? What makes people buy into Apple as an interface to TV programming is: 1) content; and 2) experience.
Apple will announce big upgrades to both of these categories Tuesday, I believe. And doing so will send people to the Apple Stores to buy Apple TVs as holiday gifts.