Why Apple is right to keep ads off Apple TV+ [Opinion]

According to Tim Cook, users won’t see any ads on Apple TV+ anytime soon. Or ever.

“For the TV+ business, we feel strongly that what that customer wants is an ad-free product,” Cook said during Tuesday’s record-breaking Apple earnings call. Considering how much money Apple could rake in from advertising, that’s leaving a lot of cash on the table. But it’s also completely the right thing to do.

Apple could embrace ads if it wanted

Should Apple wish, it could charge a premium for companies to advertise with it. In addition to being an optional $5 per month subscription, Apple TV+ is available for free to anyone who has bought a new Mac, iPhone, iPad or Apple TV recently. Since Apple’s customers already skew wealthy, this means that the customers theoretically most susceptible to premium purchases have Apple TV+ as a default on their devices. What company wouldn’t want to advertise on a platform with Apple’s reach?

It’s impossible to accurately predict how much Apple could charge for a spot on one of its shows. It hasn’t yet revealed subscriber numbers for Apple TV+, although early signs from third parties sound promising. Nor has it said how many people are watching each of its shows, which would factor into ad impressions. However, just for reference, a 30-second ad during NBC’s Sunday Night Football, one of the most-watched shows on TV, costs an average of $665,677.

At a time when Apple is looking for new ways of bringing in revenue, Apple TV+ advertising could theoretically make sense. Getting a streaming video service off the ground is pricey. The initial Apple TV+ war chest supposedly started at $1 billion, but the company reportedly blew past that figure pretty quickly. Advertising could help put Apple TV+ in the black sooner.

However, it’s not something that would work out for Apple.

Apple TV+ ads: Bad for viewers

One reason is based on the number of hours of material Apple TV+ currently boasts. A service based purely on advertising revenue needs to keep users watching to gain ad impressions.

Recent research published by Ampere Analysis shows that, to offset the $5 subscription fee Apple TV+ charges, Cupertino would need users to watch between one hour and 90 minutes per day. In recent weeks, Apple TV+ subscribers have been lucky to get that much new content each week. Even the most ardent Apple TV+ fan isn’t watching enough to make ads a massive source of revenue on their own.

In theory, Apple could charge a subscription fee (also payable as part of the “free” subscription you get when you buy a device) and show ads on the service. But, in reality, every ad you show is going to drive a small number of viewers to switch off. The greater the number of ads you show, the more people will switch off. This means more churn as users lose interest in the service and unsubscribe. For a nascent service with low consumption, this would be a disaster.

Ads and privacy don’t mix

That’s not the only reason Apple would be wrong to embrace ads. Personalized ads, targeted according to customer demographics, go against everything Apple stands for. Tim Cook frequently casts aspersions on this type of data-grubbing business model.

Even pushing out the same ad to all customers in a certain country wouldn’t be good, though. Remember the world-ending disaster when Apple pushed out a free U2 album to all users a few years back?

At the time, most criticism wasn’t the fact that it was free music, or even free U2 music. It was the fact that Apple obtrusively pushed content onto people’s devices. A similar complaint happened in 2018, when Apple started sending out push notifications to iPhone and iPad users promoting the company’s services and offerings.

You could argue that ads playing before videos isn’t exactly like either of these. It’s true: It isn’t. But I can’t imagine that people upset about free music in their iTunes account or easily dismissible notifications about new iPhones would be overjoyed at the prospect of having to sit through a commercial before watching an Apple Original.

On Apple TV+ and elsewhere, ads kind of suck

Most of all, though, Apple shouldn’t introduce ads to Apple TV+ because ads kind of suck. Nobody wants to sit through a 30-second commercial before they watch TV. Apple is all about user experience. And part of that user experience means not spamming you with commercials.

Netflix, currently the dominant player in streaming video subscription services, does not feature ads either. Several other streaming services, including Hulu, offer both ad-free and ad-supported versions of their services. But analysts suggest that, over time, even Netflix will need to begin running ads on its paid tiers. That’s because the Netflix business model might not prove sustainable long-term.

If Netflix doesn’t wind up showing ads on its programming, Apple would be foolish to stack the deck against itself by doing so. If Netflix does wind up having to, not showing ads would be a neat differentiator for Apple TV+. Not just versus other streaming companies but also online video services like YouTube and traditional TV operators.

Apple isn’t reliant on making Apple TV+ profitable as an individual business at any cost. During yesterday’s earnings call the company said that, right now, Apple TV+ revenue is “immaterial.” As I’ve written previously, the service can be profitable in other ways — such as prompting users to stick within the Apple ecosystem or upgrade more quickly to get their free subscriptions.

There are reasons another company might embrace ads to rake in more cash sooner. Apple isn’t like other companies, though. As it’s told us before, it thinks different. And, as its latest earnings show, it’s not exactly short of a buck or two.