5 Reasons Apple Can't Disrupt TV--And One Crazy Way It Could

/// 5 Reasons Apple Can’t Disrupt TV–And One Crazy Way It Could

February 22, 2013  |  Blog

Everyone has something to say about Apple, especially about the prospects for what could be its next big thing:

In a recent magazine story, I laid out the prospects for what some people are calling the iTV, as well as the considerable challenges Apple faces in bringing it to market. I couldn’t include all the insights from smart people in tech and media, so today and in coming days, I’ll share some of their thoughts to shed a little more light on what Apple can and can’t do in television.

Dave Morgan has particular insight into the challenges Apple has in taking on such an established industry. As CEO of Simulmedia, a data-driven ad network for television, he works with the television powers-that-be who are trying to make sure Apple doesn’t do a number on their business like it did on the music business.

Morgan thinks it’s inevitable that Apple will make a television–eventually. Just not all that soon, at least not in a way that will set it apart from other TV makers. “Clearly, Apple’s thing isn’t just to make money on the hardware,” he says. “It sells the bundle–including content,” like music on the iPod.

And it hasn’t been able to do that with the TV industry. He lays out five reasons why:

* Both the creators of the TV shows and the pay-TV players that distribute them are still very healthy businesses, unlike the music industry was. “They don’t need to take a risk on a new business,” Morgan says.

* TV shows and movies aren’t as likely to be completely disrupted as music. That’s mainly because a very small number of players owns the content and distribution, but also because the files are huge enough that piracy is less of a threat. Of course, you can find all or pieces of many TV shows on YouTube (at least until they get kicked off), or on pirate sites (where they still take a long time to download, perhaps along with a virus). But in any case, Morgan says, “the fear of piracy is less of an issue to TV folks.”

* The people who run the TV business are a whole lot smarter than the people in music. They may run an oligopoly, but they also compete like crazy, he says. (Or perhaps they just had the benefit of watching the music guys blow it and avoid doing what they did.)

* TV companies actually are more willing to experiment with new services. They’ve done deals, even if reluctantly at times, with Netflix. They created Hulu, even if they can’t bring themselves to fulfill its potential. You can get HBO on your smartphone (if you’re a subscriber). So the frustration level with TV show availability isn’t as high with most people as it was with music.

But Morgan points out that the TV guys retain a lot of leverage over those services. They wouldn’t have the same leverage over Apple as a partner, Morgan reckons. “That’s why they won’t work with Apple,” he says. “They’re not going to invite the fox into the henhouse.”

* The cable companies have mostly seven- to 10-year deals with TV studios for their shows, and most of those deals are still young. Even if Apple were inclined to spend billions a year for those shows, contracts make it difficult to impossible.

But Morgan thinks Apple could bust into the elite club–and this is where the crazy idea comes in. He thinks Apple could buy a big producer of TV shows and movies. He suggests that it would take a third (by now, actually, a little more than that) of Apple’s $137 billion cash hoard to buy Time Warner. CEO Jeff Bewkes, Morgan adds, is the “anti-mogul,” willing to do any deal that works for Time Warner’s finances. “Then, Apple’s got a seat in the cabal,” he says. “If you’re going into the TV business, you go in big.”

To his credit, Morgan thinks this won’t actually happen, at least not soon. So, he concludes, “Apple has no choice but to wait it out” for a deal that would make its TV set as compelling as the iPod or the iPhone.

As a result, Morgan says, another company could actually beat Amazon into the living room: Amazon.com. “Amazon’s the one to watch,” he says, because it could help fund the move with its e-commerce business–or even ads, which it’s starting to build into a real business. Apple has neither of those to make its TV more appealing, or lucrative.

Link: 5 Reasons Apple Can’t Disrupt TV–And One Crazy Way It Could

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