Category Archives: Apple TV

Apple, Apple TV, Apple Watch, Apps, iOS, iPad, iPhone, Mac, Operating Systems, OS X, Strategy

Apple’s Playbook

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One of the most interesting slides at yesterday’s Apple event was one that Tim Cook used in the context of introducing the new Apple TV:Apple PlaybookWhat I found striking about this slide was that it was a great summation of Apple’s playbook for its tightly integrated approach to hardware and software:

  • Powerful Hardware
  • Modern OS
  • New User Experience
  • Developer Tools
  • App Store.

This playbook was first introduced with the iPhone, although arguably it wasn’t fully fleshed out until 2008, when the developer tools and App Store elements arrived. This approach was then applied again both to the iPod Touch when that launched, and when the iPad launched in early 2010, using the same “modern OS” – now called iOS. Later in 2010, Apple began applying some of these elements back to the Mac (announcing these changes at an event called “Back to the Mac”), starting with the Mac App Store, and continuing since then with a variety of elements borrowed from iOS.

With this as background, it’s no surprise that Apple felt bound to include an App Store in the first version of the Apple Watch, but out of an abundance of caution and a sense of urgency, it was a diluted version of the App Store concept. Only with the launch of WatchOS 2 this month will Apple fully embrace its own playbook for devices when it comes to the Apple Watch. And as of yesterday, we now know that Apple is applying this same playbook to the Apple TV too, something that’s seemed inevitable for quite some time now.

With the release of WatchOS and the announcement of the new Apple TV, Apple now has the same strategy for hardware and operating systems for every element of its portfolio for the first time. The question now becomes which new categories Apple might apply this strategy to in future, and one obvious possibility is cars. Look at that list of bullet points that make up the Apple playbook – is there any element of this that doesn’t apply to cars?

The other thing that’s interesting about all this is that this strategy puts developers at the heart of Apple’s formula for success. Three of the bullet points are about what Apple brings to the table for end users – the hardware, the software, and the user experience these two elements tightly integrated create. The fourth and fifth bullet points are about what Apple provides for developers – the tools to create the apps, and the channel to get these apps in front of customers and make money from them. I think this is a reflection of a genuine understanding on Apple’s part that its devices would be far less meaningful without these third party apps.

Given what’s happening now with Apple Watch and Apple TV, I’m expecting to see a ton of innovation from developers in creating new experiences that are hard to imagine today. We’re about to see the same sort of flourishing of new apps and business models around these devices that we’ve already seen around the iPhone and iPad. And that in turn will reinforce the value of these devices for end users, while creating significant new revenue opportunities for developers.

Apple, Apple TV, Apple Watch, Apps, iPad, iPad Pro, iPhone, iPhone 6S, Keynotes

Apple September 2015 event quick take

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Note: I’m cross-posting this piece from the Jackdaw Research website, where it went out earlier today as a media comment on Apple’s event. I should have more in-depth analysis on the event here and on Techpinions in the next few days. My preview piece from Tuesday is here.

Apple’s September event always sets the tone for its entire year – new iPhones are announced, and the iPhone makes up the majority of Apple’s revenue and profits, and the performance of the iPhone business largely determines overall growth rates, at least for now. But today’s event, like last year’s, added another new product category that should drive significant new revenue for Apple and for developers, and arguably the new Apple TV was one of the biggest and most important things announced today.

iPhone

The new iPhones have enough new features to make them an interesting upgrade for those who always have to have the latest device from Apple, with 3D Touch the biggest new feature. The name of Force Touch badly needed to change, since it always sounded a little like a form of assault. I’m no convinced 3D Touch is the right name, but it conveys the concept reasonably well, in that the functionality is about a more layered interaction. 3D Touch itself should make navigation and interaction much quicker and easier, but it will mean something of a learning curve for users, because there won’t be any visual cues indicating what a 3D Touch might do, a problem the Apple Watch suffers from as well. For anyone with a two-year old iPhone, which includes the vast majority of iPhone users who will upgrade in the next year, this will be a significant upgrade. For all the concerns about a down year for iPhones, I believe Apple will have another year of year on year growth, though likely significantly slower year on year than in the iPhone 6 cycle.

I’ve been saying since early last year that Apple should launch its own device installment plan for iPhones, and now it’s launching one, with the iPhone Upgrade Program. This is a huge opportunity for Apple to take control of the customer relationship away from the carriers, and that in turn is a big risk factor for carriers, which will now cede some of that relationship to Apple. Arguably, only Apple has the infrastructure in place to offer this kind of plan to customers, so this will also be a further differentiator against competitors.

Apple TV

The Apple TV has been described as a hobby at Apple for too long, and today the transition to a product worthy to sit alongside Apple’s other products begins. The new SDK will create a huge new opportunity for both existing and new developers, both in gaming and content, and in the process it’ll make the device more compelling for end users too. But what will really change the Apple TV is the launch of the Apple TV service a few months from now, because only then will the Apple TV be capable of becoming the only device you need to plug into your TV. In the meantime, Apple is going to bring casual gaming and a much broader range of apps to the platform, and especially for cord cutters, the Apple TV might well become the only device they need.

One interesting wrinkle is that Apple is giving developers less than two months to create apps for the Apple TV, which is by far the shortest time it’s ever given developers for a completely new SDK. The iPad, which leveraged what had been known as iPhone OS, gave developers 66 days, while the original iPhone gave them 127 days and the Apple Watch debuted 157 days after the SDK was released. That doesn’t give developers a lot of time, but it likely reflects the shared elements in tvOS compared with iOS on iPhones and iPads.

Apple Watch

Though a minor announcement at the event this week, Apple Watch OS 2 is going to be enormously important for the Apple Watch and for Apple. An Apple Watch running OS 2 is best thought of as the version of the Watch Apple would have wanted to launch right off the bat, if it could have. The first version of the Watch software was good, but the reality is that the apps are sorely lacking, in large part because of the heavy dependence on the iPhone for functionality. With Watch OS 2, that all changes, and apps should be snappier, more functional, and far more varied in their capabilities. I believe this new phase of its history will change the Watch as much as iPhone OS 2 changed the iPhone, and make it a much more compelling device, while creating big new opportunities for developers. The new watch and band options should also help diversify the appeal of the Apple Watch in both the premium and low-end segments, with both the Hermes watches and the new colors for the Sport option. This, coupled with the holiday season, should make for a really big calendar Q4 for Watch sales.

iPad

The iPad Pro has obvious similarities to Microsoft’s Surface, with its detachable keyboard and stylus. But the big difference is that the iPad is designed first and foremost as a standalone tablet, and the keyboard and stylus are optional extras. The Surface has always felt compromised as a pure tablet, because everything is geared around the use as a quasi-laptop. The Smart Keyboard and Pencil will add a lot of value for certain kinds of users, but the iPad Pro could easily be a replacement for a family PC for gaming or TV viewing. But with the keyboard, multi-tasking, and new apps and functionality from Microsoft and Adobe among others, it could also become a fairly compelling option in the enterprise. At a minimum of $1000 including the Keyboard and Pencil, the iPad won’t be all that price competitive against a basic PC, but with the new internals, it’s actually quite a powerful computer in its own right.

The key for the iPad is that Apple is now engaged in what you might call salami tactics here; in other words, Apple is seeking to add to the iPad opportunity incrementally with a number of smaller moves, and I see the iPad Pro in this context, along with Apple’s partnerships with IBM and Cisco. The iPad Pro by itself won’t dramatically change iPad sales, but should provide a good boost for sales, especially in conjunction with the advancements in multitasking and split-screen functionality in iOS 9. I’m still skeptical that iPad sales will start growing again over the longer term, but I think they might stabilize, and that will happen in large part due to increasing education and enterprise sales rather than renewed growth in the consumer market.

Apple, Apple TV, iPad, iPhone, iPhone 6S, Keynotes

Apple September 2015 event preview

Related topic pages: Apple, and more narrowly the Apple and TV topic page.

I’m writing up a short Apple event preview here. Please note that this isn’t a list of predictions – that’s always seemed foolish to me so close in to an event, since so much is known already, and any real out-on-a-limb projections are easily proven wrong the following day. Rather, this is an analysis of the importance and impact of the things that are likely to be announced. I’ll follow up with a comment for press in the hour or so after the event – if you’re not yet on my media distribution list but would like to be, you can sign up here.

We also did something of a preview of the event on the Beyond Devices Podcast this past week, focusing especially on the Apple TV – I’m embedding the SoundCloud player below, and you can also find the episode on iTunes and Overcast, as usual.

New iPhones

One of the key mistakes a lot of people in the press and other commentators are making with regard to the new iPhones is having a single-year upgrade mentality. And because they make this mistake, many people are predicting a first down year for iPhone sales, but this view is misguided. As long as you look at each new iPhone in comparison solely to the iPhone that came the year before, you’re going to totally miss the point, which is that the vast majority of iPhone buyers are on a two-year upgrade cycle, and therefore the important comparison this year is to the 5S (and 5C) and not to the iPhone 6 and 6 Plus. I put together the table below a while back for a client, and I think it’s very relevant here – the key thing to look at is the final column, because this is the set of new features an owner of a two-year-old device will see when purchasing the new device. As you can see, even if you ignore Force Touch, which is highly likely but as yet unannounced, there’s plenty to recommend the new devices over the 5S, and if you bought a 5C two years ago, you need to add in several more features that weren’t in that device but were in the 5S, notably Touch ID.

iPhone 2 year upgrade cycles

Beyond the two-year upgrade cycle, everything else points to another big year for iPhone sales:

  • Switching from Android should continue at the same pace, especially since all the year’s major new Android devices are now out, so there’s no sense holding off on buying a new phone.
  • Upgrades from iPhones should be big again – the 5S cycle was bigger than the 5 cycle, which drove last year’s upgrades, so the starting point is much larger, and Tim Cook has made much on earnings calls of how little of Apple’s iPhone base has upgraded to the new phones yet.
  • The iPhone 6 Plus from last year will likely drop in price by $100, meaning that you can now get an extremely capable phablet for the same price as this year’s brand new phone (and the same price the Samsung Galaxy S6 and other leading Android devices launched at).
  • Installment plans and especially leasing options (many of which are iPhone-centric) from the US carriers are driving more frequent upgrades and purchases of higher-priced devices, which should further help iPhone sales. Sprint and T-Mobile in particular are driving iPhone sales hard at the moment, and I’d expect to see some bigger promotions from Verizon and AT&T around the new iPhone launch too.

Will the year-on-year growth rate be as high as this past year? No. But will it veer into negative territory? Absolutely not. Apple should sell more iPhones this year than they did last year, as they have every year in the past. Even those users that sometimes or always upgrade every year should see plenty to like in the new phones too, with Force Touch and other new features making the new phones a nice step up over last year’s ones.

Apple TV

I’ve written a lot about the Apple TV and Apple’s TV strategy in general over the past two years, so much so that last week I put together a new topic page on this site to summarize it all. That writing kicked off with a piece from January last year on how Apple could turn the Apple TV into more than a hobby, and I stand by what I said then, which is that the real transformation can’t happen until Apple launches a TV service (note that this was well before reports that Apple was working on such a thing surfaced). I still believe that’s the case, but I also believe that the announcements that will be made tomorrow will be extremely important for the Apple TV. Adding an open SDK and App Store will create significant new opportunities for third parties and for Apple around both gaming and content, something I wrote about on Techpinions last week. The potential for gaming in particular depends a great deal on the details of execution, most importantly the ease of porting apps from other flavors of iOS, and the controllers. But I think the new Apple TV will be huge. The biggest questions in my mind are how soon it will launch and therefore how much time developers will have to begin creating apps for it. Since it’s very likely to launch before Christmas (and probably in November), it’s likely to have the shortest announce-to-launch cycle of any entirely new Apple SDK, and that’s going to make this launch very interesting to watch.

Apple Watch

Though a minor announcement at the even this week, Apple Watch OS 2 is going to be enormously important for the Apple Watch and for Apple. I think an Apple Watch running OS 2 is best thought of as the version of the Watch Apple would have wanted to launch right off the bat, if it could have. The first version of the Watch software was good, but the reality is that the apps are sorely lacking, in large part because of the heavy dependence on the iPhone for functionality. With Watch OS 2, that all changes, and apps should be snappier, more functional, and far more varied in their capabilities. I believe this new phase of its history will change the Watch as much as iPhone OS 2 changed the iPhone, and make it a much more compelling device, while creating big new opportunities for developers. This, coupled with the holiday season, should make for a really big calendar Q4 for Watch sales. I’ve written about all this in more detail here.

iPad

It’s still unclear whether we’ll see new iPads at this September event, or whether they’ll be announced in October, but either way what I say here holds. The key for the iPad is that Apple is now engaged in what you might call salami tactics here (that’s a term that was coined back in the 1940s but which I first came across in this scene from the British comedy Yes, Prime Minister). That is, there are no huge boosts for iPad sales available to Apple, but rather a series of small steps it can take one by one, each of which will help iPad sales incrementally with the IBM and Cisco deals good additional examples. I first wrote about this idea here. I definitely see the iPad Pro (or whatever the larger iPad ends up being called) in this context – it won’t dramatically change iPad sales, but should add a little to the effort, especially in conjunction with the advancements in multitasking and split-screen functionality in iOS 9 (and potentially iOS 9.1), and the possibility of a stylus and Force Touch. I wrote a piece a while back about how iPad sales might eventually tick upwards due to upgrade cycles, but we’re coming to the end of the period when I thought that might happen, and I’m now skeptical that it will. Rather, I think they might stabilize, and that will happen in large part due to increasing education and enterprise sales rather than renewed growth in the consumer market.

Summary

Apple’s September event always sets the tone for its entire year – new iPhones are announced, and the iPhone makes up the majority of Apple’s revenue and profits, and the performance of the iPhone business largely determines overall growth rates, at least for now. So the new iPhones themselves are enormously important. But I’m actually far more interested in and excited by the Apple TV and Apple Watch OS 2, because they relate to unknowns in Apple’s business. iPhone upgrade and sales patterns are fairly predictable, but the Apple Watch is so early in its life, and the Apple TV is about to embark on such a significant transformation, that these moves are arguably more important in terms of their potential to move the needle on Apple’s future growth in unpredictable ways. On a personal level, too, I’m looking forward to a new iPhone, but I’m more excited by a new Apple TV, and by the new things my Apple Watch will do when running OS 2 and the new apps developers will create.

Apple, Apple TV, TV, Video

Why an Apple television doesn’t make sense (and does)

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It appears some sources at Apple have this week indicated to Daisuke Wakabayashi at the Wall Street Journal that Apple is no longer actively working on making a television. This doesn’t surprise me in the least – the project never really made sense to me as I’ve repeatedly written and told reporters over the past several years. It may seem like odd timing, but I thought I’d outline my thoughts as to why this is so, and at the end talk briefly about a couple of reasons why it does make sense.

Cost, margins and differentiation

If Apple did make a television, there are several things we can be fairly sure of: it would make it out of the same premium materials as almost everything else it makes, and it would want to make sure margins on such a product were in line with the rest of its product line. The challenge here is that Apple would be starting at a very small scale, so would enjoy none of the benefits of economies of scale that current TV makers have, and current TV makers already operate at razor-thin margins. Consumer electronics generally is an incredibly low margin business – single digit operating margins are the norm when companies make any money at all. For Apple to come in, raise the cost significantly because of both premium materials and its lack of scale, and then to try to recoup its supra-normal margins too would drive a price at least twice as high as televisions with similar specs, if not significantly higher. And of course we have a precedent for this in similar products: Apple’s 27” Thunderbolt display retails at $999, while Dell’s equivalent product retails for $599, Asus has one for $430, and low-cost brands go significantly lower. (I’m even completely ignoring, for now, the emergence of 4K televisions – which would magnify all these issues significantly, putting an Apple television into the stratosphere in TV pricing terms).

So why couldn’t Apple do this again in the TV space? To my mind, it comes down to differentiation. The Apple display is differentiated at least in part on the basis of its materials and its look. Arguably, the presence of the Apple logo is also a great signal in a workspace that this is a premium product – for the kinds of creatives who are likely to use these displays, this is an important signal to clients and others about the kind of work they do, and the products they use to get it done. But think about TVs and how they’re evolving. They’re mostly either attached to walls, on stands up against walls, or hidden away in cabinets much of the time. Bezels are shrinking and even disappearing. The prominent logos which once sat under the screen are disappearing with them. To a great extent the television is becoming the purest version of the black rectangle in our increasingly black-rectangle-filled lives. How would Apple differentiate on hardware here? Would it turn back the clock and increase the size of the bezel? Would people even notice if the tiny bezel were made of aluminum instead of black plastic? Would they care? Differentiation in TV hardware today is primarily about making everything but the screen disappear, and this seems totally at odds with Apple’s hardware differentiation.

How, then, to convince customers to part with double or more what they’d pay for an equivalent TV from competitors when the differentiation in hardware will be largely invisible? One option, of course, would be to add additional functionality to the hardware – a camera and microphone for FaceTime calls, for example, with the microphone doubling as an enabler of Siri for the TV. But these things have been tried and failed – FaceTime on personal devices works, but no-one has ever been able to convince families that they should be paying lots of extra money for a TV they can use as a videophone. It appears from Wakabayashi’s piece that Apple did indeed tinker with some of these things, but clearly concluded much the same thing.

Integration vs. a single input

The other way Apple could have differentiated a television is through software, and of course the vast majority of Apple’s products do differentiate through a combination of beautiful hardware tightly coupled with easy-to-use software. So, how would Apple differentiate an Apple TV through software? Well, the problem here isn’t so much that Apple couldn’t do this, but that if all the differentiation is in software, why can’t it be fed to the TV from a companion box like today’s Apple TV? What’s the difference, ultimately, between software baked into a TV and software baked into a box which directly connects to the TV? The challenge with companion boxes and traditional pay TV set top boxes today is that you often need more than one of them to meet your needs. TVs (and accessories such as receivers) come with more and more HDMI ports to cater to the range of devices the average individual or family wants to connect to them: pay TV set top box, Blu-Ray player, game console, a streaming box or stick, and so on. In such a world, it’s easy to imagine an Apple television providing a better way to manage all these inputs in a way a companion box simply can’t solve.

But what if Apple’s vision for the TV space involves more than just being another input plugged into another HDMI port? What if Apple’s plan is to take over the HDMI1 slot and convince you to dump all the other boxes you have historically plugged into your TV? To be clear, this is exactly the strategy I expect Apple to pursue with a revised Apple TV box and the Apple TV service. Under this scenario, input-switching goes away as a problem, and there’s very little meaningful difference between an Apple television and a generic third-party television fed by an upgraded Apple TV box. The only real differences are the need for two remotes and the lack of any audio integration with the TV hardware for Siri and other related functions. Both problems could easily be solved with the use of a better remote for the Apple TV, acting as both a universal remote and as an audio input device (much as Amazon’s Fire TV remote does).

The addressable market

The third reason why an Apple television makes far less sense than an upgraded Apple TV box is the addressable market. Were Apple to sell TVs, it could only target those willing to swap out whatever television they have for a new one, and at a significantly higher price than they’re used to paying. However, an Apple TV box, at a fraction of the price, has a significantly lower ASP but a vastly bigger addressable market – anyone who has any HD TV today and sees the value in adding an Apple experience. Now think about the potential revenue stream from an Apple TV service tightly bundled into the Apple TV box, and suddenly the overall addressable market and the associated revenue becomes significantly larger for this combination than for a television set. Factor in refresh cycles for televisions and the effect is magnified still further – a single purchase every 5-10 years versus more frequent upgrades on hardware and monthly recurring revenue from TV services becomes a no-brainer.

The counter-argument

Having spent most of this post talking about why a television doesn’t make sense, I’d like to briefly review a few reasons why it might, despite all these objections:

  • Control and integration: Apple’s standard model for product development is to approach hardware and software hand-in-hand, and create complete, end-to-end experiences. The current Apple TV flies in the face of this model, because it sits in the background behind a TV built and branded by someone else. An Apple television would be much more along familiar lines, tightly integrating hardware, software, and services, and creating an end-to-end Apple product.
  • Feeding the base: the reality is that many of Apple’s most ardent customers, who likely view Samsung as an inferior brand, nonetheless have Samsung TVs in their living rooms. For those used to buying high-end, well-designed hardware that works together seamlessly, having a relatively inferior product as one of the most visible pieces of consumer electronics in their homes may be irksome. Feeding the Apple base by providing them with an Apple product for this prominent piece of hardware must be tempting. There are no doubt those who would pay the massive premium to have an Apple television set, even if the total number is small.
  • Shutting out others: as long as Apple only makes a companion box, its role is essentially the same as other boxes plugged into the TV, and it has no control or leverage over them. With both the pay TV set top box and the television itself getting smarter and incorporating more functions, there’s a risk that the Apple TV slowly gets pushed out. But turn the model on its head, with Apple making a television, and suddenly Apple is the one calling the shots. It could gain huge leverage over the pay TV providers and how their content shows up on the television, for example.
  • Visible differentiation: one of the interesting things about the Apple TV is that it’s the only one among Apple’s product line today that’s made substantially out of black plastic rather than its usual premium materials. The reason for this is simple: it’s far cheaper, and the device in many cases will be hidden away in a closet or TV cabinet, especially when not in use. A television set, however, would allow Apple to be far more visible in the living room.

I don’t think any of these today come close to overcoming the objections I outlined above, but I can see why Apple at least wanted to explore the category for these reasons and others. Over time, it’s possible that the relative dynamics I’ve outlined above could shift such that the reasons for making a television start to overpower those for holding back. But for now I’m confident Apple has made the right decision.

Apple, Apple TV, CST, TV, Video

The challenges ahead for Apple’s TV service

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The Wall Street Journal is reporting that Apple is finally beginning to get somewhere with its TV service, and has several key content providers on board. Techpinions readers won’t be surprised by any of this, because I’ve been talking up this strategy for some time now, starting a year ago in March 2014 and most recently this past week following the HBO Now announcement. At this point, the outcome I pointed to in that first piece seems more likely than ever, but it’s still not certain that it’ll be a success. As such, I wanted to talk about some of the details of the power struggle that remains ahead for Apple (and for other would-be providers of new pay-TV services) which I haven’t said much about previously.

From lots of little games of chicken to one huge one

What’s ahead is really a huge game of chicken, with the players being Apple (and other would-be new pay TV providers), the major existing pay-TV providers (and especially the major cable operators), and the content owners, both broadcasters and cable networks. There’s already a power struggle between the content owners and the pay TV providers over the fees the latter pay the former, due to two major evolutions:

  • the shift from must-carry to retransmission consent models for local broadcasters, which means they’re now insisting that would-be carriers pay them for carriage
  • the steady increase in affiliate fees for both some individual channels and for ever-expanding packages of channels from some of the major content owners, driven in particular by the rising cost of sports rights and additional sports channels, but also by the increasing investment in original content.

We’ve seen one carriage dispute after another in recent years, with several short-term blackouts, some smaller cable operators dropping Viacom or other content providers entirely from their lineups, and most recently Verizon dropping the Weather Channel, which had hitherto been the most widely-available cable channel in the US. These carriage disputes represent smaller games of chicken, with both sides calling the other’s bluff, and waging public battles for the minds of end users. In most cases, the pay TV providers have ended up caving to some extent and ponying up the required money to keep channels on air, but it’s no longer a sure thing. The relationship between these two sets of players has become increasingly tense, but with these traditional pay TV providers the only channel to market for cable networks in particular, and realistically the main route to market for broadcast channels too, there’s been little alternative but to reach terms and move forward. But many of the content owners would love a real alternative to the traditional hegemony of major cable and satellite providers. The two major telecoms companies, AT&T and Verizon, have provided some competition, but operate very much on the same basis as the old guard.

Incentives to deal, but also penalties for stepping out

All this gives the content owners huge incentives to find alternative routes to market, both as insurance against future carriage disputes and as leverage over the pay TV providers. Few of the content owners, though, have the broad, recognizable brands that would enable them to go it alone in any meaningful way, though CBS is one of a few to be testing the waters. What they would much prefer is to partner with a player which itself has leverage and a huge potential market for TV services, and that’s where Apple comes in. To be sure, Apple today is a tiny player in the overall video market, which generates about a hundred billion dollars in the US each year, the vast majority of it going through the cable providers. But what Apple has is eyeballs, credit cards, and platforms, all of which could be applied to such a service. Apple’s leverage is entirely in its potential as a provider.

The problem, though, is that any such move by the content owners would be seen for what it is – a gambit to break down the power of the traditional pay TV providers. And as such, those providers would retaliate. They have power over these content owners in several forms, with the harshest being refusing to carry channels, but the more moderate (and more realistic) being withholding marketing dollars from promoting those channels and the packages that contain them. Until such a time as any new partnership delivers equivalent benefits (which seems far off at best) they simply can’t afford to sacrifice their existing relationships.

Apple tried one way, but now for plan B

All this creates a dilemma, and a need for a strategy which balances these competing demands. The content providers need to forge partnerships which allow them to build leverage over the pay TV providers without alienating them. For this reason, and because Apple understands the inherent challenges of going up against the pay TV providers, Apple’s plan A was to work with the pay TV providers, rather than against them. It reportedly worked with Time Warner Cable before the Comcast deal was announced, and then switched to Comcast itself, but apparently without success. Comcast is unwilling to yield two things: the customer relationship, and the lucrative set top box fees that go with controlling the delivery of the TV service. Apple would have displaced both of those in a deal with Comcast, which meant it could never happen. Comcast apparently made this clear, and so Apple went to plan B.

If Apple is successful, of course, Comcast will lose both the things it refused to sacrifice in a much worse way than it would have done had it dealt with Apple instead of shutting the talks down. At this point, its greatest leverage is its NBC Universal holdings, with NBC apparently the major holdout broadcaster, but that’s far from a deal killer for the service Apple is creating. Disney is arguably the most important content partner, with its ownership of ESPN, but with the other major broadcasters on board too along with several others, and the recent HBO deal, Apple suddenly has a pretty compelling proposition on the way. The big question now is how the larger game of chicken plays out. So much of the success of Apple’s service will depend on the exact pricing and structure, and the completeness of its content offering. And that’s where the game of chicken comes back in. If the content owners provide overly attractive terms to Apple, they undercut their relationship with the pay TV providers. If the terms aren’t that attractive, Apple’s service won’t be priced competitively.

The challenges ahead

Some of the content owners – Viacom among them – are likely to be more desperate than others, and will sign up with Apple at decent rates. Others have already shown their willingness to break ranks with the pay TV operators through their deals with DISH’s Sling TV. But others will want to tread a more careful path, and that’s the other challenge Apple faces: being truly disruptive to the current model when it can’t undercut on price, and may well end up building a comparable bundle without the a la carte options some consumers (think they) want.

One other interesting piece of leverage Apple has with the content providers is its ability to track usage across its various devices, and across live/linear, DVR, and VoD, something advertisers are particularly keen on and which traditional pay TV providers have struggled to deliver. At some point, all of this reaches a tipping point where Apple’s TV service (and those like it, from Sony and potentially others) gains enough momentum and customer and content provider support that all the content providers can swing their support fully behind it. At this point, Comcast’s refusal to play ball with NBC content will become increasingly untenable, and I would bet Apple would make it very clear (either directly or through the media) that Comcast is to blame for NBC content being absent. The big question is how long it takes to reach this tipping point, and whether Apple can get enough support in the meantime to make things worthwhile.

Of course, for some consumers, simply being rid of the cable operator would be benefit enough, but of course Apple won’t be providing the broadband service over which these services will be delivered. The cable company will still play a role in many cases as the broadband provider, and with the loss of valuable TV revenue it’ll be tempted to compensate by raising broadband prices. If cable operators then also offer comparable over-the-top TV services as a retention strategy, the appeal and impact of Apple’s TV service may be further blunted. Apple’s differentiation will be greatest in the areas it specializes in – creating great user experiences across devices. Apple can apply some of what it’s acquired through Beats to develop recommendation features, and surely has plenty else up its sleeve. The effectiveness of this differentiation is ultimately what will drive Apple’s success or failure as a truly disruptive TV offering.

Apple, Apple TV, Apple Watch, Mac, Smartwatches

Thoughts on Apple’s Spring Forward event

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I had the opportunity to attend Apple’s Spring Forward event yesterday, and wanted to give my quick take on both the event and the brief hands-on I had with both the Apple Watch and the new MacBook. I’ve already written about Apple’s ResearchKit announcement over on Techpinions (for Insiders), and put out a brief comment for reporters yesterday too.

A surprising order

Apple often starts its keynotes with a minor update on retail and other statistics, and this one was no different in that respect. However, it then normally focuses on the main event, followed by one or more additional items – the legendary “one more thing” Steven Jobs was so fond of. What was so interesting to me here was that the Apple Watch was the focus of all the pre-event speculation, and yet it was held for last, almost an hour into the event, and was given only just over 30 minutes of its own. Much of that first hour was taken up with several other announcements: ResearchKit, the new MacBook, the Apple TV price drop and the HBO Now exclusive. I think the reason for this order was likely that Apple had already covered the basics of the Apple Watch in September, with little new information to be announced yesterday other than price and availability.

ResearchKit

See my Techpinions piece for a deeper dive into what I think ResearchKit means and represents for Apple, but in some ways this was the announcement I was most excited about. It suggests various things about Apple and its potential, not least its ability to marshall its considerable resources and its installed base not just in the service of selling more product, but also in the service of doing good in the world. I see this is as a first move beyond the hobbyist self-tracking that’s usually associated with health and fitness trackers and into something that’s truly meaningful in the field of medicine.

New MacBook

The new MacBook is interesting for three key reasons: the naming and positioning, the switch to USB-C, and the technological advances involved. Taking the last first, this is clearly an example of the way in which Apple can, when it wants to, move to extend its lead in key product categories through the use of focused, meaningful innovation. Just as the MacBook Air was a huge leap forward, and has arguably maintained a lead over the competition for several years, this new device is likely to set Apple’s computers apart for the foreseeable future. It’s both a great step forward in portability and a bet on the future – a wireless future which seems more and more possible all the time, and which is being held back at this point mostly by the poor performance of wireless charging. I’ve no doubt that at some point Apple will embrace that too, but for now it’s betting instead on making battery life so long that charging is an occasional rather than a constant concern on these devices.

The switch to USB-C, and the removal of almost all other ports, is the biggest visible representation of this bet on the future, and like the removal of CD/DVD drives and Ethernet ports, will cause some consternation and complaining about the need for various adapters and such. In a scenario where someone wants to power their deice while carrying on a Skype call using an external mic and display, a MacBook user will need to plug three different items into that one port, something Apple has clearly envisaged with its various adapters. But Apple has also been laying the groundwork for this move with a variety of wireless technologies including AirPlay and AirDrop, and various standardized technologies such as Bluetooth and WiFi obviously play a role too.

Naming and positioning was the last interesting aspect, in that this device obviously looked a lot like a MacBook Air from the moment it appeared on screen, but was never referred to as such and indeed fills the MacBook slot rather than the MacBook Air slot. My sense is that the MacBook Air filled a temporary role in Apple’s product portfolio, necessary as long as the technologies involved commanded a significant premium over the base level, but soon to disappear as the key attributes (thinness, lightness, massive battery life) make their way into the MacBook line. Over time, Apple is likely to go back to the 2×2 matrix Jobs trumpeted when he returned to Apple – pro and consumer laptops, in two flavors rather than three.

I had an opportunity to use the MacBook for a few minutes at the event, and it’s truly impressive in terms of the thinness and lightness combined with the amazing screen. The absence of a fan is a plus in some ways, but it’ll be worth watching the reviews for the tradeoffs in terms of performance. Others have pointed out that the specs and performance may be more on a par with Macs from several years ago than any of recent vintage, but I’m curious to see how real-world performance is. Talk of taptic feedback in the keynote had me concerned – I’ve never been a fan of haptics in devices – but the instantiation in the MacBook trackpad feels nothing like any haptic technology I’ve ever experienced before. It’s basically used to provide a second-layer clicking feeling for the “force click” even as the new trackpad doesn’t actually travel. It’s another one of those things that has to be experienced in person to be understood, but it’s very effective, along with the new on-screen functionality associated with that force click. The keyboard keys are different enough that they were tricky to use at first, with quite a few typos, at least partly because the keys are wider than in the past. But I’m guessing it’s the kind of thing you’d quickly get used to.

Apple TV and HBO

The Apple TV and HBO Now announcements are interesting partly for what was announced on Monday but at least partly also because of what they signal about the future. HBO Now has some potential, and as I’ve said elsewhere I think a big part of the success will depend on how effectively HBO can get people who currently use someone else’s HBO password for HBO Go to switch to paying $15 per month for their own service. At least part of that will be about making the first real efforts to discourage sharing of passwords, and I’m curious to see how they accomplish that. The price cut on the Apple TV is clearly a concession to the much-lower price of the various streaming sticks such as Chromecast – the new price is now 2x the Chromecast price, whereas it was previously around 3x the price.

But the more interesting thing is what trends these two moves presage. A shift to a cheaper Apple TV suggests either that a new device might be coming or that Apple’s focus going forward might be less about making money on the hardware an more about seeding a base of devices that can in future subscribe to a TV service from Apple (or perhaps a range of services from various providers). I’ve written on Techpinions about what I think it would take for Apple to really turn the Apple TV into something other than a hobby, and it’s really about providing a fully-fledged subscription TV service on the device (and of course on other Apple devices). Apple is no doubt taking a cut of the HBO Now revenues, and is handling billing and so on for the service. App Store revenue sharing would suggest at 30% cut, but I’ve no idea if that’s accurate. I do think this makes it more likely that we see some sort of TV service from Apple, or more deals like the HBO one that allow Apple to act as the aggregator of a loosely-bundled pay TV replacement, and I’ll probably write more about this.

Apple Watch

Lastly, then, we come to what was to have been the main focus of the event according to all the preview coverage, but what ended up being just the last act of a multi-act performance. The key new details were the pricing and availability details. These confirmed to me several things: the Watch Edition is important in terms of positioning and in terms of Apple’s foray into true luxury (and beyond simply affordable luxury, its past focus). But ultimately, it’ll be a marginal story, available only in few places and in small numbers, and sold at a price to make it affordable for very few people. It’s an interesting story, but essentially all the action will happen between $349 and $1100, in the two other categories. Interestingly, that might well make for an ASP very much in line with the iPhone and iPad, somewhere between $500 and $700 per unit.

I had a chance to wear the Watch (the stainless steel version) and play with it some at the event, and the first thing you notice is how much functionality is there. In my five-minute demo we barely scratched the surface of what the Watch does, and I think that’s illustrative of the challenge and the opportunity for the Watch. The use cases for different people will be at least as diverse as they are for the iPad, with third-party apps making up much of the value proposition. Apple talked about three broad things the Apple Watch does: timekeeping, intimate communication, and health and fitness tracking. And there will be some number of people for whom each of these is perhaps the main focus. But there will be many more who will end up using the Watch for a combination of things that doesn’t fit neatly into any of these three categories, but rather combines both pre-installed and third-party apps in a way that creates a mosaic of useful experiences. That makes it challenging to market, but as I’ve said before I think the early adopters who buy the Watch right off the bat will be a big part of how the device reaches the next wave of people, as they discover its usefulness and communicate it to others.

Edit: I’ve been asked by a Twitter follower to add a little more on my experience with the device. It fit well on my wrist, was comfortable and felt very much like the analog watch I normally wear. It instantly felt better than pretty much any of the other smartwatches I’ve worn, at least in part because of the quality and fit of the band. The materials looked great on the one I tried and the others. The screen was responsive and easy to use. The best way to think about the buttons is that pushing the digital crown is like pushing the home button on an iOS device – it always takes you back to the main screen. The other button, meanwhile, is the communication button, which is an interesting departure for Apple – a dedicated button on a personal device for a specific set of functions. There’s lots of swiping involved too, whether to get to Glances, to swipe between Glances, to navigate on the main apps screen, to select emoji and so on and so forth. Then the digital crown is also used for scrolling and zooming, in some cases with the digital crown offering vertical scrolling and swiping on the screen controlling horizontal scrolling. I’m not going to go into any more detail just because I think it’s worth waiting for a thorough review.

I’ll no doubt write more about all of this going forward, and I’ll have at least one other piece on Techpinions later this week (Thursday is my regular day for my public column), but would love to hear your thoughts in the comments, as always.

Apple, Apple TV, Developer events, Developers, fragmentation, Google, HealthKit, HomeKit, iOS, iOS 8, iWatch, Microsoft, OS X, Smart home, Smartwatches, Wearables, WWDC, WWDC 2014, Yosemite

Apple resurgent – thoughts on WWDC

Today’s WWDC keynote was a sign of a renewed swagger on the part of Apple, whose executives seemed to relish the deluge of new product announcements they unleashed on developers and on their customers. In the process Apple established or strengthened its competitive positioning against two major foes – Microsoft and Google – while opening itself up in unparalleled ways to developers. Today’s announcements may come to be seen in the same way as Steve Jobs’ original launch of Mac OS X, in that it lays the groundwork in several areas for years of future Apple products.

The demotion of Google continues

Two years ago at WWDC, Apple removed erstwhile close partner Google from the iPhone in two significant areas: as the backend provider for the Maps app, and in the form of the pre-installed YouTube app. But Google’s last major bastion on iOS is its position as the default search engine in Safari, and it’s much harder to remove there. In the sense of typing a query into a search box or address bar in a browser, hitting enter and being presented with a screen of blue links, Google is unrivaled, and Apple knows that. But it has slowly been inserting itself between the user and that search box over the last couple of years, and today’s keynote provided further evidence of Apple’s pre-empting of the Google search on both iOS and OS X devices.

Apple’s more subtle disruption of the user-Google relationship began with the launch of Siri, which began to address some users’ queries without an explicit search, and which uses Wikipedia, Wolfram Alpha and Bing, but not Google, as underlying search providers. And it has continued since then, as more third party services have been layered into Siri, pre-empting the Google search for movie listings, restaurant reservations and sports scores. Today’s keynote added Spotlight search to the list of places where users will now find answers to their queries without the classic search box experience, thus further inserting Apple between users and Google.

This is potentially significant for Google, for which the US continues to be easily its single biggest and most lucrative market, and for which mobile is increasingly important. To the extent that iPhone users, which make over 40% of US smartphone users, start using Apple and its tightly integrated third party services instead of Google, for search, that’s pretty bad news. That isn’t, of course, why Apple is taking these steps, but it’s an unpleasant side effect for Google. And a great way for Apple to participate in the search business without having to match Google in the page-of-blue-links business.

A device for every need, not one device for every need

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