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Apple's success on OTT TV market depends on crucial choices

Wednesday 18 March 2015 | 16:48 CET | Background

Apple is expected to announce in June an over-the-top TV package for broadband users, with the service starting in September, according to a report in the Wall Street Journal. The offer is expected to include around 25 channels for USD 30-40 per month, delivered over an iOS app. Apple reportedly has agreements with various content providers, including Disney (ABC, ESPN), Fox and CBS, but not Comcast (NBC). Rumours of such a service from Apple have been circulating already since 2013. 

 

Apple's success with a TV service will depend on a number of factors. TV Everywhere is the biggest competitor, followed by Sling TV from Dish and PlayStation Vue from Sony (launching this month). Netflix, Hulu and other providers are also competing for consumers' budget and time. Cord-cutting is a serious threat to the market and shows how difficult the traditional TV market is. Linear broadcast TV is losing some of its attraction. Apple is less likely to bring the TV service to Europe soon though, given the much lower spending on TV there. 

Netflix breaks open the market

Netflix's significant success and continued worldwide expansion have broken open the video market. Operators are responding mainly with TV Everywhere services. Technology and the widespread availability of broadband are also bringing new players to the market, especially broadcasters. This creates a complex playing field. And in some cases apathy it appears: despite Netflix announcing well in advance its expansion plans for specific markets, few local competitors have launched before the American company's arrival. Only a few exceptions exist, such as Hooq in Asia, a joint venture started by SingTel, Sony and Warner.

Complex market

To help understand the market, we differentiate between several levels:

  • Between over-the-top (such as Netflix and the TV Everywhere services) and managed services (traditional TV as well as interactive services such as catch-up).
  • Between VOD and live TV.
  • Between traditional TV providers (cable, IPTV, satellite, DTT) and other players (broadcasters, producers, hardware makers, software companies).

In addition, the providers have their own distinguishing features:

  • Business model (especially on the VOD market). Netflix uses SVOD (subscription VOD), with no advertising (product placement aside), Pathe Thuis and Wuaki (from Rakuten) use a pay-per-view model, and Videoland uses both. YouTube is largely free, with advertising, and is rumoured to also be planning a SVOD service. Vessel, a newcomer in the US, combines a low fee (USD 3 per month) with advertising revenues. HBO Go is an OTT service from HBO only available for paid subscribers of the TV channel. HBO Now, a stand-alone OTT service, will soon launch in the US.
  • Content. Players such as HBO and Videoland have newer films than Netflix. Netflix and HBO depend more on their own high-quality, exclusive content. Vessel has videos that appear first, exclusively on Vessel and only three days later are available on other platforms. Sport is another important, but costly, differentiator.
  • Price. Content determines to a large extent the price. In the US prices are noticeably higher than in Europe. Markets such as the UK, Germany and the Netherlands have a large amount of free content available, making Europe a difficult market.

Live TV

There are fewer OTT providers of live TV than VoD providers. This is clearly a question of rights; the content owners don't want to disrupt the existing market too much by giving their content to new competitors of their trusted customers (traditional TV providers). There are a growing number of exceptions:

  • The same traditional providers with their own TV Everywhere services.
  • The NPO offers all its channels free over-the-top on NPO.nl.
  • YouTube regularly shows live events.
  • Netflix releases some content on a broadcast schedule (eg, every Tuesday a new episode is available, a day after it is broadcast in the US).
  • Magine in Europe (Sweden, Germany). A small number of channels is free (in Germany, four channels and the regional stations), and paid packages can then be added.
  • Sling TV from Dish (US). It offers a limited but growing number of channels (currently 17) for a low price (USD 20 per month), without the main national networks (ABC, CBS, NBC, Fox), but including sport (ESPN). Additional packages can be added, such as Sports Extra and Epix (each USD 5 per month).
  • Sony will soon introduce in the US PlayStation Vue. Of the four main networks (Disney, CBS, Comcast, 21st Century Fox) it's only missing Disney. The service was designed initially for PlayStation users, but can be extended easily to other devices later via an app. In addition to live TV, Sony also plans to offer catch-up TV and VOD.

And now Apple. We should remember that Apple is already active on the VoD market, through iTunes. And with Apple TV, the iPhone and the iPad, it offers a complete experience to consumers.

Live TV is a whole different market. Given the large number of variables, there is always a niche that offers a way to differentiate. For example: How much will it cost? Does the package include sport? Will catch-up also be available? Will Apple, the same as Netflix and Amazon, start producing its own content? And last but not least: will Apple bring the service to Europe?

For the moment, a number of questions remain unanswered. 



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