By Greg Mills
As an Apple fan and a believer in the wisdom of most of what comes out of Cupertino, I bought the most recent Apple TV device and have used it quite a bit since it was first launched. As I noted in this space on a number of occasions I think there is an opening for Apple to challenge the cable/satellite TV content providers, since a lot of people hate them, but it won’t be easy and it is not happening yet for Apple. The numbers aren’t right yet.
We see the decline of physical media for digital video content delivery, to be sure, but what is replacing video tapes and disks isn’t steaming video over iTunes, but rather NetFlix and other streaming content providers with affordable, flat rate monthly plans. Apple TV’s iTunes video content available for streaming is way too expensive; the one-off, rental “go to market plan” needs drastic reworking to succeed.
When you analyze the video content offered by Apple TV and the attempt to rent that content on a one-off basis, you have to consider the alternatives consumers have that is a much better deal. The notion of buying the limited right to see a single TV show for US$0.99 cents or a single movie for $5 is not going to fly, when one can subscribe to a satellite or cable company and get hundreds of channels that have unlimited showing for a one time price per month.
The “all you can watch” vs the low cost but one-off solution for each show, in any reasonable amount of content is strikingly in favor of the monthly package deals. The economics of any new technology has to find an economic sweet spot — and that is not even close to where Apple TV is priced right now.
I subscribed to NetFlix a couple of months ago and got the one “disk in the mail and unlimited streaming content package” and it has worked well. Almost too well, as my 11-year-old daughter discovered she can now stream kid video programs through the house by Wi-Fi to her iPhone using the NetFlix app. She now walks around the house ear phone jacked in watching junk kid TV over Wi-Fi, way too much.
We noticed she missed a couple of deadlines for school work recently, so we took the iPhone away until her teacher gives the all clear. I suspect, given the choice of being grounding in the form of cold showers or losing the use of her iPhone (used as an iPod touch) she would brace for the cold baths, even though you know how teens love those long hot shower. I still have to gently pry my iPad out of her grasp to borrow it back from her whenever I want to use it.
The point is, that while Apple TV gives options for using several content providers, the NetFlix “channel” is the only one really used much around here. While I know I can stream pictures, music and video from my laptop (and now iPad), to the big TV, that is not really happening much. Renting a movie for $5 for 24 hours use isn’t a reasonable charge when the same content is available at no extra charge with a monthly package deal.
The Apple TV device might as well have been sold as a NetFlix device. Ironic that with a market cap of only 5 billion or so, NetFlix would be quite affordable to Apple, which has about 60 billion in cash sitting in the bank. Keep in mind there are a lot merger forms that wouldn’t require all cash. Hooking up with Apple might also protect NetFlix from a buyout from someone not as worthy as a partner. Steve Jobs commented that Apple was looking for strategic purchases that would complement what they are doing. Duh …
The new Google TV streaming device that was launched at the $400 price point recently seems to be failing, as they cut the price to $300. Also, Google has not gotten much interest from content producers required to have content to stream. Despite a very deep pocket and a willingness to launch into new markets, there needs to be both a compelling technology that is backed by sound economic realities. Google is learning that the hard way right now. The complementary software/hardware killer product package that Apple has mastered, is a very hard act to follow. Just ask Microsoft. Zune or Kin anyone?
I suspect the actual sales numbers Apple is seeing from streaming are not has high as hoped for from renting TV shows and Movies. Apple needs a NetFlix type monthly package plan for streaming unlimited content for one reasonable monthly price. The sticky spot in all this is the content providers, who have their heads in the sand and unreasonable aspirations as to the value of their content.
If I can view the FOX Channel over Dish in an unlimited manor 24 hours a day, for say, $2 a month, how is it that $0.99 is insultingly low for only one TV show, when viewed one-off? The entire thing is about entrenched economics and an unwillingness for companies to change established business plans, until they must. As Greg Mills once said, “those who stand too long in the road of progress, will be run over.”
I did the Black Friday thing and picked up a new 55-inch Visio LED TV for $889 at the Sams Club. Since it wasn’t the newer version with WiFi and Internet apps built in, I also picked up a Visio Blu-ray disk player with those extra features for $130. Compared to Apple TV at $99, the Visio Blu-ray player gives us the ability to play Blu-ray disks as well as stream NetFlix to the new big TV.
I will retire the Apple TV device to the older and smaller 37-inch LED TV we moved down stairs. That way we can stream NetFlix to both HDTVs and any of three iPhones or iPad. NetFlix can stream from our broadband Internet connection through the Apple TV Device, PlayStation3 or through the new Visio Blue-ray player. All video content is in HD with one NetFlix account and all unlimited for $7.99 per month.
Recently NetFlix announced the “disk in the mail concept” is being phased out in favor of streaming video content alone. Fine with me, as a lot of the the content on physical disks is getting old anyway. With NetFlix as our video “on demand channel,” Dish provides the monthly package programing for live TV programs and HBO for more recent movies. Left out for us are movies at the theater and Apple’s iTune videos. Both of those two forms of content delivery are not economically viable, as far as I am concerned.
I think Apple would be absolutely nuts to not buy NetFlix and fold it into the Apple landscape of streaming content of all types that they are developing. The new server farm Apple is getting on line right now would support all forms of digital content delivery with Apple getting a cut.
I am looking forward to the launch of “The Daily” on-line iPad newspaper that’s in the works. Notice the price is expected to be $0.99 cents per week, not $4.99 an issue — which is what a lot of failed early attempts to publish magazines on line started with. The price of things have a tipping point or realistic price expectation where they make economic sense. I think $0.99 a week might fly for an on-line newspaper — but it will still have to compete with free news web sites like CNN.com.
Finally, we will, hopefully, hear this week what is going on with the “disappearing folders” on iPad’s new iOS 4.2.1
That’s Greg’s bite for today.
(Greg Mills, is a Faux Artist in Kansas City. Formerly a new product R&D man for the paint sundry market, he holds 11 US patents. He’s working on a solar energy startup, www.CottageIndustrySolar.com using a patent pending process of turning waste dual pane glass into thermal solar panels used to heat water. Greg writes for intellectual web sites and Mac related issues. See Greg’s art web site at www.gregmills.info ; his email is gregmills@mac.com )