The trend toward direct connections between video content creators and their audiences is well underway, but the new Apple TV could finally push that trend into the living room. Although direct-to-viewer relationships are the norm on the web, most premium TV content in the living room still passes through a cable television gatekeeper.
Does Apple finally have enough momentum to break the grip of the content middlemen for good?
The Great TV Unbundling
Two months ago, Apple executives got on stage and proclaimed that “The Future of TV is Apps.” This should be a surprise to no one. Consumer demand for an unbundled living-room experience may have finally reached a groundswell. Mainstream audiences are realizing what geeky cord cutters and younger viewers have known all along: while TV shows have gotten better, cable TV interfaces and subscription bundles have become more frustrating. As more consumers become accustomed to browsing Netflix-style interfaces, the cable TV experience seems downright prehistoric.
Millennial viewers barely distinguish between YouTube, TV, social networks and video messaging. Now that group is aging into the living room and they’re not interested in taking a step backward in their media consumption experience just because they bought a couch.
Achieving Content Parity
App-based TV is no longer a technology problem; it’s a business problem. Roku, ChromeCast and previous Apple TVs are all inexpensive devices that handle streaming video with aplomb. But up until this year, cable TV operators have had a monopoly on first-run premium content, without which any new device is destined to be relegated to a secondary role. Achieving content parity with cable offerings is a prerequisite for Apple TV, or any device, to graduate from an add-on box to the primary user interface for television.
Apple wants tvOS, and its app-based marketplace, to become the default user interface for the living room. But without access to the same content, they can’t cut out the cable TV middleman. So for now, Apple is paving a path around them, bolstered by tent-pole offerings like HBO Now and, more recently, Showtime, in addition to a la carte offerings on iTunes.
A year ago, brands like MLB, which offers a compelling streaming service, were the exceptions. But now that HBO and Showtime have opened the floodgates, media properties without a streaming-only option suddenly seem like outliers.
The cable TV experience seems downright prehistoric.
These key content brands are necessary to validate the platform in the same way the original iPhone had to offer top-notch calling, texting and voicemail features as the price of entry into the market. But eight years later, legacy phone features aren’t what’s driving iPhone purchases and upgrades. Instead, it’s the rich selection of apps and tight integration with Apple’s ecosystem that keeps consumers loyal. Likewise, the real platform stickiness for Apple TV will depend, not on traditional TV content, but on new entertainment apps born out of tvOS-specific capabilities and interaction models.
Incumbents Won’t Necessarily Dominate
The success of desktop software giants like Adobe and Microsoft didn’t automatically translate to mobile. They’re still playing catch-up, while newer mobile-first companies like Instagram, Rovio and Snapchat have topped the download charts and built billion-dollar valuations.
As of this writing, 7 out of the top 10 free apps on tvOS App Store are from TV channels. But the new Apple TV has the potential to create a level playing field for all content apps — not just ones from large media brands.
Users can choose which apps get to occupy the home screen, giving any brand, big or small, an opportunity to earn top-of-mind status. This is good news for long-tail content producers seeking a direct relationship with viewers and competing for audience with the big boys.
In media, as well as software, incumbents tend to resist adapting their legacy business models, while new entrants have no such limitations. Scrappy upstarts are often first to embrace new distribution platforms, and there’s little reason to think that the Apple TV ecosystem won’t offer the same disruptive opportunities for new players in the living room as the iPhone did for mobile.
Back in 2008, the massive growth of Apple’s App Store wasn’t a foregone conclusion. But this time around brands understand the value of direct-to-consumer video, and consumer demand for a better experience is off the charts.
Achieving content parity with cable offerings is a prerequisite for Apple TV.
Companies like 1 Mainstream and Zype have already announced services that allow video content creators to build and publish their own Apple TV apps, while advertising platforms like The Trade Desk and AppLovin are focusing heavily on programmatic solutions for monetizing content(Disclosure: Revel Partners is an investor in both Zype and The Trade Desk).
It’s not just smaller players in the over-the-top streaming-video market. Amazon’s recent $500 million acquisition of Elemental Technologies and Cisco’s purchase of 1 Mainstream (in a deal rumored to be over $100 million) illustrate how seriously tech giants view the space.
The Future Of TV Is Apps
In a recent interview, Eddie Cue tossed out a simple idea: real-time audience measurement that could allow news producers to extend the length of a live segment based on viewer interest. This level of massive real-time audience participation would still represent a huge shift from the way television operates today. Along with live sports, real-time interactivity might be one of the only ways to keep increasingly fragmented, time-shifted audiences glued to a screen at the same time.
Beyond that, we could see interactive narratives that merge the best aspects of TV shows and games. Award-winning projects like Her Story are already blurring those lines. Imagine live crowdsourced improv, user-directed narratives, shows with built-in social interaction features or political debates that use Fruit Ninja-style swipes and slices for voting.
There’s no reason to think that future TV apps will be limited to passive viewing experiences. It’s more likely that the majority will be mixtures of both code and content. We know that the future of TV is apps; we just don’t know what those apps look like yet.