Apple TV+; What is a bundle? What is a Streaming Service?
During Apple’s September “iPhone event”, they threw some light on the wonderings and questions that existed regarding their video streaming service since presented earlier this year. As the time has gone by since their first presentation of the service, back in March, there has been more clarity each week how Apple will position themselves, though there were some questions left to get answered.
Positioning, pricing and capitalization
A classic separation of services, both in the traditional linear TV environment as well as in streaming, is to separate services by their capitalization model; free advertisement-based services (AVOD) and paid subscription services (SVOD). As of today and the latest months of new service announcements, companies merging and changed directions we can filter this into a few more specific positionings on the market. As far as I see, you can do deeper consumption group separation into the following segments
- Basics
- Family
- Premium
- (Sports)
Positioning
Apple is coming on to this market with a smaller sharp-edged offer, holding only 9 titles at start. Even as they will add new films and series each month it’s becoming quite clear that their focus is on quality premium films and series, rather than offer a broader service. This puts them, as of today’s market, in direct competition with HBO as their most obvious competitor which has historically been focusing on fewer Premium series where their logo is set as a quality stamp. I.e. the Premium segment.
Looking at Disney+, announced a few months back, which will go live in November as well — I rather see them as a competitor to Netflix, focusing on a wide catalog with a lot of children and family programming, rather than a direct competitor to Apple.
Pricing and capitalization
Even though media has focused a lot on the price point on which both Disney and Apple have initiated their services, I think it is much more interesting looking at their long-term goals as well as how they try to reach as many as possible utilizing available levers.
In opposite to Netflix, HBO and traditional broadcasters — Apple and Disney, together with Amazon, have other income streams that they can capitalize on. Therefore, there’s no need for them to evolve a bigger capitalization on their video services themselves but looking at the bigger picture.
Apple, even though moving more towards a service offer, has their bigger income streams and margins coming from hardware. Their end goal with their services obviously is, even though delivering the services on third-party hardware, to drive and tie people into their ecosystem, buying into Apple hardware even more. Like the classic Apple slogan, used with iPod and Mac — “If you like the iPod, you’ll love the Mac”.
As Disney’s income from Parks & Resorts together with Merchandise & Toys is more than double the income contribution from their movies puts them in a position where there IPs can be compared to very long advertisement videos for the hardware end experience being sold on the side. I don’t think that Disney+ will change that direction but push it even harder. Disney will create even more content surrounding their main IPs from both their Television Animation division, creating simpler animated series, as their high-end studio contributing to their more high-end IPs like Star Wars. In the end, this will build up the IPs even more, pushing the sales for the Parks, Toys and Merchandise.
This puts Netflix and HBO in the ring corner. They need to push more money into new content to keep their position as front runners in the respective fields. At the same time, they don’t as of today have the ability to capitalize in the same way on that content.
Conclusion
As the competition gets harder, the spread between money put into new content and the ability to capitalize on it gets even wider. As households on average have 1.5–2 subscription-based services per months the competition for the direct to consumer money is already there. Looking at the image above and if you’ve read this far — you’ll probably understand that there is a position left to be taken; be a part of the Basics.
Even though this might not be the consumer’s “go-to”-service and may not have as high possibilities as the others, the consumer will be able to hold a lot more of these services — just like the old basic distribution package on linear tv being advertisement based.
In the end, with all these services in different segments, the biggest fight won’t end by the consumer pocket — but the time spent. As Netflix CEO Reed Hastings puts it; Their biggest competitor is sleep.
Erik Hoffman is an expert consultant in streaming media & ads at Eyevinn Technology. Eyevinn Technology is the leading independent consultant firm specializing in video technology and media distribution.
