As the summer of media mergers musical chairs draws to an end, we’re left wondering who will find a seat the next time the music stops. It’s a little hard to listen to the big-pipes companies like AT&T and Comcast whine about how they are struggling to maintain viewership after decades of fat bundles and fatter profits. It’s not a lot easier to muster sympathy for the media guys. They claim they didn’t realize they were giving away much of their most valued assets, the digital rights to older shows and movies, to Netflix. Don’t they all have buildings full of deal-savvy lawyers? In the wake of the AppNexus acquisition, the ad tech sector has hung its hopes of a better payday on the franken-partners’ need for ad revenue. But it might take a while for the old school players to really understand digital ads and data.
Netflix is the killer. The crusher of industries. The only one being talked about in boardrooms across the globe. But what about Apple?
Tim Cook’s Q3 call stirred up lots of speculation about his trillion-dollar gorilla’s interest in creating original programming and pumping it through an all-new streaming service. But I think he’s a magician, drawing our eye to the shiny thing while he pockets the ace of diamonds. I think he already has a plan to out-fox them all, and it starts with 700 million active iPhones.
Unlike the six cord cutters per minute leaving cable that plague AT&T and Comcast, the cell subscriber numbers are still growing not shrinking. Though Apple doesn’t provide the service and carry that financial liability, it does own an active billing relationship with every single consumer. But unlike Netflix, Apple customers don’t view their relationship as optional or susceptible to pricing pressures. They see it as a necessity, so they respond to messages and offers from Apple like they are commands not requests. Apple has seven times the number of billing relationships as Netflix, and the relationships are arguably higher quality.
Cook knows those relationships matter, but it’s the Apple user experience that wins consumers’ hearts and defends Apple from the price pressures of its commoditized competitors. Apple TV is more than a simple box that puts digital content on your flat screen. It offers a premium experience that makes the Wild West of thousands of tiny digital content providers with millions of shows easy to enjoy.
For years I told myself I had to buy Apple devices because I have always bought Apple devices. They work better together, I told myself. They can all access my music and shows, I told myself. Last week Mr. Cook made me feel less alone in my neuroses when he said, “A lot of people that buy Apple products buy for the whole ecosystem.” Because of that mentality, Apple may already own the most valuable new television viewers and could therefore be in the best position to shape the new TV experience.
So it sounds like the plan is to first own and grow the best billing relationships. Then create original content so you don’t have to pay anyone else and have exclusivity. Next you infiltrate the living rooms and bedrooms of those willing to pay more for the best TV experience. Then finally, when we’re not looking, you turn 700 million iPhones into loyal Apple TV viewers who embrace their new way of watching television.
To be clear, I don’t think everyone will start watching their favorite long format content on their iPhone screens. Rather, I think the phone is the key to the next TV experience. We have screens around us all the time. Apple may be the first to connect those screens to a singular, high-quality TV experience manager we all already carry in our pockets. If Apple does this right no one will be able to touch it, and it will reinvent the future of entertainment … again.
David Simon is CMO of ad platform SteelHouse.