Apple has made a concerted global push into original TV with the launch of its ad-free streaming service today (Friday 1 November). So how does the tech giant barging into an increasingly fierce market alter the future of streaming?
Apple TV+ launches at an aggressively inexpensive $4.99 a month, which chief executive Tim Cook has described as “a gift to our users”. In addition to a seven-day trial, it is free for a year to new Apple device buyers.
With $6bn allocated towards content acquisition (rival Netflix is expected to spend $15bn this year) it is relying on its own original content globally so as not to have to get embroiled in the territory streaming rights battles which weigh down pre-existing shows and other broadcasters.
Its slate is noticeably thinner than the likes of Netflix and Amazon Prime, with eight TV shows and one movie comprising its launch lineup. Among them: 'The Morning Show’, a drama from Jennifer Aniston, Reese Witherspoon and Steve Carell; Jason Mamoa’s fantasy epic ‘See’; space-faring ‘For All Mankind’ and tale of the feminist icon ‘Dickinson’.
These original shows have been tepidly received by some critics, underlining the difficulty in pivoting a hardware company into content.
Whereas Amazon Prime bulks up Amazon’s membership programme with its TV output, Apple TV+ likely has an ulterior motive – not least since its generous pricing would, on the face of it, point towards this wing being a likely loss-maker.
The Financial Times cited an insider in the company who couldn’t explain the service’s purpose. “I don’t know who the Apple offering is first and foremost designed for,” he said.
Jim Nail, a principal analyst of B2C marketing at Forrester, told The Drum Apple's offering is significantly weaker than Disney or incoming HBO Max – but across a shallower pool of originals, it has some strong casts signed up.
Already Aniston, Witherspoon, Carrell and Momoa are plastered across Apple’s marketing and websites, showing how it will use star power and intellectual property to try to dial up desire for its hardware in a similar mould to how it once shifted iPods with U2's help – at least until it forced an album onto all its devices.
Furthermore, a one-year free membership to new Apple device buyers could help catalyse device sales and upgrades at a time when they are plateauing.
Nail said: “Competing on original content is not really Apple's strategy. It is using the content as a loss leader to sell more devices, and appealing to a more tech-savvy audience, the audience who wants to build their own channel bundle by picking individual channels out of the Apple store."
Symbolising the relationship between content and devices, specific benefits have been granted to those Apple TV+ subscribers using Apple’s hardware; for example, iOS and macOS users can download videos for offline viewing, whereas Microsoft and Android users can only watch online. Tuong Nguyen, senior principal analyst at Gartner, described this as using content to "bolster the Apple experience".
But giving non-Apple users access to the service (albeit with limitations) has its benefits, too. Sarah Stringer, senior vice-president, head of innovation at Carat USA, suggested it helps Apple "capture consumer data outside of its own hardware ecosystem".
She added: "It will be interesting to see if this is an opportunity to trojan horse data from arguably competitors who will be streaming their content to understand what’s happening behind competitor doors.”
The winners in this space will be those who best identify the reasons why viewers migrate to streaming video.
Is it the convenience of an on-demand app on any device? The pursuit of premium content? An escape from advertising?
The prevalence of incoming ad-free services indicates the blocked-out advertising of TV is a particular annoyance.
Quick on the heels of Apple, ad-free Disney+ arrives next week, with WarnerMedia's ad-free HBO Max and NBCUniversal's ad-supported Peacock following suit early next year.
Disney+, in particular, is coming to market with much of its entire vast back catalog available alongside a slew of interesting originals in the Marvel and Star Wars universes. It is leading subscription intent and brand awareness in the US. It is followed closely by Apple TV+, which has less brand awareness than Disney+ but with the power of Apple’s advertising and hardware ecosystem driving it, this gap could close.
A cause for concern for any new services is the fact that first-mover Netflix is levelling out at 150 million global subscribers. With some strong competition out there, it may have peaked – but it is upping spend in marketing to differentiate itself regardless.
Mark Inskip, chief executive UK and Ireland at Kantar’s Media Division, is concerned that “we’re seeing countless services emerging for only a limited number of eyeballs”. Kantar data says 44% of streamers have at least two subscriptions, but only 18% have more than three. As more services come to market, how many paid subscriptions will consumers generally tolerate or afford?
There's an argument that this saturation opens up an opportunity for ad-funded or freemium models instead. Inskip said: “Content creators need to bear in mind that consumers aren’t paying for the service to avoid ads, but to get access to premium content. Accurately measuring the content audiences are enjoying – and tailoring it accordingly – will be critical for any new streamers to stand out in a crowded space.”
Gavin Stirrat, vice president of partner services EMEA at the OpenX ad-exchange, believes the ad-free subscription “business model is unsustainable” and presents freemium as a “win-win opportunity”.
He suggested more services will follow the ad-funded model, similar to what Discovery has launched with Dplay last week. "It could provide consumers with the content they want, without demanding even more money from them."
Dave Castell, general manager EMEA of inventory and partnerships at The Trade Desk, sees the “streaming wars becoming even more fierce” and doesn’t see top-quality content paying the bills alone.
“Nothing offers the same monetary potential as advertising.
"Moving forward, we’re likely to see the growing sway of the ‘freemium’ model, offering consumers two options: ad-funded free content, or ad-free subscription services.”
As it stands the emergence of ad-free streaming services presents an issue to advertisers determined to reach consumers through TV advertising.
Forrester's Nail issued a warning that Nielsen ratings have declined 30% in the past couple of years and streaming service inventory has not made up for the decline.
If “younger, higher-income” consumers continue to be attracted to digital services, advertisers could struggle to reach these audiences without ad models being adopted down the line.
He concluded: “The industry should be concerned about this, they are exactly the prime audience brands want to reach.”
While this may not be an option or requirement for cash-heavy Apple, it may see many of its competitors adopt ad-free services down the line, easing the competition in an evermore crowded paid subscription market.