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Apple TV+: a canny plan to compete with Netflix

Apple is building a new base while selling expensive hardware to users, and taking a 30% cut from developers

WT24 Desk

Not everything was predictable. It’s just we had to take the surprises where we found them.

Apple had few treats for those avid followers who tuned in to the company’s press event this week. Three new phones, all thoroughly leaked in advance; a new basic iPad with a slightly larger screen; and a new Apple Watch with a face that never turns off, The Guardian reports.

Case in point: Apple TV+. You would be forgiven for missing that the company’s most meaningful announcement came in the section where it largely repeated news it had already revealed back in March. Yet surprise there was.

The streaming service is launching with a panoply of star-filled titles (though few that look good: Jennifer Aniston and Reese Witherspoon may be able pull off dramedy in The Morning Show, but judging by its abysmal trailer, Jason Momoa’s See is likely to be less successful).

The service will be priced at just $5 (£4) a month. Yet many won’t even be paying that, since a year’s subscription will also come free with any purchase of an iPhone, iPad, Apple TV or Mac.

It’s a canny answer to the obvious question asked since Apple TV+ was announced: how is this thing going to compete with Netflix? The service had big exclusives, but seemed to lack the sort of backlist that could reliably answer the question: “What shall we watch tonight?” Without that content, it was always going to be difficult to convince people to drop their Netflix subscriptions for Apple TV+.

Now we know that was never the intention. In fact, at least in the immediate future, the goal is not to make money from Apple TV+ directly at all, since a substantial proportion of the desired user base will qualify for the free year.

Instead, the goal is to build up a new platform for the company, and make money where it is happiest: selling expensive hardware to users, and taking a 30% cut of all the payments they send to developers. The clue is in the name: Apple TV+ is just the bolt-on to the real star, Apple TV.

This is where things get slightly confusing, of course, because there are two things called Apple TV. The first is the marginally successful set-top box that Apple sells to sit under your TV. Since its relaunch a few years back as an app platform to sit alongside iOS, watchOS and macOS, the Apple TV range has struggled to justify itself in the homes of many: if all you do is watch the two or three largest streaming services, it’s wildly overpowered and overpriced compared with the competition from Roku or Amazon.

But that’s where the second Apple TV comes in – the TV app, which runs not only on the TV hardware, but also on Macs, iPads and iPhones. The app combines TV and movies from every streaming provider, letting users jump between shows from different services, combine their algorithmic recommendations, and pick up where they left off across devices.

It’s also intended to be a revenue-raiser for Apple through the Channels service, which lets users subscribe to individual TV channels and watch the content in the app. Great for those services without the clout for their own standalone streaming app, but which still have some exclusive content – and great for Apple sitting in the middle.

There’s just one problem: the TV app is not supported by Netflix, which means a substantial chunk of Apple customers never even open it.

And so, Apple TV+. Suddenly, a growing proportion of Apple customers have subscription to a buzzy streaming service only accessible through the TV app. At least on paper, that subscription is worth $60 a year. All it takes is one show to catch on for those viewers, and they get in the habit of opening the TV app, at least weekly, to watch the new episodes, placing Apple in the lucrative middleman position in yet another industry.

It’s a solid bet. The only flaw is Jason Momoa. Sorry, pal. Maybe Jennifer Aniston will have more luck?

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