It looks as though Apple will hold a special event next month unlike any it's held in recent memory, according to multiple reports. At the center of the stage won't be new Mac, iPhone, or iPad hardware, but a new collection of subscription services.
This rumored March 25 event has probably been inevitable for a few years now, ever since Apple called out the importance of services revenue to its corporate growth. The most reliable source of growth at Apple the last few years has been in services, powered largely by the App Store, along with Apple Music, Apple Pay, and iCloud.
With its new services, Apple is planning on using its stature in the tech world, the size of its customer base, and its staggering cash flow to insert itself in markets that are undergoing rapid transformations. And while Apple’s not going to beat Netflix or Amazon Prime overnight, Tim Cook could always unveil a bundle that ties together video, music, news and more that could further shake things up.
Apple video service: Goodbye, cable bundle
The rise of streaming services like Netflix and over-the-top TV services like YouTube TV, PlayStation Vue, and DirecTV Now suggest that we are in the midst of a shift from traditional cable and satellite TV to a world where all our video entertainment is streamed over the Internet. (I'd use the phrase "cord cutters" here, but if your house gets Internet from something other than a wireless connection, there's still a cord involved.)
Tim Cook told financial analysts last month that "the breakdown of the cable bundle... [will] likely take place at a much faster pace this year." Apple's plan is to take advantage of that in two ways: by creating its own content and by reselling premium channels offered by others.
It will be hard for a lot of people to conceive of Apple as a streaming service, but the same was true of Netflix and Amazon at one time. The fact is, Apple's reportedly spent $1 billion or more on TV series and movies over the last year and a half, and next month we are going to get an idea of the scope of its programming plans. Apple can't become Netflix overnight, but its offerings can probably blow past Starz or Epix and other lower-tier services with ease.
Apple has only admitted that it's working with Oprah Winfrey, but it's bought series from all sorts of other big names, and is also buying up movies, including making a recent purchase at the Sundance film festival. While it's an open question how much Apple will charge for this service — is it bundled with Apple Music, or entirely separate? — there's no question that Apple is not spending a billion just to sell a few more Apple TV boxes.
There's another aspect to the game Apple's playing here. Presumably Apple's service will live inside its TV app, which the company continues to push as the single place to go on its devices for all video entertainment. Reports say that Apple also plans to follow Amazon's move into reselling other services like HBO Now and CBS All Access and placing their content into the same app. While the margins on reselling TV subscription services are low, they can add up — Amazon has reportedly seen $1.7 billion in annual revenues from its similar offering within Prime Video, Amazon Channels.
Netflix for news
Apple's other big new subscription initiative is apparently an extension of another relatively new stock Apple app: Apple News. Just as Apple is using the breakdown of the cable bundle to insert itself in the TV world, it's using the fade-out of classic publishing business models to create a new service for consuming magazine and news journalism.
Just as the TV app centralizes all video watching, Apple wants Apple News to be the place where people read the news. The business model here is a little bit different, though. Rather than commission journalism or buy out publishing outlets, Apple will instead reportedly offer a cut of subscription sales to publishers based on their readership statistics. It's a tough sell for publishing businesses, especially ones that have had success selling directly to consumers from within their own apps (and with Apple reportedly taking a 50 percent cut on the subscription fee).
In the end, Apple News will probably be a lot like the TV app — a combination of a subscription service unlocking content for some publishers, with the option to subscribe to content from other premium outlets right within the app. Unless Apple sells an awful lot of news subscriptions — or bundles the news subscription into a much larger package of services — it's hard for me to see this being a success for most publishers.
The big bundle
It seems to me like Apple's TV service and its existing Apple Music offering are destined to be offered as separate subscriptions, because spending $1 billion on TV content only to give it away for free to existing Apple Music subscribers seems like a bad business move. But I can see arguments to the contrary, especially at first as the service is getting up to speed and lacks a large back catalog of content to entice subscribers.
It's the addition of the news subscription service that's convinced me that there has to be a larger story here. Apple's adding a whole lot of separate subscription services, and I have a hard time believing every single one of them will be sold a la carte. More likely, Apple will create a bundle of services, offering a small discount in order to sell people the entire suite of offerings the company has created.
The idea of an Apple version of Amazon's Prime subscription service has been an enticing one for a few years now, but it's never seemed to make sense because Apple hasn't had enough items to throw into the subscription basket. With these two services — combined with Apple Music, and maybe even with more device-specific services like iCloud storage and AppleCare — maybe it does. I might not pay for the Apple news service on its own, but if I can pay a single bill each month to give me access to all the things Apple offers, I'm intrigued.
This is uncharted territory for Apple, and the more I learn about what the company may be doing, the more questions I have. No matter what happens at next month's event, this will be a side of Apple we've never really seen before. And not just because it'll feature famous TV actors and creators instead of product managers showing off new computer hardware.
Credit: Tom's Guide