For years, Apple (AAPL) has teased the public with hints of big plans to reinvent television. And with its iPhone business maturing, no one could use a market-defining new take on video more than Apple itself.
But all it has to show for that talk so far is a set-top box that lags rivals in features and a couple of original TV series coming soon to its Apple Music service.
Long-running rumors that Apple would flex its considerable muscles and put together a "best of cable" package of channels for an over-the-top internet television service have gone nowhere. It has dithered over how to compete in the emerging internet video sector.
Meanwhile, Netflix (NFLX) has grown into a giant in the on-demand video arena, with Amazon.com's (AMZN) Amazon Prime Video a fast follower.
"Over the years, Apple and TV have been a laughingstock," Phillip Swann, an analyst with TV Predictions, told Investor's Business Daily.
"They talk a hell of a game," he said. "Their executives love to lecture the television industry on what they're doing wrong. They always hint that coming on the horizon they will have the solution. The only thing they have done is a set-top box, which is derivative of other set-top boxes."
IBD'S TAKE: Apple. By far the biggest company, by market cap and many other measures. Also, arguably, the most interesting company, at least at times. IBD groups its Apple stories, a convenient spot to keep up with the iPhone — and news — maker.
The company needs new businesses to drive growth. Last year, its sales fell nearly 8% year over year. This year, they're forecast to rise about 6%. And streaming video is the most prominent of Apple's rumored possible businesses, but it's a question mark as to whether the company sees much urgency in pursuing ventures in that realm.
The best evidence that Apple intends to do something big in the streaming video space could be the company's stated goal to double its services business over the next four years to $48 billion to $50 billion in sales in fiscal 2020. To do that, Apple will need to add a new services offering or two, BMO Capital Markets analyst Tim Long said in a report March 6. Apple can't reach its goal with its current services, which include the App Store, iTunes, AppleCare, Apple Music and other offerings.
"Apple will need to develop or acquire additional services in order to close the gap with the doubling goal," Long said.
For now, analysts take Apple executives at their word that their original video programming efforts are limited to attracting and retaining subscribers to the Apple Music service. Still, executives like CEO Tim Cook and Senior Vice President Eddie Cue say they'll learn from the experience and see where it can take them.
But don't expect Apple to come out with a streaming video service to compete with traditional pay-TV services or a subscription video-on-demand network to take on Netflix, Hulu, Amazon, Time Warner's (TWX) HBO and others anytime soon, analysts say.
Apple's latest idea is to sell consumers a bundle of premium TV channels, namely HBO, Showtime and Starz, Recode reported Sunday. Apple already sells each of those channels separately. It offers HBO for $15 a month, Showtime for $11 a month, and Starz for $9 a month. No word on what a bundle of those three would cost.
Apple And 'Carpool Karaoke'
Apple has announced two shows for its Apple Music service: "Carpool Karaoke," a spinoff of the popular "Late, Late Show" segment; and "Planet of the Apps," a reality show contest, in which would-be entrepreneurs pitch ideas for iOS device apps in hopes of winning funding. Both shows will come out this spring.
"Look, we are just starting out," Cue said about original video at the Code Media conference on Feb. 13. "Where it goes, we don't know."
Apple hopes the videos will help distinguish Apple Music from streaming music rivals like Spotify and Pandora (P).
On a conference call with analysts Jan. 31, Cook described its original video efforts as a "toe in the water."
Started With Jobs
Apple aspirations in the TV business date back to when Steve Jobs was running the show. In the years since, it has been all bark and no bite. Stories on Apple's negotiations with major content producers would regularly leak to major news outlets, but nothing would come of it.
"The Wall Street Journal has probably done two dozen stories that say 'Apple is in talks' with this company or that company about some television scheme that will rule the world," Swann said. "It's ridiculous."
Apple had a leg up on competitors when it started offering video rentals and purchases through its iTunes store. But it stayed focused on that business for too long, even as the market shifted to streaming, nScreenMedia analyst Colin Dixon said.
"Apple missed the boat," Dixon said. "Not only has Apple failed to establish a serious footprint in video, they've actually lost ground on where they were four years ago."
Getting Embarrassed By Amazon
Amazon.com has taken market share from Apple in the movie download business, Dixon said. Plus, Amazon has established a formidable on-demand streaming video business with Prime Video, which, like Netflix, boasts critically acclaimed original shows.
"Amazon is beating the pants off of Apple in the video business and Apple should be embarrassed about that," Dixon said.
Neil Cybart, an analyst with Above Avalon, said he can see a natural progression of Apple building an entertainment streaming service using Apple Music as a starting point. Apple Music has more than 20 million subscribers in less than two years after its launch. By comparison, Netflix, which started offering streaming video as a sideline to its DVD-by-mail business in 2007, had 93.8 million streaming subscribers worldwide at the end of 2016.
Apple is positioning itself as a video content distributor and sees an opportunity to sell subscriptions to many different streaming video services as the traditional cable bundle starts to fracture, Cybart said.
One sticking point with content companies is that Apple wants to control the user experience. But it has received pushback from some content providers that don't want to funnel their content through Apple's TV user interface. Netflix and others want to control that experience, which gives them the opportunity to suggest other shows to watch.
Clearinghouse For Others
Apple seems to be content to sell other companies' streaming video services through its App Store and take a fee for managing the payments. Apple gets 30% of the subscription revenue if someone signs up for a service through its App Store and 15% if they continue to subscribe after the first year.
Apple recently hired Timothy Twerdahl, the former head of Amazon's Fire TV unit, as a vice president in charge of product marketing for its Apple TV set-top box. It shifted the executive who previously held the job to a position negotiating media content deals, Bloomberg reported Feb. 7.
The moves suggest a renewed focus on Apple TV and on providing more content for the device, Bloomberg said. Apple TV hasn't had a hardware update since October 2015. The device doesn't offer 4K video streaming and doesn't carry Amazon Prime as a content offering — two big knocks on the device.
"Apple TV is good, but it's a me-too box," Dixon said. Amazon and Roku have similarly priced streaming video boxes that have more capabilities and programming options, he said.
"It's amazing to me that they haven't done more here," Dixon said. "Apple needs to do what it said it was going to do, which is reinvent the TV experience."
Instead, Apple is "playing around the edges" of the market, he said.
The longer Apple waits to make a move in streaming video, the harder it could be for the company to make a dent in the market.
RELATED:
Apple Music, Spotify Lead In Streaming Tunes, But It's Early Days
