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Apple’s approach should be different from others.

The Translation Bureau is a compilation team that focuses on technology, business, workplace, life and other fields, focusing on foreign new technologies, new ideas, and new trends.

Editor’s note: Watching Netflix do a good job, now video content has become a must for everyone. Apple, which is affected by the weak growth of the iPhone, is also beginning to look for new business growth points. The apple with 1 billion customers is naturally eyeing the service sector. But if you want to do content services, especially video content services, what should Apple do? Senior analyst Neil Cybart provided his opinion. This article was compiled from Above Avalon, the original title is: The Apple TV+ Strategy

Apple has the opportunity to succeed in paid video streaming. It allows others to launch an arms race of content, and then finds ways to get a stream of content that can be touched by people’s visual narratives. As long as sustainability is kept in mind, Apple TV+ can be positioned as a means of driving A’s broader video distribution platform forward. Combining Apple TV+ with other curated content sets, Apple is creating a different type of content consumption for hundreds of millions of highly loyal users. Unlike the general view, I think Apple TV+ is much more likely to succeed.

Content Distribution Department

For decades, Apple has been working to distribute content for users. However, 2019 will be Apple’s year of reinvigorating the content distribution department. In order to reflect the growth momentum of subscriptions and take advantage of the ideal concepts unearthed from privacy and curatorial, Apple has been revealing that it has continuously improved the mechanism of content distribution, and users can see those people. To plan a series of media and entertainment content. This content can be provided by Apple (video) or by a third party (news, video, music, games).

• Apple News + (Edited by people to plan articles from hundreds of paid magazines)

• AppleMusic (by being a fashion pioneer, creating a playlist)

• Apple Arcade (edited by people, custom game sets)

• Apple TV + (Create a selection of visual stories by people)

Details of Apple TV +

Although Apple’s details of Apple TV+ are still kept secret, we can still be confident about several key attributes of the service.

• Apple TV+ will be a paid service. Apple has hinted at Apple’s March event that Apple TV+ will be tied to subscriptions (that is, it’s not free). Last month, during Apple’s third quarter revenue conference call, we got another major clue from Apple CFO Luca Maestri that Apple TV+ would be a paid service. Maestri said that Apple TV + will increase the revenue of Apple Services. Given that Apple has previously stated that Apple TV+ will not have ads, the only way Apple TV+ can contribute to boosting service revenue is through paid subscriptions.

• Apple TV+ will have limited content when it first launched. Apple TV+ may not yet have a content album when it is released. Because getting expensive album copyrights can lead to bidding wars and a lot of leaks to the media. Although the exact amount of content when Apple TV+ was launched is still unknown, Apple has already exposed five in its March event, and another 30 shows are still being produced. Apple has shared with the public four trailers (“For All Mankind”, “Dickinson”, “The Morning Show” and “Snoopy in Space” that are said to be launched this fall.

• Apple TV+ will offer a free trial. Maestri revealed in Apple’s earnings conference call in the third quarter of 19th, Apple TV + will have a free trial. If Apple TV+ is available for free, there is no need to provide such a trial. In addition, the existence of a free trial may also provide some clues as to how Apple intends to release new programs. Apple has previously said that the new series will remain on a monthly basis.

Early questioning

For Apple TV + PhaseSome basic issues are still controversial in terms of consensus. For example, the idea that Apple will be involved in original programming for the first time still makes some people feel uncomfortable. However, many of the questions about this service can be attributed to one thing: everyone thinks that Apple has not enough content to prove the reasonableness of charging users.

One of the most weird criticisms of this is that for consumers, there are already too many paid video packages. This is a typical example of “this mountain looks at the mountain high.” The consumer’s dream is to be able to access their favorite TV channels on-demand. This vision is becoming a reality, but not as we expected. There are now ways to subscribe to personal “channels,” but those are basically bundled with content that is driven by billions of dollars in content budgets each year. However, some people think that subscription fatigue can make it difficult for Apple TV+ to find their seats at the table of paid streaming media.

Strategy

The public opinion agrees that if Apple wants Apple TV+ to have the opportunity to compete, it will have to increase its video content budget (perhaps about $2 billion a year), while also artificially lowering the subscription price. The mistake of this type is that Apple TV+ is not the same as other paid video packs. Apple will seek to play another battle.

Apple will position Apple TV+ as a means of enhancing its broader video distribution platform, rather than participating in a content arms race or as much war as possible to attract users’ attention (both wars will be Very cruel).

Apple TV+ will be positioned to offer exclusive curated content only in Apple TV apps. Subscribers have access to a few exclusive stories that can be watched by the whole family without having to pay to watch a lot of mediocre video content that won’t be watched.

Apple TV app can be used on hundreds of millions of iPhone, iPad, Mac, Apple TV boxes and a variety of third-party smart TVs and streaming media/boxes, with the goal of becoming a repository for user video consumption. Apple’s success will depend on the number of users who turn to the Apple TV app for video consumption. Similar to Apple Card’s approach to familiarizing users with the Wallet app, Apple TV+ is also a way to drive the development of Apple TV apps. Because as long as the user uses Apple TV appp, Apple can win, even if the subscriber is watching HBO, Hulu or Disney content (because Apple can earn revenue from these third-party subscriptions).

One problem Apple faces is that video streaming leaders, including Netflix, are not interested in playing Apple TV apps with Apple. These companies want users to spend their time on their ownOn the platform, not Apple. This has led to the lack of deep integration of Apple TV apps with third-party content bundles, which is what Apple executives hope. However, recent developments in the paid video industry have begun to raise the question of deciding to bypass Apple’s home devices and resort to various third-party video “channels” to be the best business decision.

Industry News

There are five basic issues in the controversial paid video streaming market, each of which can be used by Apple.

1. Subscription pricing is subsidized. Most companies are subsidizing the pricing of paid packages to attract as much users (and their data) as possible. Considering the amount spent on content, Netflix’s subscription fee in the US is more likely to be $20 per month instead of $13. Disney could have easily set the Disney+ subscription fee at around $15 to $20 a month instead of $7 because the subscription included access to the company’s enduring library of content. This kind of dynamic will eventually help new entrants like Apple, because consumers will subscribe to cheap packages instead of an expensive big bundle.

2. User growth priority is set too high. Product and business strategy decisions made by some companies to achieve growth as quickly as possible are problematic. Is it aimed at letting everyone stay on the platform for as long as possible to read the strategy, and has it played a positive role in the development of the video field? It’s time to reflect on it. The more packages that are included in the weekly new program release, the more central applications such as the Apple TV app (which offers a variety of packages).

3. Mediocre content is becoming a problem. The time of day is limited. The company is eager to let users consume as much of their content as possible. Fighting for our time will cause the paid video package to become bloated and mediocre. This will allow users to want more quality content that has been curated and filtered – and apps like the Apple TV app are another means they can use.

4. Data collection is a time bomb. The extent to which video streaming companies collect audience data has not received the attention they deserve. Data collection has now been positioned as a selling point, and the trick is to provide better content recommendations. However, the failures found in “smart recommendations” represent a major loophole that raises questions about the need for such data collection. The data privacy stance demonstrated by Apple’s improvements to the content distribution department is underestimated.

5. Lack of value proposition. Everyone is not doing enough to differentiate their paid video packages from competition. As consumers follow new shows from one package to another,Loss can be a worthwhile issue in the industry. If this happens, we may see more programs being released on a weekly or even monthly basis. Although this is done to reduce customer churn, it is likely to make many people eager to have a distribution center for the latest shows.

The cruel truth

The cruel reality of pay-per-view video streaming is emerging: there is no sustainable business model for independent streaming services that want to gain a foothold in the content arms race. Netflix is ​​trying to become a stand-alone paid video streaming service, but its content spending is also increasing significantly. It’s worth noting that Netflix is ​​still taking steps to get rid of Apple’s content publishing methods, including bypassing iTunes payments and not wanting too much entanglement with Apple TV apps.

There is a way to evaluate the Netflix business model, and that is to look at the company’s free cash flow. The situation doesn’t look too good.

Chart 1: Netflix Free Cash Flow (annual total for the past 12 months)

Netflix Free Cash Flow (Above Avalon)

Netflix burns billions of dollars a year, but there is still no light at the end of the tunnel. Netflix’s management will argue that negative free cash flow is only the result of a company’s huge bet on original content (higher prepaid costs). However, the company did not try to make a suggestion that their free cash flow will soon turn positive. On the contrary, Netflix intends to continue issuing bonds to fund the ever-expanding content budget. This is simply not sustainable. Some things will have to give up.

The $140 billion problem Netflix faces is whether companies can reduce content spending and increase subscription prices once they achieve most of their user growth goals. We have reason to question. The competition for the user’s eye will be very cruel, and most players in the paid video field are looking for other ways to monetize the IP behind the user and the paid video streaming package. This will put pressure on Netflix’s ability to raise prices.

• Disney has three viable and profitable ways (movie tickets, theme parks, merchandise) to monetize IP as the basis of Disney+.

• Amazon has positioned Prime Video as a supplement to Prime subscriptions.

• NBCUniversal sees its upcoming ad-based video subscription service as another way to maintain existing cable subscribers.

In view of the ease with which users can jump from one paid video package to another paid video package, the loss can be raging across the industry. According to Netflix’s latest earnings report, this churn effect is truly visible, and we haven’t even seen real competition in the paid video streaming space. It’s time to wonder if Netflix will benefit from the integration into the Apple TV app, and whether or not to support iTunes payments again.

Long-term battle

According to Disney’s enthusiasm for Disney+ ($13 per month for content including Disney+, Hulu, and ESPN+, this will make a huge splash), and given NBCUniversal and Warner Media recently Taking action to bring the most valuable IP to the family, it is clear that these companies are ready to follow the pre-emptive: Netflix.

Apple found that it was different because it produced both original video content and third-party video packages. From Apple’s point of view, competition in the field of paid video streaming is a good thing. By being able to move from one or two companies to multiple companies, Apple’s strategy of becoming a “bundle of packages” will benefit. And the ecosystem of one billion users and 1.5 billion devices naturally does not have any disadvantages.

Translator: boxi.