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How An Apple Television Set Could Cost You Nothing

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This article is more than 9 years old.

Every time the possibility of an Apple television set crops up in casual conversation (which it does with amusing regularity in tech journalist circles), two main reasons tend to be put forward for why such a product will probably never be more than a myth.

One is that it would be difficult for Apple to put its own ‘stamp’ on something as essentially dumb as a TV screen. The other is that Apple couldn’t realistically release a TV because it would be way too expensive to survive - even with that ‘bulletproof’ Apple logo - in a market that’s become insanely, destructively price-centric in recent years.

Having once been very much in the ‘it will never happen’ camp myself, though, I’ve recently started to see signs that might just overcome both of the prime objections to the emergence of an Apple television set.

First, as I’ve covered in an earlier article, I believe you can detect traces of what might make an Apple television a truly distinctive - and distinctively Apple - proposition in the arrival and gradual device-creep of Apple’s HomeKit system. But now I’ve also started to see a potential solution to the seemingly more intractable pricing issue. Namely that Apple could be planning to launch the world’s first television given away to consumers - or at least heavily subsidised - on the back of a contract-based business model.

The idea of an expensive Apple product doing explosively well on the back of a contract sales model is, of course, hardly new. It’s unlikely to say the least that Apple would have shifted 74.5 million iPhones in the first quarter of its 2015 fiscal year if every buyer had been expected to hand over in one lump sum - or even via a traditional finance agreement - the hefty guideline prices Apple attaches to its phones. Let people ‘lose’ the costs of these Apple phones amid monthly payment contracts with their mobile service provider, though, et voila: people snap the phones up almost as if they were being given away for free.

Naturally nobody will be more aware of the importance of contract-driven sales to its business than Apple itself. So much so that there’s potentially no other company in the world as experienced and interested in leveraging similar payment models across other parts of its business.

Clearly, though, the mobile phone marketplace is not the same as the TV marketplace. The way selling phones on a contract works is that the carriers of the phone services subsidise the handset costs in return for signing customers up to monthly call/text/data charges over a minimum defined period. Yet if Apple tried to sell televisions through some sort of contract system, who would subsidise the hardware cost? None of the traditional broadcasters across the world would suddenly set up shop to ‘give’ you a TV in return for you signing up to their broadcast wares, would they?

Actually, this sort of business model does already exist - kind of. After all, it’s common practice for subscription-based broadcasting platforms like Sky, Virgin and Dish to subsidise the set-top boxes you need to receive their cable and satellite-delivered services in return for guaranteed monthly payments for their broadcast services. So aside from the much higher amount of the subsidy involved, what’s the difference between giving consumers a free or heavily subsidised set-top box to receive your broadcast service and giving them a TV on the same basis?

Intriguing though this scenario sounds, however, there’s a pretty major problem with it: the sort of subscription broadcasting platforms that currently give away or subsidise hardware in return for a minimum period of viewer subscription are definitely not Apple’s friends. In fact, Apple’s own Internet-delivered Apple TV content service is a deadly rival to the more ‘traditional’ Sky/Dish/Virgin-type broadcast models, so it’s next to impossible to imagine how relationships might spring up between such service providers and Apple’s hardware division.

Cue a much simpler and more direct solution: Apple itself sets up the subscription-based content service/package through which it could subsidise its home-grown TV hardware.

In terms of the distribution infrastructure required for this, Apple is more or less already there. It already has a prodigious volume of video content available for streaming via iTunes, while its Apple TV platform distributes a vast amount of over-the-top content to tens of millions of households across the globe. In building the pay-per-view iTunes library and Apple TV service Apple has clearly established critical relationships with many of the biggest players in the video content provision world - relationships that would undoubtedly serve the brand well in reshaping its content provision approach to deliver a package built around a monthly umbrella subscription rather than the current piece-meal Apple TV approach.

Obviously any attempt by Apple to build a subscription-based content platform for distribution would quickly become a direct challenge to the big-hitting likes of Netflix and Amazon Prime. But there’s nothing inherently wrong with that, and actually it’s hard to think of any brand that might be better placed to launch a compelling new subscription video platform than Apple given the systems and relationships it already has in place - as well as, of course, that seemingly irresistible Apple brand power.

In fact, the seemingly unstoppable power of that brand at the moment means that right now would be pretty much the perfect time for Apple to go about create a compelling subscription/contract TV service through which it could subsidise a proprietary, Apple-branded TV. For as Forbes colleague Anthony Wing Kosner pointed out in a recent article, Apple’s emergence as an unprecedentedly enormous business with a vast network of customers plugged passionately into its brand is coinciding perfectly with a new move by key content creation players like HBO and CBS towards establishing their own individual streaming services that stand free of restrictive ‘you can only have this if you also have that’ cable or satellite bundle deals.

This new ‘debundling’ trend opens the door to the creation of a much more fluid subscription package environment where powerful entities like Apple can negotiate with smaller entities for more manageable chunks of content, enabling the creation of much more customised programming packages with more easily negotiated global rights reaches. Apple could even potentially create a cherry-picked streaming service containing only the most successful and/or acclaimed content, delivering a content experience consistent with Apple’s premium approach and branding that would also likely look very attractive versus the less distinguishing platforms out there that require you to hunt through mountains of crud to find the good stuff.

Even better, being able to strike deals more directly with individual content providers may enable Apple to share the upfront cost of subsidising an Apple television as part of a contract deal with the content providers, who would get in return a share of the spoils that accrue from the potentially vast subscriber base of people who simply can’t resist contracting themselves in to secure glamorous new Apple hardware at a discount price.

There’s one final point to add that ties back to the argument that says Apple won’t make a TV because it can’t bring anything truly distinctive to the TV hardware market. For surely if an Apple TV is designed from the ground up to work optimally with the new sort of TV distribution model I’ve been talking about in this article, then it truly could deliver just the sort of game-changing interface and experience that’s become Apple’s trademark. All doubtless wrapped up in some deeply glamorous aesthetic design and potentially able to run your entire electronic household via the HomeKit system.

In fact, I believe the internet content delivery landscape is now sufficiently evolved that Apple could even decide to forego putting broadcast tuners into its TV, thereby sidestepping one of the key territory localisation issues some people raise as a key barrier to Apple entering the TV market.

Naturally all of this could turn out to be just wishful thinking on my part; the mad ramblings of a man who just fancies being able to get his hands on an Apple TV for free. But at the same time there really do seem to be signs that the TV world is rapidly moving towards a state where it could deliver just the sort of business model that has helped make Apple such a monumental success elsewhere.

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