For the past few years we have said time and time again that all the major disruptors in the US pay TV space ‘ Apple, Google, Intel and Microsoft ‘ would be unlikely to get direct content relationships with cable TV networks. If they did and they then took them direct to consumers over the internet, cable TV would be dead in the US, and so why would cable continue to support any content business that broke cover and cut a deal direct. They would drop them with an immediate downward effect on their revenues.
That truth frustrated Steve Jobs before he died and Tim Cook, both at Apple and Google TV fared even worse in that some of the Free To Air players refused to recognize the browser of Google TV and continue to do so, giving it access to even less. Microsoft gave up trying a while back and began to sign up individual pieces of VoD content instead and looked to partner with cable and IPTV companies with its Xbox, to make it a set top substitute. Now Apple looks like it is prepared to do the same with Apple TV, relegating it to being a simple Roku style player, instead of a revolutionary breakthrough for viewing TV. iTV may well be born a damp squib.
There is perhaps one difference here, in that Apple TV, by cutting a deal with Time Warner Cable, may have more control over the look and feel of the entire service, and all of the additional apps that can be downloaded and used with it, than Xbox has so far achieved.
The mounting pressure in this sector of attached devices, had Samsung this week, reaching out to acquire Boxee for a rumored $30 million, although first indications there are that this is to use the core media center software as an App on its smart TVs, rather than to offer a separate box, although the details are not clear yet (see Worth Noting).
The Apple story broke in Bloomberg, which said that it would not be announced for a few months, implying that Apple may line it up with other, similar deals with other cable operators, into a viable launch. Apple announced in June that HBO GO and WatchESPN were now on the Apple TV.
Apple TV at last count had already sold 13 million Apple TV boxes and sold 4 million in its immediate past quarter and the general availability of the same TV that people have always had from cable, but with an Apple ease of use, and alongside other Apple services, may well accelerate that uptake rate dramatically.
There is nothing revolutionary here and Time Warner Cable has in the past struck similar deals to make programming available on Roku boxes and Xbox. It is also working with Samsung to make channels available on portable Android devices and Smart TVs. So once again this is Apple following where others have already been, instead of innovating.
To a company like Apple this is a second best to innovating the cable industry into oblivion. This was very much the way that Apple broke into music, initially allowing people to burn illegal music on some of its devices, and then moving on to partner with the music industry instead. So it doesn’t mean that Apple cannot do well here, as long as it dictates terms and can control the experience.
The Bloomberg story also noted that Apple is hiring Pete Distad from online-video service Hulu, where he was senior vice president in charge of marketing and distribution. Distad will help Apple in negotiations with media and cable companies to line up further deals. The Time Warner deal has been fortuitously launched to perhaps speed up this process.
We think this type of deal was always on for Apple, and it has taken 3 or 4 years to come around to this point of view. It will also create a goldrush of other players ‘ Google and Samsung in particular, trying to position themselves in much the same way.
Google this week is being rumored to be bringing to market its own gaming console, and while we cannot see how this could possibly be successful in its own right, if it is marketed in the same way that the Xbox and PS3 were marketed, as a gaming box that also brings video and the VoD elements could be brought in from its Play service, it could find a successful niche and perhaps get the free to air channels who previously refused to co-operate with Google TV, onside.
It looks a bit redundant in that what Google is after, as it is in so many of its hardware ventures, is the seeding of the market, perhaps showing everyone what can be done. Already one US company Ouya has been working on a $99 Android games console that doubles as a video console, showing its beta in March and due to launch it fully shortly. So not only do non-Android companies already do this quite well, but newcomers are doing it with Android.
Google is probably reacting to the fact that Apple has also been rumored to be coming up with gaming console software for the Apple TV. Apple does not have to look far, in that touch based games took off on its original Apple iPod Touch and have been shifting to iOS ever since. Apple certainly has the clout to invite the top end gaming software players onto its Apple TV platform, and can make it easy by keeping it similar to its tablet and iPhone and can perhaps can use those devices as touch based controllers for in-home gaming.
Confusingly Google is also thought to be coming out with another version of its failed Nexus Q, the video streaming device that it tried to bring to market last year, although perhaps this is one and the same with its gaming console. In the end it was felt the Nexus Q was too expensive and the launch was pulled. Whether this is the same device as the gaming console (it should be), this is clearly a new battle ground ‘ OTT TV attached devices, which may complete the standoff between Apple as a hardware maker with its restrictive developer rules and refusal to work with anyone else’s equipment, and Android that wants to be the operating system for all seasons.
Into all this we have what appears to be a single and simple executive move, with Don Mattrick leaving Microsoft this week. Mattrick is the man who inherited the entertainment crown at Microsoft, and forced it to go down the business to consumer route that Xbox represents and who crashed it out of Mediaroom, which was effectively its business to telco TV operation. Mattrick has now left Microsoft, after just 3 years in charge of the entertainment division. He has not completed the job and who gets to take on the role will be extremely important to Microsoft’s chances of success. But the question remains did he fall or was he pushed?
When Mattrick took over the Mediaroom talent left in droves and now he’s gone. We can’t help thinking that this is no mere coincidence, and that either he felt that his hands were tied by his boss Ballmer, who was rightly fed up with Microsoft bleeding cash in the entertainment sector, or a failure by Mattrick’s department to come up with a clear enough strategy.
Either way Mattrick is now off to join casual games firm Zynga, a company in need of a rethink, and this takes Mattrick back to the gaming world that he loves.
The long game for Microsoft in entertainment had been some kind of unholy merger between the three assets Mattrick looked after, Xbox, Skype and Windows 8 on mobile devices. Perhaps this was supposed to be Skype being built into all Windows 8 devices, interacting with the new TV attached Xbox for video, music, social networking and actual gaming. The launch of the new Xbox has certainly not won Mattrick any friends in the gaming community, especially the idea that Microsoft will come out later than Sony at a higher price with its next gen device, with virtually the same spec.
The SmartGlass app was supposed to be the other half of the equation ‘ the App that sits on phones and tablets and offers a second screen experience, but it launched was also poorly reviewed and thought disappointing, so perhaps Mattrick just attracted too much collective criticism and fell on his sword.
On the plus side, during his reign he announced deals all over the world with major TV and entertainment providers including recent deals with Bravo, Comcast, HBO GO, Verizon FiOS and Syfy, the BBC in the UK, Telef’nica in Spain, Rogers in Canada, Televisa in Mexico, ZDF in Germany and MediaSet in Italy.
So across the market the weakness portrayed by Microsoft lately in Xbox and other entertainment spheres may well have had the effect of inviting Apple to copy its strategy, and try to do a better job than Microsoft. This is turn has led Samsung and Google to following in short order, not to let Apple have a lead. It won’t be lost on either of them that the gaming console market usually has had a new leader after each generation of devices, and they need to be in that race in order to win it, come the holiday season.
This now leaves Intel as the sole company trying to cut linear content deals directly with content majors, instead of acting as a platform for the delivery of existing pay TV content bundles. That either make Intel the play that is most likely to revolutionize TV, or the one that is most likely to waste most money and fail. The new CEO at Intel may well feel inclined to pull back from that market, and refocus, as his early speeches have suggested, on the company’s latest attempts to get back into the mobile market and stave off attacks in its core platform CPU business.