Broadband Cable Association of Pennsylvania


September 5, 2012

Apple's television: never has more been written about a product almost nobody really knows anything about.

So much, in fact, that many now take the Apple TV as a fait accompli. Piper Jaffray analyst Gene Munster certainly does. He has been one of the most outspoken prognosticators, saying earlier this year that "the question is now 'when'" the set will finally launch. (Among other things, Munster believes Apple will offer models ranging in size from 42 to 55 inches and cost $1,500 to $2,000.) Rarely asked: is this mythical product even a good idea?

The television market is by no means an easy nut to crack. The business model that goes along with making and selling TVs, meanwhile, doesn't match up with Apple's. Over the last decade, Apple's most successful products -- the devices that have driven its success -- have been those people buy early and often. That's precisely why the iPod -- not the Macintosh -- was the centerpiece of Apple's resurgence, and why the iPhone and iPad are now its most important products.

Last October, Apple announced that it has sold 300 million iPods worldwide since the first of those devices hit store shelves in 2001. Some of those sales went to folks who owned two, three, and sometimes, four of the iconic little music players. The Nano or Shuffle are great for a run, but the iPod Classic is ideal for long trips. The iPod Touch is the next-best option for little kids who aren't old enough for iPhones, but want an iOS device. The justifications practically multiply themselves.

The iPhone is a similar story. According to a June survey conducted by Consumer Intelligence Research Partners, just 38% of those who bought an iPhone 4S in the last year were previously running devices from competing vendors. Nearly all of the others already owned an iPhone, in other words. Spending a few hundred dollars (at most) every couple of years on an iPod or iPhone is not greatly significant.

Apple's genius, in part, has been in maintaining a comparatively short upgrade cycle. That won't fly as far TVs are concerned. Television makers such as Sony and Samsung have gotten accustomed to throwing as much into each device as possible, rather than fine-tuning the feature balance every year as Apple so studiously does. Why? People hang onto their TVs much longer. According to research firm DisplaySearch, the average life span of a TV is nearly 7 years. (That figure has been dropping from a previous high of 15 years.)

To make matters worse, margins are not nearly as high in the television market as they are in smartphones or tablets. DisplaySearch reported earlier this year most LCD TV makers are facing lousy margins that push most of them to losses. Sony, for example, has watched its television business lose money for years. Panasonic and Sharp are also having trouble staying afloat. Of course, true believers point to Apple's uncanny ability to upend stodgy markets -- cellphones, clunky mainframes -- over and over. But not even the most ardent Apple watchers can ignore the significant headwinds it might face if it enters the TV business. For better or worse, the television market is a different beast -- one Apple won't be able to slay so easily. Fortune; more in USA Today

Investors reacted negatively to the news that the Netflix service would no longer hold exclusive rights to stream such movies as "The Avengers," "The Hunger Games" and "Mission: Impossible."

Netflix's stock dropped nearly 7% in midday trading Tuesday on news that had reached a multiyear licensing agreement with EPIX that would add thousands of movies to its rival Prime Instant Video service. The deal between Amazon and EPIX will more than double the number of entertainment titles available through the Prime Instant Video service since last September, when Amazon introduced the Kindle Fire tablet. Some 25,000 movies and TV episodes can be viewed through the subscription service, for which members pay an annual fee of $79 for instant access to video as well as unlimited two-day shipping of packages.

Some analysts predicted that the EPIX deal -- which adds movies from Paramount Pictures, Lionsgate and Metro-Goldwyn-Mayer-- will intensify competition for Netflix. Janney Capital Markets analyst Tony Wible noted that about half of Netflix's customers subscribe to the service because of its movie collection. Others observed that the Amazon deal is "hardly a lethal blow" to Netflix, because EPIX's movies account for just a fraction (mid-single-digits) of the viewing in Netflix households, wrote Vasily Karasyov of Susquehanna Financial Group. Los Angeles Times