Apple's next big thing has no home button, no headphone jack, no bezels and no cords. For the company that built its reputation on radical simplicity, its mantra will be put to the test in its ambitious new Apple TV app, Apple TV Channels and . Changing the way the world used computers and cellphones was one thing; changing the way we watch TV will be a different animal.
Plenty of people -- include many inside Apple -- used to think changing TV meant Apple would have to design its own stylish television sets. But as consumer behavior evolved over the past decade, it became clear that the most powerful innovations in this space aren't going to happen in silicon or plastic, but in the software and services that are dramatically reshaping how we consume entertainment.
On Monday at its "Show Time" event in the Steve Jobs Theater in Cupertino, Apple unveiled a three-part strategy for its new Apple TV streaming service:
- Apple TV app: A superset of the current Apple TV app on Apple TV streaming boxes, iPhones and iPads, the new version of the app will do even more to pull in all of the shows and movies you care about from across all the channels you have access to. It will handle all of the content within the app so that you don't have to jump from app to app, and it will learn your preferences so that it can recommend and surface other shows and movies you might be interested in. The new app launches in May.
- Apple Channels: Here, the 1.4 billion customers with Apple devices will now be able to purchase channels a la carte, including HBO, Showtime, Starz, CBS All Access, MTV Hits, EPIX and others, starting in May. As part of the new Apple TV app, consumers can launch trial subscriptions to any of these channels with a single tap.
- : We also officially learned where Apple has been spending the $1 billion that it's budgeted for original content. With new shows from Oprah, Steven Spielberg, Jennifer Aniston and Steve Carell, Kumail Nanjiani, Alfre Woodard and Jason Momoa and more, Apple also announced its new premium content service that will launch in the fall and will also be part of the new Apple TV app, but didn't reveal pricing.
How could Apple's new TV services make cord cutting a better experience? Let's take a look.
1. Unify the streaming chaos
While the pace of cord cutting continues to accelerate, it's important to remember that two-thirds of US households still get their TV programming the old-fashioned way -- even as consumer satisfaction with cable TV continues to erode. One of the main reasons for this inertia is that cable is the proverbial "devil you know versus the devil you don't." You pay one (often exorbitant) bill, you get access to virtually all of the programming you want (plus a ton of extra stuff you'll never watch), and you have one familiar (if slightly overcomplicated) remote control to navigate it all.
The alternative with cord cutting is that you pay less, you get a better user interface to access your favorite shows and movies (most of the time), and you have a little better control over when you watch and on what device. But the trade-offs can also be heavy. You end up having to manage a bunch of different subscriptions to different services with different billing dates. All of the apps (Netflix, YouTube, Hulu, Prime Video, CBS All-Access) have different features, different capabilities and different ways to access them.
If Apple can provide a unifying interface, billing structure and a way to access a ton of content across phone, tablet, computer and TV, then it will have something worth consumers' time and money. To pull that off, Apple's new Apple TV app will try to "do the whole banana," as Steve Jobs famously said about the company's vertical integration strategy -- its preference to control the entire user experience so it can smooth out the rough edges.
Some content providers -- like Netflix, YouTube TV, and Comcast -- will balk at Apple's new video play, but most will at least still participate in the app ecosystem across iPhone, iPad and Apple TV. The question is whether their apps will be relegated to a secondary role once Apple rolls out its new integrated Apple TV app. Apple will have to tread carefully there, or it could risk alienating customers and run afoul of antitrust regulators.
2. Improve downloading and offline viewing
One of the most frustrating parts of many video-streaming services is the way they handle downloading content -- or simply don't allow it at all. The Netflix experience is a pain, as it allows downloading for just some shows and often expires your downloads before you get a chance to watch them. The interface can also be a little confusing for the average consumer trying to figure out how to download a movie or an episode.
Hulu doesn't even offer downloading -- although it's said it will in the future. Amazon Prime Video handles it a bit better. But the best downloading experience, based on UI and content available, is actually Apple's existing iTunes-based store for movies and TV shows. And at Monday's "Show Time" event, Apple repeatedly promised that content will be available to download and view offline across all of your devices.
All of that matters because the average user still has to deal with plenty of inconsistent internet connections at different times and in different places. The ability to download videos to a phone or tablet and watch them during a commute, on an airplane or at a cafe is a more and more common scenario. So making that experience more universal and user-friendly would be a win for consumers. It also announced that the Apple TV app is coming to the Mac for the first time this fall.
Along the same lines, Apple also has the opportunity to improve the handoff between devices as you, for example, transition from watching something on your phone during your commute to your living room when you get home. It's a scenario that's been envisioned for a long time in science fiction, and Netflix and YouTube have made some progress there. But there's plenty of opportunity to make it more seamless, and Apple mentioned this kind of handoff multiple times throughout the March 25 event.
3. Make cord cutting as simple as an iPhone
It's easy to think of Apple's streaming video play as a challenge to Netflix since Apple is commissioning $1 billion worth of its own shows. By comparison, HBO spends about $2 billion on programming every year and Netflix now spends over $10 billion a year. So, as much as Apple is spending on content, that's not its main play.
But, think of Apple's streaming TV service as less of a competitor to Netflix or HBO, and more of a move to bring order and simplicity to cord cutting. Apple likely sees a big opportunity to give cord cutters some of what they lose when they give up cable -- while recreating the TV model for the next decade as cord cutting goes mainstream and cable companies lose their grip on the industry.
At their core, cable companies are aggregators that sell you a bunch of TV and movies and give you one way to access it all. The problem is that the rising cost of content and their complicated contracts with content companies have made the price of cable too big to swallow for a lot of consumers. The average household pays $107 for cable per month to get about 200 channels and only watches an average of 17 of them. And the cost of cable has increased by 50 percent since 2010.
The other problem with cable companies is that the remote controls and the software interfaces on their cable boxes are often hopelessly outdated and complicated. What good is having 200 channels and a lot of great content on demand if you can barely figure out how to access all of it?
These are the problems Apple is likely eager to tackle -- especially when you consider that two-thirds of US households are still cable subscribers, and many of them are unhappy and open to better alternatives. And that doesn't count all of the young professionals just coming into the workforce, 60 percent of whom rely on streaming as their preferred way to watch TV.
Apple already has access to 1.4 billion customers with active Apple devices. That's a lot of consumers to whom it can pitch a new way to get TV and movies using its streaming service. We saw the power of that with the launch of Apple Music, which now has over 50 million subscribers and has been swiftly gaining on streaming music champ Spotify (96 million).
When it comes to building a better user interface than the average cable box, it's easy to see a path where Apple can build something better, and it already has some experience and momentum with Apple TV.
However, for those who'll be using the new Apple streaming service in the living room on their biggest and best screen, the company will have work to do, because it will have to tackle the other frustration for many cable customers -- the remote control. For Apple, that will mean rethinking the remote for its Apple TV box, which is innovative and simple but often as frustrating and complicated as cable box remotes -- just in different ways. The Apple TV remote is small, slippery and easy to lose. Its touch and gesture area make it too easy to select the wrong thing. And, at times, it can be more frustrating than a cable remote to simply move backward 15 seconds to rewatch or rehear something that just happened.
We didn't hear anything new about Apple TV hardware at the Show Time event on Monday. A new version of that product and especially the remote will eventually need to be part of Apple's strategy, if it's going to make cord cutting as simple as using an iPhone. It's unclear whether Apple will make that a priority after Monday's event, since it announced partnerships to bring the new Apple TV app to Roku, Amazon Fire TV, Samsung TVs, LG TVs, and other smart TV platforms -- which all have their own distinct remotes, of course. This makes it clearer than ever that Apple's big bet in TV is not on hardware, but on software.