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TV and Movies

Apple TV Plus is the ultimate test of Apple's brand magic

With Apple only offering a glimpse of its projects, it'll have to rely on the interest of its devoted fanbase to get the service off the ground.

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Apple waited until the end to show off its lineup of celebrities and projects for its Apple TV Plus. 

Apple

Between Oprah Winfrey, Steven Spielberg, J.J. Abrams and Sofia Coppola, Apple showed off a star-studded lineup for its newly unveiled Apple TV Plus service. Consistent with the Apple way of building up its products and services, the superlatives poured forth from CEO Tim Cook.

"It's unlike anything that's been done before," he said at an event on Monday at the company's Cupertino, California, headquarters' Steve Jobs Theater. 

Given the talent signed on to Apple, you might be under the impression that this is a groundbreaking, must-have service.

After all, who are we to question Oprah?

But Apple's legendary track record with products may not automatically equate to success elsewhere. For one, Hollywood is a tough business and one that Apple has little experience in. Spending an estimated $2 billion on A-list talent garners a whole lot of buzz, but it's no guarantee of success. Its first forays into original programming -- Carpool Karaoke and Planet of the Apps -- flopped. 

(Note: Carpool Karaoke originally emerged out of the The Late Late Show on CBS, the parent company of CNET.)

So Apple TV Plus represents the biggest test of whether its loyal fanbase will hoover up all of its services like it lines up at its stores for the latest iPhone. The company's focus on services, which include newly unveiled Apple News Plus and Apple Arcade, as well as a revamp of its Apple TV app, comes as the company attempts to transform itself into a company that's less reliant on the iPhone, which provides two-thirds of its revenue. There are 1.4 billion Apple devices out there, an ideal platform for its services business, which in the December quarter jumped 19 percent to a record $10.9 billion.

While Apple will have you believe it's breaking new ground, the truth is it's just one of myriad players going after cord-cutters. There are a host of services including HBO, Hulu and YouTube all going after subscription dollars, while another highly anticipated option from Disney, which will tie together kids programming, Star Wars and Marvel content, will launch this year.

Apple's option to bundle different subscriptions like HBO and Starz through its Apple TV Channel app, meanwhile, looks a lot like the Amazon Prime Video Channels program offered to Prime subscribers.

One advantage that Apple seems to be pushing: a focus on privacy and a safe space away from advertisers. If there's one theme the company hit time and time again, it's that these services would respect your personal information. 

It's tough to discount Apple entirely. After all, Apple Music came out of nowhere to capture the No. 2 spot behind Spotify. Then there are the myriad of hit products, from the game-changing iPhone to the iPod and MacBook Air. The company is hoping history repeats itself with video. But without a price yet (the service launches in the fall in more than 100 countries), it's still unclear what the demand will be.

"Apple's advantage is certainly that they have such large resources -- they showcased today that they can line up big Hollywood stars to make this happen," said Gartner analyst Annette Zimmerman. "And maybe even more important -- they gave a hint towards the themes they want to address with their own shows/movies, not light and easy topics but rather societal issues that not only the US-based users can relate to."

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What will it cost?

Want to stir up some internet rage? Announce a price hike to a beloved streaming service.

Netflix found that out the hard way once after dropping a sudden 60 percent hike on customers, driving away members in droves. Since then, Netflix has become an expert at tapping its prices gently higher every couple of years. It announced its latest price increase earlier this year.

In the US, Netflix's plans range between $9 and $16.  Its cheapest plan received the first bump in almost eight years.

For now, Apple remains mum on the pricing for Apple TV Plus. The company has a history of pricing its hardware at a premium, but its Apple Music service, at $10 a month, is in line with Spotify. 

Peter Stern, Apple's vice president of services

Peter Stern, Apple's vice president of services, talks about the different services on Apple TV. 

Screenshot by Stephen Shankland/CNET

The other side of the streaming video coin is Apple TV Channels, which bundles different services like HBO and Starz with livestreaming TV services like DirecTV Now and PlayStation Vue. Cable and satellite companies like Charter and DirecTV will integrate their services into Apple TV, while Optimum and Altice will join later this year. 

Having a hub for all of your shows makes a lot of sense. Consulting firm PwC notes that consumers increasingly want a single source for programming. But Apple hasn't talked about pricing for the channels, although you can look elsewhere for clues. 

HBO as an Amazon Channel, for example, costs $15 a month for people who already subscribe to the $119-a-year Amazon Prime service, the same price you'd pay if you signed up directly for HBO Now. Starz costs $9 a month -- again, the same price as for an online customer.

But the more you look at competitive pricing, the more confusing it can be. Hulu, for example, would compete with Apple by offering both video-on-demand for exclusive originals as well as its giant library of programs from giant networks like NBC, ABC, Fox, FX, Bravo and others. That starts at just $6 a month with ads or $12 a month if you want to pay to strip them out.

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But if you wanted to get HBO with your Hulu, you need to sign up for its cablelike live-TV service known as Hulu + Live TV, which starts at $45 monthly and then requires an additional $15 a month for the premium network.

And then there are things like AMC Premiere. The Walking Dead's network offers fans the option to pay an extra $5 a month to stream its shows without any of its ads and watch certain shows two days before they air, but you need to already be paying for AMC through a typical pay-TV provider.

That headache-inducing complexity of navigating online video subscriptions could play in Apple's favor, at least in the US. The company is touting Apple TV as a simplified hub for streaming services and cable channels.

Big spenders

Apple was long reported to have kicked off its original programming mission with a $1 billion budget, but the company has flown past that. BTIG analyst Rich Greenfield estimated Apple's budget has swelled to $2 billion a year.

While that seems big, especially for a gadget giant with barely any background in programming, it pales in comparison with Netflix. The streaming company, operating the world's biggest subscription video service by members, spent $12 billion on content last year. That budget could surpass $15 billion this year, according to BMO Capital Markets analyst Daniel Salmon.

But Netflix's big spending is unprecedented for a company that doesn't touch live sports.

Netflix's head of content, Ted Sarandos, once said the company was trying to become HBO before HBO could become Netflix. Purely based on budget, Netflix passed that point long ago. Research firm Kagan estimated that HBO spent $2.5 billion in 2017, compared with the $6 billion Netflix spent then.

(HBO's spending is sure to rise in 2019: John Stankey, the new head the unit that oversees the premium channel, said one of AT&T's plans as HBO's new parent company would be to boost the network's programming budget.)

Even Amazon was expected to spend $5 billion in video content last year, according to JPMorgan's Doug Anmuth. 

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Killer app: Privacy

While celebrities lined up to sing Apple TV Plus's praises, we saw little footage from the individual projects aside from a sizzle reel at the end. For now, it's not enough to get people excited about the prospect of spending more money, despite the star power. 

One recurrent theme at the event was Apple's focus on privacy. The company noted that article recommendations from Apple News Plus would happen on device, so the company won't know what you like to read. 

Another perk for the News service: Advertisers won't track you.

Cook calls the App Store, "A safe and trusted place for users to discover and download apps."

Apple has spent the last few years talking up the privacy aspects of its products and services but ramped up its focus in the last few months as other tech titans have fumbled with how they've handled the personal information of their users. Stumbles by Google and Facebook have raised questions about how seriously the tech world considers our information. 

It's a nice story for Apple to present. But time will tell if its fans tune in for the exclusive stories on its TV service. 

For now, competitors like Netflix aren't sweating too much -- even with Apple's storied history of success. 

Originally published March 25, 11:54 a.m. PT. 
Update, 2:25 p.m. PT: Adds analyst comments. 
Update, March 26 at 4 a.m. PT: Adds additional background. 

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