Apple's ambitious vision for the future of TV is finally about to take shape. Here's why it matters more than ever.
- Apple laid the foundation for its approach to the TV market when it announced its refreshed Apple TV in 2015, and a new streaming service would serve to further that vision.
- It's a critical move for Apple as it looks to combat slowing iPhone sales and maintain its status as an innovator in the industry.
- The service will represent a new product category for Apple as next-generation gadgets like augmented reality glasses and autonomous driving software are still said to be in development.
When Apple unveiled its revamped Apple TV set-top box in 2015, it framed the update as a dramatic rethinking and much-needed modernization of the medium. "And our vision for TV is simple, and perhaps a little provocative," CEO Tim Cook said during the company's September keynote that year. "We believe the future of television is apps."
Now, more than three years later, Apple may be preparing to give the world an even clearer picture of exactly what that statement means. On March 25, the company is slated to hold an event at the Steve Jobs Theater on its Apple Park campus where it's expected to unveil a new streaming video service among other announcements. The service will likely be integrated into Apple products and would allow access to Apple original programming as well as shows from other media giants like CBS, Showtime, and HBO among others.
Apple pioneered the modern smartphone when it launched the iPhone in 2007, and its original iPad set the standard for modern tablets in 2010. But it's struggled to make a similar impact with its more recent hardware products.
The Apple Watch, which is now the most popular smartwatch in the world, was more of a slow burn than an overnight game changer, as some reviewers criticized the first generation Apple Watch for not doing enough. Average consumers, too, weren't initially blown away by the watch, as more than half of those surveyed in a 2016 poll by advertising firm Fluent thought the watch was a flop. (One could argue that the now-defunct Pebble, which raised more than $10 million on Kickstarter and still remains one of the platform's most-funded projects, was the first smartwatch to excite the masses about wearable technology).
Amazon's Alexa and the Google Assistant have already established themselves as being the most pervasive digital assistants in the home. In the fourth quarter of 2018, the Amazon Echo accounted for 35.5% of smart speaker shipments while Google Home devices were responsible for 30%, according to findings from Strategy Analytics reported bt VentureBeat. Apple's HomePod speaker only claimed 4.1% of the market, although shipments did increase by 45% quarter-over-quarter.
That leaves many investors, analysts, and industry watchers wondering what's next for Apple. And if the latest reports are to be believed, the answer is clearly new digital services. Bolstering its services business is particularly important for Apple in 2019 as iPhone sales - and worldwide smartphone sales - have slowed down.
Apple said in its earnings report from January that iPhone sales in the ever-important holiday quarter declined 15% compared to the year prior. The company attributed this drop to macroeconomic factors and the fact that consumers are holding onto their phones for longer periods of time.
But Apple's services business, which includes products like the App Store, Apple Pay, and Apple Music, served as the silver lining in the company's earnings report. It grew by 19% in the December quarter and reached an all-time high of $10.9 billion in revenue.
Business interests aside, Apple's long-anticipated presence in the video streaming market will be key for the company to maintain its reputation as an innovator. The smartphone market has matured, and the next-generation technologies Apple is reported to be working on like augmented reality glasses and a new car platform likely won't be ready in the immediate future.
New smartphone models introduced by industry giants like Apple and Samsung have felt iterative more than revolutionary in recent years, with the biggest advancements coming in the form of camera upgrades and revamped designs. At the same time, smartphones are becoming increasingly expensive; even the entry level iPhone XR is roughly $50 more expensive than 2017's iPhone 8, which started at $699. That is making it increasingly difficult for companies like Apple to convince consumers to upgrade to new devices.
Apple is also still readying its plan for whatever it believes the next evolution of the personal computer will be, whether that's augmented reality glasses or self-driving car technology. The company is reportedly preparing to release an augmented reality headset in 2020 that would run on a new Apple-designed chipset and operating system, but that timeline could change, according to Bloomberg.
The company is also reportedly devoting resources to building autonomous driving software under its Project Titan initiative, as Bloomberg also reported. But it's unclear exactly when the company will release any products stemming from that project. Apple initially intended to design an electric vehicle that would launch by 2020, but it shifted its focus to self-driving software in 2016, the report says. Apple also laid off 190 employees from its Project Titan division last month.
That means Apple may have to prove it can do more with the products it already sells, and launching a new video streaming service would certainly be one way to do that. But as a newcomer in the space, the company will undoubtedly face stiff competition from rivals like Netflix and Amazon, especially when it comes to content.
Apple is developing its own programs for the service, which it's expected to preview during its event on March 25, and has invested $1 billion in original content, according to The Wall Street Journal. Apple has signed a multiyear deal with Oprah and is reportedly working with M. Night Shyamalan on a thriller and Steven Spielberg on a revival of the Amazing Stories anthology series, according to Variety and The Wall Street Journal. It also acquired James Corden's Carpool Karaoke in 2016.
But $1 billion is just a small sliver of what Netflix spends on programming, as the company said in its most recent earnings report that it spent $12.04 billion on content last year. Wedbush Securities analyst Daniel Ives recently urged Apple to pursue content acquisitions in a bid to catch up in a note to investors on February 21.
"Now is the time for Apple to rip off the band-aid and finally do significant content [mergers and acquisitions] with the landscape ripe," Ives wrote in the note. "Otherwise it will be a major strategic mistake that will haunt the company for years to come, as content is the rocket fuel in the services engine and currently missing in the portfolio."
Yet Apple does have a key advantage that Amazon and Netflix lack: the iPhone. Apple recently announced that there are now 900 million active iPhones around the world. And if Apple does incorporate this new streaming app into iPhones, iPads, and Apple TVs as it's expected to, it will certainly have a broad means of distribution. Wedbush predicts that Apple's streaming service could have 100 million subscribers in three to five years if it proves to be a hit.
Apple may have established its vision for television in 2015, proving that the Apple TV is no longer a "hobby." But if successful, this new video service will be the missing puzzle piece necessary to execute on that mission. And it's more important for Apple now than ever.