Likely the most interesting news from CES this year is that Apple is finally partnering in meaningful ways with big TV manufacturers. Most notably, Apple is creating an exclusive iTunes app for certain Samsung smart TVs. It is also enabling AirPlay 2 and HomeKit support on certain Samsung, Vizio, LG and Sony smart TVs which means users can display content from their Apple devices (iPhone, iPad, Mac) on their big screens.
Apple’s moves are certainly a nod to how important its services/content business is becoming. But 2019 is a huge year for Apple in defining its place in the content ecosystem, with a $1 billion reportedly allocated to create original TV shows. The business model for these shows has been shrouded in mystery, but several months ago, CNBC reported that the shows will actually be given away for free to Apple’s device owners as part of the TV app which will also include subscription options akin to Amazon Channels.
Despite the proliferation of mobile devices, many viewers still want to easily watch on the big screen. This has been a sore spot for Apple because it lacks its own branded TV (like Roku has with Roku TV and Amazon has with Fire TV) and the Apple TV still has a relatively small user base.
That’s not a good foundation for the $1 billion of originals, especially given high percentages of Netflix, Hulu and other long-form content is now mostly watched on the big screen. Absent these deals with big TV OEMS, Apple would be running the risk of relegating its marquee programs mainly to mobile consumption. You can almost hear the late night hosts’ joking “Did you hear Apple’s making TV shows...the bad news, they’re almost impossible to actually watch on TV.”
Even the new round of deals is only a half measure. For example, Samsung and LG combined are estimated to have a little over a third of global market share of smart TVs, less than the 40% share for all smart TVs running Android. And smart TVs are just one way viewers watch OTT content on the big screen…the rise of inexpensive streaming devices (e.g. Roku, Fire TV, Chromecast) has enabled older HDTVs to be used in modern ways. Then there are the game consoles and other connected devices. It’s still unclear how iTunes will offer the originals, alongside Apple’s TV app.
So the bottom line is that Apple’s new deals with Samsung, LG, Vizio and Sony are a start toward giving viewers more flexibility to access forthcoming originals on their big screens, but still leave Apple well behind Netflix, YouTube, Hulu, etc all of whom have long embraced big screen distribution of their apps.