There's a rumor Apple is going to simplify TV through fewer, more relevant channels and make TV more affordable and customizable. Applying the lens of low end disruption theory:
- The standard cable package with ESPN and HBO overserves many customers -- it's too expensive with more TV channels than they want. These customers want something simpler and more affordable.
- Apple can use an asymmetric business model to offer overserved cable customers: (1) more affordable television that's customizable and/or more focused on the best content (like ESPN and HBO); and (2) a simpler, more usable interface that makes it easy and convenient to watch desired content when and where you want. These are unmet jobs-to-be-done that cable companies and content providers are currently ignoring.
- Apple's asymmetric model likely involves reducing/eliminating the middleman role of cable companies by allowing users to subscribe to content directly (from a content provider like HBO), with small margins for the Apple TV and small margins for Apple in its assumed role as content provider middleman. Apple still benefits from this asymmetric model because Apple TV and the company's role as content middleman facilitate the sale of "sticky," highly profitable ecosystem hardware like iPhones, iPads, and Apple Watches.
- Content providers may benefit from this model because it will motivate them to focus on creating, nurturing, and producing the best content and the best channels -- content that actually generates meaningful subscription/advertising revenues -- rather than creating sub-par content/channels that providers package and sell to cable companies through affiliate fees. Some of these sub-par channels probably can't survive without packaging and affiliate fee support: they can't survive unless they're packaged with better content/channels, with cable companies forced to pay the content provider an affiliate fee for the whole package (kind of like an unprofitable product subsidized by a profitable product). If sub-par, packaged content that can't survive on its own is subsidized through affiliate fees then this may artificially inflate end user cable subscription fees. If end user cable fees are artificially inflated due to subsidized content then Apple's asymmetric model may improve affordability more than anticipated.
- Another factor driving a more affordable business model for the distribution of television content is the way mobile devices are competing for user attention. Paid or advertising-reliant TV content providers (ESPN, HBO, ABC, CBS, NBC, etc.) are currently seeing user time and attention shift to free content on mobile devices (YouTube, social media, news, entertainment, etc.). To benefit from this shift rather than be harmed by it, traditional TV content providers must look for ways to: (1) make television content on mobile devices widely available and easily accessible; and (2) offer affordable subscriber options that can compete with free mobile content. Content providers can benefit from an asymmetric model because more affordable/accessible/customizable content, available across TV's and mobile devices, will likely increase the viewer base for content providers, increasing the subscription and advertising revenues these providers receive.
See Concepts page and discussion of Clayton Christensen.
The author owns stock shares of Apple.