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Apple Has Millions on iPhones. Can It Use That to Get You to Watch Its Shows?

Apple Has Millions on iPhones. Can It Use That to Get You to Watch Its Shows?

By Hayley Tsukayama, The Washington Post | Updated: 1 September 2017 13:09 IST

Apple is reigniting its push for the living room, investing more in original shows and following in the footsteps of Netflix, Hulu and Amazon. But there's no doubt that Apple, which reports have said is spending as much as $1 billion on developing its own shows, is late to the party when it comes to courting audiences, and it's unclear how it will stand out to the average couch potato.

Apple is expected to announce at a September 12 event that Apple TV is getting support for 4K - an ultra high-definition format - which would see it catch up to competitors that already do.

When looking at Apple and its prospects for elbowing past its competitors in the streaming content space, one thing stands out: It has devices in millions of people's pockets and living rooms. Which raises the question: Can Apple take advantage of this fact when eyeing a move into streaming video?

That was an argument many made about Apple Music when the company moved into streaming music in 2015. Because Apple had a way to place Apple Music before everyone's eyes, getting people to try it should be fairly easy.

And to an extent, that is what happened. Within two years, Apple Music has racked up 27 million subscribers, though it still lags behind Spotify by about 20 percentage points in market share. Leveraging what analysts call its "install base" - the number of people who are already using its products - Apple could quickly build up a lot of users, said Angelo Zino, analyst at CFRA.

Apple didn't immediately respond to a request for comment.

Those who buy Apple products are likely to be open to paying for streaming services, Zino said. Apple, he said, would be crazy not to try to sell its customers on some sort of video play, especially as mobile networks improve and make it even easier to watch video on smartphones.

But other analysts said Apple won't make a service that can only be viewed on Apple products for a while - if at all. Locking your shows to devices, even for devices as common as Apple's, automatically limits your audience. So while iPhone, Mac and Apple TV users may see the most marketing for future Apple shows, since Apple is looking to get as many subscribers as possible, it's unlikely to cut off any potential audience, at least before it has a hit.

Consumers also shouldn't expect Apple's video efforts to mirror what its competitors are doing right away, said Dan Rayburn, analyst at Frost and Sullivan and a former Apple employee. Making a few big original shows, which is all that Apple's reportedly interested in so far, is different from planning a full-fledged video streaming service.

For a full service, Apple would need to directly negotiate with other production companies if it wanted to compete with the likes of Netflix and give us all its version of streaming media.

And that takes the firm right back to where it's been since Apple's late co-founder Steve Jobs described a vision for the television - which is mired in negotiations. Analysts have guessed for years that Apple is looking to launch some form of streaming service with a mix of live television and on-demand shows. But disagreements over the prices have left the prospect of an Apple streaming service with its wheels spinning; in recent years, the company has focused more on making sure that other services' apps are centralized on its stores, rather than trying to compete with them directly.

Even earlier this week, the Wall Street Journal reported that Apple is in protracted talks with movie studios over how to set the price of 4K movies and shows for the Apple TV set-top box.

Rayburn said, to him, these sounded like fairly standard negotiations, but noted that the disagreement over 4K prices shows the studios aren't willing to bend on content that matters to them.

"To me, the studios have always put a lot of value in 4K, even if consumers haven't," he said.

For now, customers should expect Apple to use its originals as a way to push Apple Music subscriptions - which are available off Apple devices. Content hasn't proven wildly profitable for anyone, Rayburn said, and certainly not at the level Apple aims for with its other businesses. Even having a large, obvious audience - iPhone and other Apple users - doesn't mean that Apple will find a formula that works for them.

"Hardware drives awareness, but it doesn't guarantee success with a platform," Rayburn said.

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