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TV Bundles Challenge Apple to Make a Deal

TV Bundles Challenge Apple to Make a Deal

By Katie Benner, The New York Times | Updated: 14 September 2015 15:17 IST

Never let it be said that Apple releases products quietly. In an event on Wednesday that lasted over two hours, the Silicon Valley giant unveiled new iPhones, a large new iPad and - for the fashionable among us - nice new bands for the Apple Watch.

But a new beefed-up version of the Apple TV device, not all that long ago deemed a hobby for Apple by its executives, received much of the pre- and post-event publicity.

Still, for all the changes to Apple TV, one component still missing was a hoped-for bundle of television programs. So what happened?

Blame a combination of complexity and cost.

"Television broadcast and digital rights are incredibly complicated, especially when you get into international rights," said Dan Cryan, senior director of media and content at IHS Technology, a research firm. "This is tougher than film. It's an absolute snarl of contracts and agreements."

Television shows are crucial for any tech company that wants to make inroads into our living rooms. Apps for video games and other pastimes are all well and good, but television shows bring in viewers.

"Apple TV needs TV shows to succeed, especially live sports," said James McQuivey, a Forrester analyst. "Otherwise it doesn't stand out from other products that let us stream Netflix and Hulu."

In the United States, Apple might have to negotiate with a network like CBS for content, but it would also have to negotiate with local affiliates for rights to some shows. People with knowledge of Apple's television negotiations say that local affiliates pushed back against some content deals.

In many cases, the digital rights to a single show are held by several different parties, which means that companies that want to offer them, like Apple, have to wait for some of those contracts to expire. McQuivey points out that HBO does not even have the rights to everything it has created for its own app, since it is waiting for agreements that it made with other distributors to expire.

The complexity of these agreements increases exponentially when accounting for the fact that deals need to be renegotiated in different countries.

"Ten years ago there were no templates for doing digital deals and figuring out complexities like streaming rights and union negotiations," said Brian Wieser, an analyst at Pivotal Research Group. "But now those templates exist and a company can get the rights to content if it's willing to pay a huge amount of money."

The price tag Apple would have to pay at this point would be high, because the TV world that Apple is dealing with is stronger than the music industry was when Apple needed songs for iTunes and the iPod.

"The record companies were facing what was obviously a mortal threat with illegal file sharing," Wieser said. "You could argue that Steve Jobs didn't let a good crisis go to waste and he cut some very good deals."

By contrast, Wieser says that viewers in about 3 million of the country's 110 million homes watch television shows via broadband only. "At that pace you can understand why there's no sense of urgency" to work with Apple, he said.

The headache of securing television content is one of the reasons things like amateur action sports videos are so appealing to digital outlets, and why they might make for easily accessible app content on Apple TV. They are not encumbered by the copyright and distribution restrictions that govern traditional television shows.

There has been some talk that Apple could bypass some of these rights issues and high costs - and still provide entertaining content to users - by emphasizing apps.

During the company's special product event last week, Eddy Cue, Apple's head of software and services, showed off apps made for Apple TV by the room-booking giant Airbnb, the fitness company Zova, Activision Blizzard's Guitar Hero and Disney's Infinity video game. A shopping app from Gilt also got prime time.

The message: Televisions are for a lot more than just watching TV. And apps could get more television content onto Apple TV internationally if a local broadcaster that already has the digital rights to the shows that it broadcasts built an app, Cryan says. In this scenario, Apple does not have to negotiate with anyone for content. The broadcaster has already done that and is now bringing what it has to Apple TV via its app.

People are spending more time looking at their app-centric mobile devices than at traditional television, according to a study from the Yahoo-owned analytics company Flurry. But it is not clear whether local broadcasters will have enough digital rights to make an appealing app, nor is there a guarantee that they will want to make an app at all.

But YouTube stars and shopping apps are not, for now, enough to create a broad base of users around Apple TV. For that, the holy grail is still more traditional programming like sports and hit television shows.

"Getting these deals done is no longer impossible," Wieser said. "But for now it's incredibly expensive instead."

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