How Apple TV Could Dominate The Market

Apple is likely to unveil a new version of Apple TV soon, and the major new features will probably be 4K/HDR support along with a faster processor. Supposedly Apple is arguing with studios over the pricing for 4K movies – Apple wants to charge $19.95, studios want $29.95. Really, this is a battle with no winners, only losers. Who buys movies any more? It’s streaming all the way down. If this is all Apple has for the Apple TV, the product will continue its slow downward slide in market share as Roku and Amazon continue to grow. What’s so great about Amazon and Roku? Look no further than the pricing – you can get a streaming stick for $40 or less. Apple’s TV solution begins at $150. That’s why Apple TV has a 5% market share, well behind Roku’s 18% (as well as Amazon’s Fire TV and Google’s Chromecast).

Apple could certainly dominate in this market if it wanted to – after all, the company has more money than any other company (well north of $200 billion in cash!) and an enormously talented hardware and software engineering team, as well as top-notch marketing. They have the resources, but not (apparently) the burning desire to dominate the TV market.

How could Apple TV dominate the market? Here are 5 ways:

Go Big with Games

Apple has already taken the important step of putting an App Store on the Apple TV, but they didn’t really push the idea. Some game publishers offered games, but nothing really compelling – and Apple didn’t really market the idea of Apple TV as a game-playing device. The problem isn’t the Apple TV’s horsepower (though a more powerful CPU/GPU would also help, along with more RAM) – it’s the lack of good controls. Apple should at least offer its own Apple-branded controller, or better still bundle it in. This could be a controller in the old-school mode of the Xbox, or even a bigger version of the touchpad with a thumbstick or two.

Beyond the controls, Apple needs to take some of its spare change and buy some top-quality exclusives – maybe a studio or three to make sure they are properly done and supported. Nothing moves game hardware better than kick-ass exclusive games. These can (and should!) be based on well-known IP, though you should also take some risks with compelling new IP as well. Throw a billion dollars at this, or maybe two, and you’ll get plenty of amazing games.

Finally, market the living hell out of these games, and push Apple TV as an important gaming platform that every publisher should support. Will this be enough to sell millions of Apple TVs? Not by itself, but if you take the next point seriously, it will.

Slash The Price

C’mon, Apple, if you really want to own the market you have to be price-competitive. You can make plenty of money on software here, but only if you have a huge installed base. Which means you need a low-cost option. An Apple TV stick for $49 would do the trick; you can still have higher-end boxes, but that should be $99 and perhaps $129 for the loaded version with extra RAM and two controllers. What about your margins? Consider those lost margins a marketing expense. If you’ve got compelling softwre and services, you’ll easily make that up.

Offer Bundled TV Channels

Yes, it’s time you stepped up and cut some deals, rather than demanding everyone bow to your will. If Sling and PlayStation Vue can offer bundles, why can’t you? With Apple’s massive power you should be able to offer a compelling bundle of channels at a great prices – or better yet, several options at different price points, ranging from $10/month up to $99/month (don’t leave the high-paying customers behind!). The right prices and collections of channels will make Apple TVs sell very, very swiftly.

Include DVR Capability

Sure, local storage is expensive, but that’s what vast cloud storage and streaming is for. Haven’t you been building out that capability? Give people what they want, and let them time-shift broadcast content. Heck, you can start charging for it after a certain amount of free storage, and probably make another huge fortune just from that. Record 50 hours of programming for free, then it’s $9.99 a month for another 100 hours… keeping adding 100 hour blocks if you like, we’re happy to sell it to you!

Innovate

Encourage developers to really make use of the App Store, and HomeKit. Add some spiffy devices for the home with some excellent prices – they can be under Apple’s label, or not, as long as the company stands behind them. Bring Siri to the next level, connect all your Apple devices through Apple TV and make it indispensable. Support app developers with marketing , and as the installed base grows there will many great new apps coming to the platform.

Summary

You’ll note that I did not call for Apple to spend billions on original content, which is something they are apparently already planning to do. I hope that succeeds, but it will take a long time for that sort of initiative to drive hardware sales. Also, implicit in all of this is that Apple makes a strong marketing effort, much more than limply saying “Apple TV is here” and expecting everyone to buy it. Apple hasn’t done that in the past, perhaps because they realized the product wasn’t worthy of a strong marketing push. Add in some or all of the features mentioned here, and it will be.

Do I expect Apple to do all of these things, or even some of them? No, not really. The company seems content to let Apple TV remain a hobby. 

Xbox One X Sales Don’t Matter

As we approach the launch of Microsoft’s new console, the Xbox One X, there’s plenty of concern being voiced by commentators. “The Xbox One X probably isn’t for you,” blares one headline. Another says it’s “still a tough sell.” There are plenty of complaints about the $499 cost, the slim lineup of exclusive games, the fact that one of the best potential games (Crackdown 3) is delayed until next year. Microsoft’s released a list of about 100 games that will be enhanced in some way on the Xbox One X, but some critics correctly point out that the differences will be minor in many cases – and not really noticeable unless you have a pretty large 4K UHD TV, which is still a rare thing.

Given all that, and the fact that the Xbox One S plays all the same games and retails for only $249, many are predicting that the Xbox One X won’t be a big seller. True, Microsoft has noted that early Xbox One X pre-orders are the strongest they’ve ever seen, but we are given no numbers to make comparisons here. We do know that the PlayStation 4 Pro represents only about 20% of ongoing PS4 sales, which is actually a surprise to Sony that it’s doing that well. So in all likelihood, the Xbox One X will not be selling very well for Microsoft for some time to come, at least not until 4K TVs get more popular, games start to develop more compelling Xbox One X features, and/or the price of the hardware drops.

But none of that matters to Microsoft, I bet.

Why should Microsoft be OK with their new console not selling well? Because the benefits of the Xbox One X to Microsoft are primarily marketing ones not tied directly to unit sales. The Xbox One X (and the PS4 Pro) are primarily marketing tools, not direct profit centers.

Here’s the logic: Both Microsoft and Sony’s newest consoles are, unlike new consoles in the past, extensions of the existing console line, with full software compatibility between the entry level console and the high-end console. (This compatibility is currently mandated by both publishers, and is unlikely to change any time soon.) For both publishers, margins are slim on the consoles compared to margins on software – the incentive is clearly to maximize software sales. A user who replaces their current Xbox One with an Xbox One X isn’t really helping the bottom line, unless they begin buying more software than they did before the upgrade. So, from a purely monetary point of view, it doesn’t really matter what percentage of overall console sales is made up of the high end consoles. What matters is increasing overall console sales.

Here’s where the marketing benefit of the high end console kicks in. Screen shots will look better taken from the high-end consoles. The feature list of high end consoles is definitely premium, and the halo effect extends to the entire brand when you start talking about the teraflops and the 4K output. Microsoft can now boast having the world’s most powerful console, a clear marketing benefit.

The benefits of high-end consoles to players are mostly in the future. When 4K TVs become the majority of TVs in homes, and 4K streaming movies are the standard, then having a 4K console will become even more important. That will take a couple of years.

It’s also possible that high-end consoles will eventually get some exclusive software, and that at some point there will be a more clear benefit to games played on high-end consoles beyond the somewhat better graphics. The greater CPU and GPU power could also be harnessed to improve AI, or to put many more opponents on screen, for instance, or to make the world more responsive to player actions.

For now, though, don’t spend any time worrying about how well the Xbox One X sells, because however well it sells it is accomplishing its purpose for Microsoft. The Xbox One X puts Microsoft in the technological lead and provides a great list of marketing benefits, and should help expand the installed base of Xbox One consoles that Microsoft can sell highly profitable software into.