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New Apple TV Coming Without Streaming TV

20 Oct, 2015 By: Erik Gruenwedel

Apple Music hits 6.5 million paying subscribers since June launch

Look for an updated Apple TV media player to be released this month, CEO Tim Cook told a tech confab in Laguna Beach, Calif. Speaking Oct. 20 at WSJDLive, Cook said the Apple TV device would feature enhanced search functionality and related apps. It will not have a TV streaming service similar to Sling TV, PlayStation Vue or Charter’s upstart Spectrum TV Plus.

Scuttlebutt regarding Apple TV offering streaming TV was put on hold earlier this year after media reports hinted content holders weren’t keen on the license terms Apple was offering.

The tech giant has history on its side, however, when it comes to negotiating with content holders. It strong-armed lucrative terms from a fading recording music industry in 2001 when launching iTunes. The platform also commands 50% of digital sales of movies and TV shows, according to research firm IHS.

Cook contends the writing is on the wall regarding broadcast TV in its current form. 

"There are very few content owners that believe that the existing model will last forever. I think the most forward-thinking ones are looking and saying, 'I'd rather have the first-mover advantage,’” he said.

Separately, CBS announced a deal with Apple TV to offer subscription streaming service, CBS All Access, to the latter’s streaming device.

The $5.99 monthly CBS All Access offers users more than 7,500 episodes from the current season, previous seasons and classic shows on demand, as well as the ability to stream their local CBS Television station live in more than 100 markets across the U.S., including New York, Los Angeles, San Francisco, Chicago and Philadelphia.

Meanwhile, Apple Music, the upstart $10 monthly music streaming service targeting industry stalwarts Pandora, Spotify and Prime Music, among  others, has generated 6.5 million paying customers.

Cook said the service (launched in June) has another 8.5 million free trial (90-day) users, giving it about 15 million users — and $780 million in current annual revenue.

"I'm really happy about it, and I think the runway here is really good," he said.

Spotify reportedly has about 20 million subscribers. Pandora, which is largely ad-supported, had more than 79 million active listeners at the end of June. It also posted a $16 million loss in the most recent fiscal quarter — largely due to rising content costs.

London-based Edison Investment Research analyst Richard Windsor says the success of Apple Music underscores the importance of controlling the platform upon which a service is to be sold. Apple Music was installed by default on iOS devices already found on iPhones and iPads.

The Apple Music icon is prominently featured and the free trial can be started with the click of a button. As Apple already has a credit card relationship with most iOS users, if the user does nothing s/he becomes a paying user at the end of the trial.

Windsor said he believes Spotify is a superior music service to Apple, but he agrees that users tend to go with a brand they know and Apple’s brand is far stronger than Spotify’s.

To combat this, the analyst says Spotify should up marketing.

“Spotify needs to help users realize how its service is better than Apple Music for the same price. The first step would be to re-run the year-end 2014 campaign where users were offered three months of the paid service for 99 cents,” Windsor wrote in a note.



About the Author: Erik Gruenwedel

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