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Video Briefing: Apple wants what Amazon already has (in OTT)

Apple has a lot of ground to make up if it wants to compete with Amazon and Roku in the world of over-the-top streaming video.

The key hits:

  • Apple plans to release its original TV shows for free on the “TV” app that comes pre-installed on iPhones, iPads and Apple TVs.
  • The original video programming — which Apple is spending $1 billion on — is essentially a marketing expense for other services and products.
  • This will soon include an Amazon Prime Video Channels-like program that will let media companies distribute subscription streaming channels inside the TV app.
  • Apple sits behind Roku, Amazon and Chromecast in terms of U.S. connected TV users, and it won’t be easy or quick to close the gap — especially when Apple devices are pricier than its competition.
  • Still, Apple’s strength in tablet sales — and the continued growth in OTT users — will help the company grow users.

I guess when you have a trillion dollars, you can afford to spend a billion on TV shows that you give away for free. That’s exactly what Apple is planning to do, according to CNBC, which reports that Apple will release all of the TV shows it’s producing for free on the pre-installed “TV” app available on iPhones, iPads and Apple TVs.

Remember, for Apple, these shows are essentially marketing. Eventually, Apple could offer some type of subscription that bundles various services and products including Apple Music and AppleCare — something people could find very compelling.

But soon, Apple’s TV shows will also serve as a marketing tool for a new offering: A program that lets TV networks and other video programmers distribute their subscription streaming channel through that pre-installed TV app. The idea is simple: Apple will let users bundle various subscriptions — from, say, HBO Now to Crunchyroll — through Apple, which can handle billing and other services in exchange for a cut of subscription revenue.

If that sounds familiar, it’s because that’s what Amazon already does with its Prime Video Channels program, which offers well over a hundred OTT channels for Prime customers to subscribe to. As I’ve reported before, Prime Video Channels is a blockbuster program and can account for anywhere from 25 percent to 55 percent or more of a streaming channel’s total number of subscribers. It’s made Amazon indispensable for any network or programmer building an OTT business. And you can see why Apple — and Roku, which is also working on a similar program — would want to get a piece of this action.

Trouble is, for years Apple sat back and let Amazon and Roku carve up significant portions of the OTT market, and it might take some years for the device maker to catch up. Roku has about a 32.4 percent share of monthly connected TV users, followed by Amazon’s Fire TV at roughly 26.6 percent, Google’s Chromecast at 16.8 percent and Apple TV with about 13.2 percent of monthly connected TV users, according to eMarketer. That won’t be overcome in a quarter.

Another thing going against Apple’s ability to close the gap with Roku and Amazon is the fact that Apple goes after the high-end market. The latest Apple TV is priced at $149, but both Roku and Amazon offer streaming USB-sized dongles that cost around $30 to $40. If all these devices offer the same apps, most customers are going to opt for the cheaper options, said Alan Wolk of consulting firm TVRev.

“The iPhone and iPod were significant improvements and better than anything else out in the market at that time,” Wolk said. “You can’t say the same about Apple TV, which is fairly identical to Roku and Amazon — even in the layout.”

There are some things going in Apple’s favor: Apple said it sold nearly 12 million iPads worldwide in the third quarter of 2018 — and while I still don’t buy the idea that a significant number of people would watch half-hour and hour-long comedies and dramas on iPhones, I can see them doing so on iPads. What’s more, eMarketer estimates that there are 182.6 million connected TV users in the U.S. this year, a figure which will grow to 204.1 million users by 2022. More users means more viewers across the board.

And if some of those users are enticed to try out Apple TV and the TV app because it’s offering a show starring Reese Witherspoon — for free? — then Apple will call it a success. It’s marketing.

Three questions with…
David Gandler, CEO of FuboTV

FuboTV now has 250,000 subscribers and is on track to do more than $102 million in revenue this year. What’s driving growth?
The first thing is just a significant improvement of the product. We’ve had a remarkable track record of ensuring the stability of the platform and high-quality viewing experiences. The second thing is the greater breadth of content. In the very early days, FuboTV was about the soccer fan that came into watch his or her team 10 hours per month. Now [with more channel options] we’re seeing users average 50 to 55 hours-plus per month now.

FuboTV is up against some big guys, including Google and AT&T. How do you plan on competing with them for new customers?
This is based on my own research, but about 6 percent of the population knows who we are. But if you think about the percentage of the population that has heard of YouTube TV and DirecTV Now, that’s closer to 65 to 75 to 85 percent brand penetration. We’ve got 250,000 subs at six percent of brand penetration. We don’t have the brand power yet, but that’s a function of marketing.

Hulu’s CEO just said he’d like to see skinny bundles get even skinnier. Is this something we’ll see with FuboTV?
Long-term, I think bigger bundles are going to succeed. Right now, virtual MVPDs are the only thing that can compete with Netflix because we can stack together AMC, Bravo, NBC, CBS. The question will ultimately come down to what’s the right packaging, what are the penetration rates of both networks and distributors, and what makes the most business sense for both sides.

Confessional
“I do think that the platform and the content are king and queen, but it’s hard to tell which one is God.” — Production exec, speaking with Digiday’s Tim Peterson.

Numbers don’t lie
25 percent: Amount of FuboTV users that watch for more than 80 hours per month, which is up from 10 percent in the first quarter

1.3 cents: Average cost per completed view for Snapchat’s unskippable six-second “commercials

Speaking gig: Digiday Video Marketing Summit
We’re hosting our first-ever Video Marketing Summit in Nashville from Nov. 28-30. The event will tackle a wide range of topics in video marketing and advertising. Want to speak? Want to attend as a VIP? Hit me up. (Again: This opportunity is for brand marketers and ad agencies only.)

What we’ve covered
Walmart’s Vudu is ramping up its ad-supported, free OTT ambitions:

  • Vudu just commissioned its first original project, a remake of “Mr. Mom.”
  • Marketers say Vudu is more generous with its first-party and shopping data than competitors such as Amazon and Roku — and will soon introduce shoppable ads.

Read more about Vudu’s ambitions here.

How sports streaming platform Dazn ads and retains subscribers:

  • About 70 percent of Dazn’s developers work on customer acquisition product features and 10 percent work on retention.
  • Dazn has 13 different cohorts of users based on all sorts of viewing behavior.

Read more about Dazn here.

What we’re reading
Hulu’s CEO wants a skinnier bundle (sub required): Randy Freer also indicated that Hulu is also working on an Amazon Prime Video Channels-style program. Hulu already gives users the ability to subscribe to HBO Now and/or Showtime, so this could work. Everybody wants to be Amazon Channels.

Facebook is working on a TV device: This device would sit on top of the TV and would allow users to do video calls and watch Facebook Watch — and eventually, access other streaming services, too. They really should just buy Roku.

DramaFever has shut down: The subscription video streaming service focused on Korean dramas. Warner Bros., which bought the company in 2016, is shutting it down citing “business reasons.” About 20 percent of DramaFever employees will be laid off and the rest are working for the Warner Bros. Digital Labs unit, which is already using DramaFever tech to power other OTT services from Warner Bros.

Tastemade raises more money: The digital network, which recently expanded beyond food to include home and travel, has raised $35 million in a Series E round. The money will go toward hiring more ad sales execs, fund more original programming and grow non-ad revenue streams. Tastemade recently signed a deal with Subway through which the companies will use Tastemade data — and influencers — to test out new menu items.

This post has been updated to include news on DramaFever and Tastemade.

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