Why Apple Walked Away From TV (For Now)

Yes, Apple has walked away from the negotiating table with the TV guys, which means you won’t be getting a subscription TV service from Apple anytime soon.

And yes, there’s a dispute between Apple and the TV guys about how much Apple should pay the TV guys.

But there’s a conflict about money in any negotiation. Apple’s beef with the TV Industrial Complex is a bit more nuanced. It’s also a significant one: If Apple gets its way, TV will undergo a significant change, just like the music business did when Apple launched its iTunes store in 2003.

Industry executives say Apple has spent much of 2015 pushing for a “skinny” bundle of TV channels — limited to perhaps a dozen core networks — delivered over the Web, which would retail for no more than $30.

So while the price of the individual channels that Apple wants to package has been an issue, it’s the composition of the package itself — which channels go in and which don’t make the cut — that is just as important to both Apple and the programmers, according to sources.

If Apple gets its way, it means the traditional pay TV package, which averages around 100 channels, will get shrunk by nearly 80 percent. And while TV executives will say they understand that consumers don’t want to pay for channels they don’t watch, all of them will argue that their channels are must-haves.

That means 21st Century Fox, for instance, is reluctant to sell Fox and Fox News without bundling in its FX channels or its new Fox Sports 1 network. The same goes for Disney (ABC, ESPN, Disney, etc.) and NBCUniversal (NBC, Bravo, USA, SyFy, etc.) and on down the line.

Apple media boss Eddy Cue has proposed selling additional tiers of programming, like a sports tier, on top of its core service. But he has been insistent that Apple’s base package be limited to a small group — both because that’s the way to keep the price low and also because he thinks that’s what customers want.

“The optics are important to him,” said a TV executive who has talked to Cue about his plans. “He doesn’t want to have filler.”

While the TV industry has been experimenting with skinny bundles over the past couple of years, it hasn’t fully embraced them. Verizon’s plan to sell make-your-own bundles that would be slightly smaller than traditional ones, and which would give consumers the option to drop channels like ESPN, has generated a lawsuit from Disney.

And while Dish’s Sling TV service offers a smallish bundle of a couple dozen channels, that Web TV service is only comprised of Disney and a few other programmers, which are each bundling their own channels.

Sling is also intentionally constructed as a service without the full functionality of “real” pay TV — many of its channels, for instance, don’t offer the ability to pause or rewind programs. And Sling’s licensing deals also give the networks the ability to bail out if the service gets any real traction — Apple would be insistent on a service built for a mass audience.

Still, earlier in the year Apple had seemed confident it could get all of this done, after years of false starts. It had hoped to launch, or at least announce, the new Web TV service this fall, along with its new Apple TV box.

Instead, Apple launched Apple TV as a standalone product, along with messaging about the notion that apps, not bundles of TV networks, are the future of TV.

TV executives say Apple has been quite vocal about the fact that it has stopped negotiating for new licensing rights for a couple months. In retrospect, the surprise is that it took this long for someone like CBS CEO Les Moonves to say so out loud.

Now the question is when the two sides will come back to the table, and what it will take to get them there.

It would help Apple’s case if it could prove that Apple TV is indeed a transformative platform, instead of an update of a nice-to-have, not must-have, box; to do that, it will need some amazing apps, which don’t yet exist.

Apple may also be counting on continuing erosion from pay TV’s subscriber base, and/or an increase in investor concern about that base, to soften the TV guys’ stance. But for now everyone is standing pat: The TV guys don’t want to give up their bundles until they have to, and right now they don’t.

This article originally appeared on Recode.net.

Will you support Vox’s explanatory journalism?

Most news outlets make their money through advertising or subscriptions. But when it comes to what we’re trying to do at Vox, there are a couple reasons that we can't rely only on ads and subscriptions to keep the lights on.

First, advertising dollars go up and down with the economy. We often only know a few months out what our advertising revenue will be, which makes it hard to plan ahead.

Second, we’re not in the subscriptions business. Vox is here to help everyone understand the complex issues shaping the world — not just the people who can afford to pay for a subscription. We believe that’s an important part of building a more equal society. We can’t do that if we have a paywall.

That’s why we also turn to you, our readers, to help us keep Vox free. If you also believe that everyone deserves access to trusted high-quality information, will you make a gift to Vox today?

One-Time Monthly Annual

$5/month

$10/month

$25/month

$50/month

Other

$

Yes, I'll give $5/month

Yes, I'll give $5/month

We accept credit card, Apple Pay, and Google Pay. You can also contribute via