Apple's TV ad-skipping proposition: If you can't beat 'em, pay 'em
TV ads: They’re loud, they’re intrusive, and, in this age of on-demand streaming from Netflix and its competitors, they’re increasingly anachronistic. And yet, the television industry has been sticking to its guns with a vehemence that would make Charlton Heston proud.
Apple may be looking for a way around that status quo, if a story from former Wall Street Journal writer Jessica Lessin is any indication: Cupertino has reportedly proposed to television companies a system whereby users of a hypothetical Apple television service would be able to skip ads, while the networks would be recompensed for those missed commercials.
Rumors and whispers of Apple’s forays into the deep end of the television pool have persisted for years now, but little progress seems to be made—publicly, at least. The ad-skipping plan is the latest in a long line of rumored back-room negotiations with the powers that broadcast.
While ad-skipping is nothing new, it’s a perfectly Apple suggestion. Though the company currently plays ball with a multitude of video providers for its Apple TV set-top box—more than a few of which show ads—it’s no stretch to believe that Apple sees the commercials a necessary evil.
It’s even a necessary evil that Apple itself has dabbled in, though the company has never been particularly successful at it. When Steve Jobs launched the in-app iAd program in 2010, the intent was to class up advertising—”We want to change the quality of the advertising,” the late CEO said at the time. As a result, the initial minimum buy-in for ads was $1 million, and was targeted at high-end, premium customers like car companies, fashion firms, and the like.
“Premium” might work great for the company when it comes to its products, but it didn’t pan out so well in advertising: These days, that initial buy-in is down to $50, even as Apple plans to expand its ad spots from just apps to its iTunes Radio music-streaming service, set to debut in the fall.
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And television is an advertising stronghold that’s arguably harder to break, even as we increasingly skip commercials with our DVRs or totally ignore them by watching our shows streaming on Netflix, purchased from the iTunes Store, or even acquired from less-than-licit sources. The network-backed Hulu service does show ads (as do most of the networks’ own websites), but its owners are still having a hard time trying to figure out to make money from it. (Tip: Don’t make paying customers still watch ads and limit which shows they can see.)
Despite all this, ads still pay for television, and show ratings are used to set the prices that advertisers pay. That’s not to say there isn’t a better solution—after all, with on-demand and streaming you can theoretically tell exactly how many people are watching your show, rather than estimating based on a statistical sample. (I wonder if perhaps the networks’ worry is that the move away from sampling might make the bottom fall out of the ad market; hard data about what people are watching, and how they’re watching it could have a sobering effect on ad rates.)
What Apple is attempting to do with its ad-skipping plan, however, is bridge the stalemate: Don’t tick off consumer by making them watch the endless, annoying ads that they’re used to being able to skip or avoid and, at the same time, throw the broadcast networks a bone in the form of some revenue.
It’s roughly analogous to what Apple tried with its iTunes Match service: Sure, many users ended up with free, legitimate copies of songs that they’d acquired through—ahem—alternative means, but at $25-per-year, the record companies brought in money that they otherwise never would have seen.
The networks, of course, likely wouldn’t be bought off for a song (if you’ll pardon the expression)—they aren’t yet in as dire straits as the music companies, which is probably one reason that the television industry probably prefers to keep Apple at arm’s length. That may get harder and harder for the content providers, as recent figures show that the Apple TV accounts for more than half of set-top box sales.
But there’s still an attractive proposition here: After all, if there’s a cardinal rule to business, it’s that a little money beats no money every single time.
Something for nothing
None of this is to say that this particular future will come to pass. Apple’s clearly been going back and forth with the networks for some time now, and this is only the latest tactic that’s made it to the public eye—there are certainly more issues to be worked out before any theoretical Apple television service becomes a practical one.
But TV watchers won’t stand still forever. Every minute that the television networks hold out on moving forward is another minute that competitors like Netflix and Amazon—both of which are now producing their own original (and semi-original) series—scoop up television viewers. Because if there’s another key rule of business, it’s this: If you don’t move, someone else is going to make you move.