Apple Bites

Capsule:  Has Apple reinvented retail for the rest of us?  Is the iPad launch akin to the birth of broadcast or cable TV?  Before TV, movies fit in the theater; sports, in the stadium; and, news on the broadsheet.  After TV, they all fit--shorter, portable and with commercials--on a little screen. After reinventing music, has Apple reinvented TV--as well as newspapers and magazines, to fit on the Mac, the PC, the TV, the smart phone, the "pod," the "pad," in the purse, in the pocket--everywhere, as long as you buy your media from Apple?  Will the media ever be the same?


Apple Bytes
Business Insider
The New York Review of Books
Apple iPad
The New York Times
The Financial Times


It's a new way of experiencing media, they say.  Could it be long before they say: "It's a new way of watching TV?"  Will a new way of shopping be far behind? 

"They" are the inaugural iPad buyers, who came alive this past Saturday, April 3rd, when over 300,000 iPads were sold. 

Other Apple iPad "birthday" statistics: one million applications were downloaded, as were 250,000 e-books from the iBookstore, prompting JP Morgan to increase its Apple per-share price target from $240 to $305.  

Apple is projected to sell one million iPads in Q2 and five million in FY 2010.  For a nation of over 300 million consumers, that ain't chicken-feed--especially at $500-$800 a pop, plus monthly 3G subscription fees for partners on the high end.  Is the iPad a green shoot (planted by Johnny Appleseed) on its way to becoming a retail media beanstalk?

Americans spend over 30 hours a week watching TV and 13 hours online.  The American media appetite is extraordinary.  Until now, that appetite couldn't go out on the town.  It had to be satisfied at home through a cable, satellite or telco TV connection.  After the iPad launch, who will keep us down on the farm now that we've seen Paris?

It's inevitable that WiFi service, as well as subscription 3G and plus-G's services, will make TV more of an online viewing experience: something you can watch at home and carry with you to share.  But with our current wired and wireless broadband limitations, we don't yet have a sense of how the portable online viewing experience will alter today's network-and-VOD spin around the digital-set-top-box dial.

We'll have a better sense soon. Before those five million iPad's are sold by year's end, the iPad model will begin to stimulate broadband expansion.  Cable and telco broadband distributors will announce improvements to the American online experience, as they've already begun to do through wideband and 100-500Mbps broadband market launches.  Broadband's main motivation for a service upgrade: to retain customers and to ensure that cable and telcos' retail path to the customer wallet and credit card remains the preferred way to buy media.

Developing an alternative retail view, Apple has already announced a plan to add more TV and movies to its iTunes online store.  It's even talking numbers with content giants CBS, News Corp., Disney and others.  As a show of media strength, Apple's iBookstore disrupted the Amazon Kindle retail book-selling model before the iPad was even launched. Given that two major publishing houses--Simon&Schuster and Harper-Collins--are owned by CBS and News Corp., multimedia content deals make sense.

Omnibus content deals also make sense because it's time content found other outlets beyond the existing wired mega-model.  Cable networks remain on solid revenue footing as long as the combination of advertising and subscription dollars continue to dual-stream in.  But the breakdown of advertising value--enabled in part by Google and its ad search model that has contained ad unit pricing within its online revenue zip codes for most of the last five years--persists. 

Cable networks have pushed the subscription stream as far as possible by adopting what some cable distributors call "the arms merchant model"--selling to cable, telcos and satellite until they've wrung the annual growth potential out of the wired subscription model.  Seeing this coming, content networks have been hopeful that their world will get larger with new wireless TV subscription distribution through AT&T, Verizon, Sprint and T-Mobile's wireless phones. These hopes have been largely dashed over the last decade; phone companies have been even less likely to "get" TV in its wireless form than in its wired Fios or U-verse just-like-cable-plus versions.

All of which leads today's content mega-giants to the retail Master of the Universe: Apple.  Ready to accept TV as the new software with open arms, Apple's iPad is developing its brand definition as a media device for today's media consumer.  Computing seems old-school, particularly when most computer users use computers more as portals, simple e-mailers, word processors, calculators and TV screens already.  (Can door-stops be far behind?)

Where will this all lead?  Cable, satellite and telco TV distribution won't go away, but their attractive growth will likely be curbed as content networks find new supplementary distribution paths, grinding their primary distribution relationships down to arguments over carriage fees while pretending to wonder: "Where did the love go?"

If they're cautious, distributors will resist iTV the same way they resisted alliances with DVD retail (and, before that, videotape rentals and purchases.) But, given the speed of the device advances that digital technology has wrought, waiting out the deterioration of the iTV platform as if it were Blockbuster won't necessarily work.

If confident, distributors will jump on the iTV bandwagon with a clear vision of their broadband backbone as the best foundation for the iTV retail store, even when that store travels via an iPad.

In the meantime, the biggest losers could be Google and the TV commercial.  Isn't it likely that Apple goes after advertising after conquering music, voice, books, movies and TV?   In this scenario, TV ads will follow their fast-shrinking relatives--the online display ad, the online search ad and the displaced newspaper ad--into a more confined space.

With iPad viewers free to catch-and-carry TV-on-the-run, TV ads may have to thrive in a new media form--iSpots?--via a new technology embrace. Google--the online advertising market-maker--may have to search its pockets to play in an online environment that carries TV-and-text on a portable screen.

Wouldn't it be ironic if Apple bit Google in the end? 

It's not so far-fetched. These twin online Masters of the Universe are already in a scuffle over mobile operating systems.  A scuffle over the value of advertising may be next, with Apple setting the market for ad prices on its ingenious traveling platform.  Because the iPad will get there first, Google's Android model--stuck on a phone while looking for a tablet to call its own--may have to dance to the iTunes' music. 

Welcome to the new media reality: it's paradoxically like a  musical chairs game where the market plays its tune while technology pulls chairs to eliminate players. Will the last laugh belong to the last distributor standing?