TV May Be the Only Hope for AAPL Stock
For years, there have been rumors that Apple Inc. (NASDAQ:AAPL) is building an Apple television. Analysts are constantly hoping this product will fall into their laps, fill the gap of slowing “iPhone” sales, and ultimately save AAPL stock from its recent troubles.
Sorry guys, but I don’t think it’s going to happen.
Apple recently held its much-anticipated Worldwide Developers’ Conference, which is exactly where you’d expect to hear about something as earth shattering as an Apple television.
So what did we hear, you ask? Crickets. Zero. Zilch. Nada. Nothing.
Maybe there is a secret team of Apple engineers working deep in the bowels of the sprawling Cupertino offices, but I doubt it. Don’t get too depressed, though; Apple looks like it’s taking a different route to securing the TV market. (Source: “The 13 biggest announcements from Apple WWDC 2016,” The Verge, June 13, 2016.)
The company is continuing to sell its “Apple TV” set-box, which allows viewers to use apps, stream movies, and, most importantly, live streaming TV channels on their televisions.
Investors have been obsessing about slowing iPhone sales so much that they forgot how big Apple’s cult following truly is. The company already has a massive base of users; it just needs to sell them more services. They need to get on the distribution side of TV.
Live streaming of TV channels are central to this strategy. Think about it: if a diehard Apple fan had to choose between a cable subscription and an Apple TV subscription, they’d almost certainly choose the latter every time. As long as users can watch the shows they want to watch, customers will flow to the path with least resistance. In this case, that’s definitely Apple.
But let’s take a step back.
What are live streaming TV channels in the first place? They’re basically identical to regular broadcast TV, except that the shows are delivered through an app instead of a cable. And no, Netflix doesn’t fit into this category. It has plenty of TV shows and movies, but you’re not watching them in real time. With Netflix, you’re simply streaming shows that have already been broadcast.
Also, with services like Netflix, you have to select the show yoy want to watch. There is less of a sense of discovery, less of a happy chance of stumbling on an old show you loved as a kid, and less of a sudden thrill of finding a soon-to-be favorite movie, especially with so much content to browse through. Sometimes people just want to switch on the TV and watch whatever is on. Netflix doesn’t offer that.
That’s why live streaming TV channels are the happy middle between old cable and Netflix. They come via apps, meaning they are transportable across devices, but they flow like regular television. There is space for serendipity with live streaming TV channels.
Apple thinks it can lure in customers with a price point of $30.00 to $40.00 per month for the whole package. The company’s service would give users a Netflix-style platform plus a bunch of live streaming TV channels, including ESPN. So far, no service offers live streaming for sporting events.
We have some reason to believe that Apple is close to releasing this package. At a recent conference, the CEO of CBS Corporation, Les Moonves, said that he was close to signing a deal with Apple. Kara Swisher from Recode was the interviewer. (Source: “CBS CEO Les Moonves Full Session,” Recode, May 10, 2016.)
Here’s how it came up:
Kara Swisher: Apple TV. Are you going to do a deal with them?
CEO Les Moonves: Probably.
KW: And what will it take?
[The crowd laughed, but Moonves went on to reveal some really important insights into Apple’s plan.]
LM (continued): Apple TV is trying to change the universe a bit… I think the age of the 200-channel universe is slowly dying. I think the average home has somewhere between 150 and 200 channels, and they’re watching somewhere between 14 and 17 of these channels regularly. And what Apple will offer, and what some of the other offerings are, are a more select group for a lower price.
Although he refused to dive into specifics about when CBS would sign a deal with Apple, Moonves did admit that he met with Apple’s senior VP the week before the conference.
My guess is that the two are close. Right now, Apple is trading at a significant discount because of slowing iPhone sales and Britain’s departure from the European Union. Considering that they could potentially become a major TV distributor as well, I’m incredibly bullish on AAPL stock. At its current price, a stock like Apple could be a steal.