What Bundling Services Means to Disney and Apple in the Frenemy Economy

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Citing unnamed sources, Bloomberg reported that Apple TV+ will be priced at $9.99 per month when it launches this fall, and most likely the launch will happen sometime before Disney debuts its own video streaming service, Disney+ on November 12th. Apple TV+ will launch in the United States followed by an expansion to 100 countries.

There’s been a rumor circulating for awhile that Apple will give away TV+ for free on Apple devices (iPhone, iPad, Apple TV). So if you’re using an Android phone or Samsung Smart TV, there’s a tax for that.

Not including Apple Care or iCloud, Apple will operate four direct-to-consumer subscription services by the end of 2019: Apple Music, Apple News+, Apple TV+, and Apple Arcade. It’s possible Apple bundles all or some of these services into a single offering.

The company could also consider bundling TV+ with other Apple TV Channels such as CuriosityStream, Acorn TV, and Smithsonian Channel. For smaller SVOD channels, being offered as part of a greater bundle could help increase your subscriber base. Basically, this is the cable model minus all the must-carries (the channels you don’t watch but networks make pay TV operators buy).

By bundling services, Apple would be taking a move from the Disney playbook, who recently announced their own bundle of Disney+, Hulu with ads, and ESPN+ for $12.99. 

This was a smart move by Disney for two reasons: increase leverage in carriage negotiations and bypass in-app billing.

#1 Using ESPN+ to Increase Leverage

If you purchase Disney+ and Hulu, it’ll cost you $12.98 monthly. For an extra penny, you could get access to ESPN+. Say what you will about the programming, but that’s a hella good deal.  

In April 2018, when ESPN rolled ESPN Insider into ESPN+, the new streaming service inherited a 670,000 paying ESPN Insider subscribers. Five months later, the company announced ESPN+ reached a million paid subscribers (the head start helped.) And in February, it was announced the service surpassed 2 million subscribers.

Bundling ESPN+ with Disney+ and Hulu is only going to fuel ESPN+ subscriber growth. Obviously this is important for any subscription service, but most notably, an increase in subscribers will give ESPN greater leverage when negotiating carriage deals with pay TV operators such as AT&T and Comcast, who are seeing their own TV customer bases slowly dying.

#2 Bypass Platform Billing

Disney announced commercial deals with several platform operators last week including Apple. From what we can tell, Disney’s standalone third-party Disney+ app will be part of the Apple TV App, but it will not be a part of Apple TV Channels. Put simply, if you want to subscribe to Disney+ via Apple TV, you’ll have to download the Disney+ app from the App Store and subscribe directly through the app. 

The kicker, and this is where all this frenemy stuff gets complicated, is that when you subscribe to the Disney+ app on your Apple TV, you’ll be routed through Apple’s iTunes billing. And when your transaction is approved, Disney will share the revenue with Apple.

For OTT service providers, using in-app billing platforms such as iTunes, Roku, Google Play, and Amazon is a love-hate relationship. What service providers love is joint marketing, not having customers drop out of the funnel, capitalizing on impulse purchases, and lower subscriber acquisition costs. What they hate is not owning the direct billing relationship and most importantly, the customer data. I’ve heard from some of Apple’s TV Channel’s partners that Apple is being cagey with the data it has. 

Back in December, Netflix chucked deuces to Apple and said goodbye to the iTunes billing program. Apple reportedly earned as much as $256 million in revenue last year from the Netflix app, so that must have stung a bit.

How Disney can bypass sharing revenue with Apple is through its bundle. If you want Disney+ only, go ahead and sign up through iTunes. If you just want Hulu only, go ahead sign up through iTunes. But if you want the Disney+, Hulu, and ESPN+ bundle, you’ll most likely have to go to either of these services’ website and subscribe directly. This would give Disney the direct customer relationship across three of its video services. And if it plays out this way…well played Disney. Well played. 

Don’t be fooled. The Streaming Wars are not about spending billions of dollars on original content or the exclusive rights to 90’s sitcoms. The Streaming Wars is 100% about direct relationships and customer data. 

For the record, Apple is reportedly spending $6 billion on content and until further notice, we have to presume this spend is 100% on new originals as no mention has been made to licensing any shows or movies.

So what else do we know about Apple TV+

Only a small portion of Apple’s original titles  will be available at launch. Other than The Morning Show, we don’t know what will be available or not. Even the very people creating this original content are being kept in the dark. 

We also don’t know how originals will be released. Will they be released week-to-week similar to Starz or HBO? Or will series be released in-bulk like Netflix? There’s a rumor going around that Apple could experiment with releasing the first three episodes of a series at once and dishing the rest out weekly.

Regardless of how this stuff is released, I think Apple would be insane not to offer a free-trail of TV+. For starters, not only are free trials industry norm and already a part of the Apple Music service, but $6 billion is being invested in brand-new content. It may be a tough sell (even for Apple diehards) to commit to a bunch of unproven series because after all, TV is an art, not a science.

Apple TV+ will be available via the Apple TV App (on Apple devices) in addition to platforms such as Roku, Amazon Fire TV, and Samsung. Supporting third-party platforms is a smart play by Apple. 

Apple Music has done well (currently around 60m subs), largely due to the fact that the app’s pre-installed on iPhones and in the pockets of millions of people. That strategy hasn’t been as successful working in the other direction — getting people to buy new Apple devices.

There’s one fundamental difference between Music and TV. Apple Music has virtually the same content other music services such as Spotify. But with TV exclusives, the strategy is different and just might work. Especially if Apple gives away its original content away on its own-and-operated devices. 

But let’s say I want to subscribe to Apple TV+ via Roku, is Apple going to split 30% of its revenue with Roku?

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