Apple, TV, Data and Ads

on March 19, 2015

This is the fourth in a series of posts on Apple TV, with the first a year ago here on Tech.pinions, the second another Tech,pinions post on Apple’s HBO deal and what it signified, and the most recent from earlier this week on my own blog on the WSJ reports of Apple’s new TV service. This post focuses specifically on a couple of detail points around what Apple might offer, beyond the obvious stuff, which comes down to what Apple might want to do beyond the basics, and what it might have to offer the content providers to get that done.

Although each of these pieces has been based on my own analysis of what’s going on in the market, I’ve been grateful for the conversations I’ve had with a number of individuals, not all of whom wish to be named, who’ve helped me think through all this and who have added insight. You know who you are – thank you.

Linear content alone isn’t enough

Most of the focus with regard to Apple’s reported TV service has been on the channels and content itself, and that’s to be expected: a TV service that doesn’t have the channels people want will never be successful. But the reality is TV has moved a long way beyond pure consumption of linear content. There are lots of surveys out there on this, but they all point to the fact that, for under 45s especially, the main viewing method is now a combination of DVR and Video on Demand rather than live. And the younger you go, the more extreme this becomes. As such, a new TV service launching today has to have some combination of DVR and VoD functionality, the more advanced the better. Even Aereo, ill-fated though it was, recognized this and provided a cloud DVR service.

Of course, one new TV service that launched recently didn’t launch with DVR or full VoD functionality: Sling TV. It’s not because Sling’s owners don’t know how to do DVR. DISH makes the Hopper DVR for its own subscribers, so it clearly isn’t a matter of know how. There are three possible explanations for this. First, Sling wanted to get the service out the door and didn’t have time to prepare this functionality for launch, so it’s coming later; second, DISH, as the owner of Sling TV, didn’t want to compete head-on with its existing service, which is much more lucrative, and so they handicapped it; third, Sling couldn’t garner the rights it needed. My money’s on the last of these explanations and that suggests getting DVR rights might be tough for Apple without giving something in return (Sony has leverage through its content ownership, which explains how it was able to offer it in the service it announced today).

TV rights are tied up in ratings and ads

Television rights are tied up in two things: ratings and advertising. In other words, your ability to secure the rights to the content you want in the format you want depends entirely on your ability to not just deliver but track viewership and to deliver relevant and targeted advertising. But one of the biggest challenges with the shift to non-live viewing is tracking this is tough, and serving ads as content ages gets harder too. As live viewing has dropped off, Nielsen (which tracks this stuff on behalf of the industry) has moved from tracking live viewing only to tracking live viewing plus any views within three days of airing (“live+3”) but that still fails to capture a great deal of viewing which occurs after those three days are up. Given many VoD services offer five recent episodes, some content might well be consumed five weeks after airing, but this isn’t captured in ratings. Content providers feel under-compensated because of this and would love to both track more viewing and better monetize that viewing with higher rated ads. If content providers could reliably track viewing over a longer period, and if they could report those ratings back to advertisers, that would be a boon.

Apple’s ratings and ad play and data

This is where Apple comes in. Apple could do two significant things here. First, because any Apple TV service will be entirely controlled by Apple, it will be able to track all viewing and tie it back to a single user ID. Second, because it knows a certain amount about its users, it will also be able to report aggregated demographic information back to content providers and to advertisers. And it could offer to track viewing through DVR and VoD over a longer period, which would differentiate it nicely from the classic pay TV providers, which are doing live+3 only. Now, here’s where the recent article in the New York Post comes in. That article states:

Apple is offering to share data with programming partners to get them on board with its cable-like TV network package, The Post has learned.

The company is willing to share details on who its viewers are, what they watch and when they watch it to entice broadcast networks and others to go along with the service, sources said.

The information could help programmers better target shows to viewers and advertisers, who are increasingly chasing niche audiences.

Apple could, in this way, become the trusted source of ratings data Nielsen tries to be but is increasingly failing at. With Nielsen struggling to capture viewing beyond three days, and all viewing on TV Everywhere platforms, it’s serving the content owners and pay TV providers poorly. Some of the pay TV providers have their own data on that viewing, but since they are incentivized to maximize those numbers, they don’t represent a trusted party and this data counts for little. Apple, on the other hand, wouldn’t directly benefit from higher ratings numbers, and could, at the same time, provide very granular tracking and reporting of exactly what’s been watched, by which users, for how long, etc. It would be a trusted third party in much the same way as Nielsen is. This would be valuable for the content owners and give them something traditional pay TV providers can’t. Apple could capture the actual quality of experience on the end user side, something most cloud providers can’t do because they only see their end of the stream.

Privacy concerns are overblown

I’ve seen some people take umbrage at this suggestion that Apple will share data with third parties, because it appears to contradict the principles outlined in Tim Cook’s recent privacy letter, which reads in part:

We believe in telling you up front exactly what’s going to happen to your personal information and asking for your permission before you share it with us. And if you change your mind later, we make it easy to stop sharing with us…

A few years ago, users of Internet services began to realize that when an online service is free, you’re not the customer. You’re the product. But at Apple, we believe a great customer experience shouldn’t come at the expense of your privacy.

Our business model is very straightforward: We sell great products. We don’t build a profile based on your email content or web browsing habits to sell to advertisers. We don’t “monetize” the information you store on your iPhone or in iCloud. And we don’t read your email or your messages to get information to market to you. Our software and services are designed to make our devices better. Plain and simple.

One very small part of our business does serve advertisers, and that’s iAd. We built an advertising network because some app developers depend on that business model, and we want to support them as well as a free iTunes Radio service. iAd sticks to the same privacy policy that applies to every other Apple product. It doesn’t get data from Health and HomeKit, Maps, Siri, iMessage, your call history, or any iCloud service like Contacts or Mail, and you can always just opt out altogether.

Here’s the thing: Apple’s privacy letter outlines several separate concepts and has very careful wording around each:

  • Personal information – users decide what to share through privacy settings, and retain control over this
  • Profiling – Apple doesn’t build profiles of its users based on the content they access or sell this information to advertisers or others
  • iAd – Apple does have an ad product, which respects the overall privacy policy and also doesn’t dip into personal data.

Nothing in this privacy letter contradicts anything in the Post story, as long as it is understood correctly. Apple won’t start collecting browsing or email content and reporting to advertisers or content owners, they’ll let you decide what to share with the apps you use, and yes, they’ll show you ads (or let content providers show you ads) based on broader data they have about you. That last paragraph is key, because it demonstrates Apple isn’t anti-advertising and, in fact, it understands ad-based business models are critical for certain types of services. I’ve no doubt this won’t go away as an issue for some time, but to my mind there’s no contradiction.

On a related note, Amir Efrati of The Information mentioned a tantalizing tidbit in a tweet but never expanded on it in the linked article:

This is the other element of what Apple could do — offering to help content providers (and their advertisers) match IDs across services, so that it wouldn’t share any information about subscribers itself but would allow these partners to identify users they already know something about from third party databases and services.

What else can Apple offer content providers?

One other thing it could offer is an enhanced electronic programming guide (EPG). Today, what’s typical is the grid of times and channels, with a title, brief description and metadata, possibly a logo or other image, for each program. Apple could offer individual networks a landing page, similar to those they have on iTunes, as an alternate way for users to engage with content. Instead of going to the classic grid EPG, you could navigate by channel and, from the channel page, view the schedule for this evening, but also review your recordings from that channel, set up new recordings through your DVR, browse and view VoD content and so on. This is far more branding than networks currently get from any other service, and it would be familiar to consumers from iTunes. It could also potentially integrate purchases or rentals of content not currently available through free VoD or in the schedule. Apple could also create similar landing pages for genres (sports, dramas, comedy etc) which would also go beyond the typical color coding in the EPG.

An additional benefit for content providers is Apple’s audience isn’t like the general TV audience. As Ben Bajarin has pointed out, Apple’s audience spends more time and more money on its devices and related services. This is the most valuable audience out there and advertisers would love to be able to target such an audience. As a result, even if the audience is small, it’s a very lucrative segment. It may well command higher advertising rates than the general TV audiences at existing pay TV providers.

Apple Pay and iAd

One last thing Apple could do is use its iAd product combined with Apple Pay to offer direct-response advertising, allowing users to immediately purchase items advertised through the TV service. This has been a holy grail of sorts for both advertisers and pay TV providers, but with the only option for payments being adding items to the cable bill, it’s never been attractive for either users or providers. But with Apple Pay offering a secure existing payment solution tied directly to credit and debit cards, it could finally break through this problem. Whether Apple would want to take a direct role in this with iAd, or whether it would simply give the necessary hooks to the content providers is an open question. I’m somewhat doubtful we’ll see this anytime soon, but it’s an interesting additional angle.

A quid pro quo

I talked in my piece earlier this week about the risk content providers are taking here, dealing with Apple and enabling this form of competition with their existing channel to market, the pay TV providers. As I mentioned in that piece, Apple needs to provide significant incentives for these providers to take those risks, especially if it wants to be able to offer full cloud DVR functionality and extended VoD libraries. I believe the benefits associated with better ratings and advertiser data, enhanced branding for channels and content, and the attractive Apple audience could all sway content providers to do just this. That’s critical because, as I also said in my earlier piece, this thing won’t be sold on price, but on the user experience, and that depends on offering much more than just standard linear TV.