WSJ: Apple’s ‘hard-charging’ approach unsuccessful in negotiations with TV networks

WSJ: Apple’s ‘hard-charging’ approach unsuccessful in negotiations with TV networks

A new report in the Wall Street Journal provides some insight as to why Apple’s efforts to launch a web-based streaming service may have failed to gain much traction last year. Clearly drawing on information gleaned from sources from within the television industry, the report describes Apple’s typically “assertive” negotiating style as having alienated networks and cable providers, suggesting that the tactics used by Steve Jobs to “muscle music labels into selling songs online for 99 cents apiece” may have backfired on the company in working with television media companies. Executives are said to be concerned that if they agree to “Apple’s sweetheart terms” it would set a precedent for traditional cable distributors to demand a similar arrangement, cutting into their bottom lines.

We’re challenged in a lot of ways, but we’re not waiting for this white knight to come racing in the way music was.

While Apple’s approach is that the TV industry should be embracing the Apple strategy in light of technological shifts in the business, one senior TV executive was quoted as saying that although the TV industry has its problems, they’re not “waiting for a white knight to come racing in” in the way that they feel the music industry was 15 years ago.

Over the past several years, Apple has been attempting to make several inroads into the online TV space, with reports last year suggesting that the company was aiming to launch a web TV service by last fall, although later news revealed that the service was gradually being pushed back until Apple eventually appeared to have all but abandoned the initiative out of a growing frustration with a lack of progress in negotiations with content providers.

This latest report, however, reveals that Apple was actually working on plans to build a subscription streaming TV service as far back as 2009, trying to entice media companies with higher fees than pay TV providers to gain access to their broadcast channels. But Apple’s attempts to pick and choose which channels to include caused this early effort to fizzle without much progress being made. In 2011, Time Warner came to Apple, proposing to offer a joint TV service via an Apple set-top box that would go up against satellite and telecoms rivals, and Apple CEO Tim Cook began discussions along those lines with both Time Warner and Comcast, with a goal to offer an Apple-made set-top box and service exclusively through cable companies. However, Apple demanded higher pricing and more control over the hardware and software experience than the cable networks were willing to concede — the Cupertino company wanted users to sign in with Apple IDs and refused to share important details of the proposed set-top box’s design. It was only after Apple failed to make progress in these discussions that the company turned to its more recent “skinny bundle” approach, looking to build the 25-channel package that was originally rumored to be coming in 2015. Apple reportedly dictated the price at which those channels would be offered, working backward from that price and dictating terms that TV executives felt were unreasonable in light of similar deals with other distributors.

In more recent negotiations, Eddy Cue, Apple’s Senior VP of Internet Software and Services, has been tasked as the point man for building relationships with television networks and other content providers, and his approach has been described by those speaking with the WSJ as having a “hard-nosed negotiating style,” with one cable-industry executive summing up his strategy as basically saying, “We’re Apple.” Cue is described in the report as arriving late to one significant meeting with business-suited executives while wearing “jeans, tennis shoes with no socks, and a Hawaiian shirt” and in other cases making “demands that would have upended decades of cable-industry and Hollywood practices.” On the other hand, Cue has accused the TV industry of “overly complicating” talks, telling some media executives that “time is on my side.” At this point, Apple appears to have all but abandoned any effort to work further with the TV industry, taking the new approach of developing some original content, building an App Store into the Apple TV so that networks can provide their own content apps, and possibly considering premiering original shows on iTunes in order to bolster its iTunes video download business.

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