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Apple TV

In the late 90s I started a company called iSpyMusic. It was focused on helping the music industry embrace the Internet. It was a short lived adventure. I remember a meeting with Universal’s music group that left me shaking my head. We were discussing an online promotion we were going to do with Boyz II Men via their website. It included using some of the latest and greatest web technologies and would promote a number of their songs. My vision for this company was to help artists stay relevant in the public eye. Artists often lose mindshare months after their albums come out. Their labels then have to spend tens of millions of dollars getting the artists back into the minds eye of their fans prior to their next album debut. iSpyMusic was going to help artists use technology and the Internet to keep their fans engaged year round.

In this particular meeting with Universal was Boyz II Men’s management, their label representative and 6 members of Universal’s legal team. The lawyers outnumbered the non-lawyers in this meeting. We got no where. Legal shut down nearly everything we could do on the basis of contract rights. Whether a stream of a song snippet constituted a “play” and the label should be compensated each time it is streamed was an issue. All kinds of ridiculous things that later got worked out to get where we are today with digital rights. But it was at that time that I realized how much a mess the entertainment industry is when it comes to the ability to use technology.

So that brings me to TV and more specifically Apple TV. Have you ever asked yourself why companies like Amazon and Netflix don’t offer more movies online as a part of the subscription service? Or why a more robust subscription service to motion pictures with movies that have recently come to DVD isn’t available? The answer is digital rights.

Back when Starz was working on their own streaming subscription service the president of this group explained to me something that was fundamental. He explained that, at the time, Starz owned the rights to any subscription service for movies up to a certain length of time after it is released to DVD. These rights were acquired for their network TV channel but extended to digital as well. The length of time after a DVD released they had rights to depended on the studio and ranged from 6 months to a year. This is why Netflix and Amazon don’t have new releases available to stream for a number of films anywhere near their release date. What Netflix and Amazon have paid the rights for are the movies that fall outside these contracts or where the rights have lapsed. Starz pays the studios for these rights and even a few years ago Sony announced their deal with Starz was extended to 2021.

Things are not as cut and dry for the TV networks either. They receive absurd sums of money for access to their shows from the cable providers. Apple or any other company has ways of creating a compelling service with unrestricted access to this content but it will cost them some serious cash. Which they do happen to have.

This is the archaic and dysfunctional backdrop of entertainment media rights that Apple and any companies who hope to compete in the TV service space must cope with. Service providers, network broadcasters, content owners, studios, and more have out of date contracts cut prior to the digital era and extent for decades. This makes any play by Apple TV as a primary service or replacement for cable an uphill climb. It is not the technology as much as it is the contracts that stand in the way of the re-invention of TV.

  • nuttmedia

    Went to B-school with someone from Sony ca. that timeframe — this is exactly why they missed the Walkman opportunity and couldn’t gear themselves for digital music distribution

  • mostlyfreeideas

    Apple should buy Starz. Problem solved.

  • adamschoales

    I remember Coldplay mentioning that when they simply wanted to offer a song for free on their website in the lead-up to their new album Management/Lawyers at EMI freaked out.

    So not even the people who MAKE the music can control what’s done with it. That’s just absurd.

  • SockRolid

    Exactly Ben. It will take some kind of major outside disruption before the TV / movie industry caves in to Apple. On the same level as the rampant MP3 piracy that disrupted the music industry. Of course, that kind of copying is vastly harder with DRM-protected digital video.

    It will take a major internet-only broadcaster and/or content aggregator with their own unique, compelling content. Possibly with full iOS / OS X device availability through a deal with Apple and iTunes. They’ll succeed in making tons of money, others will follow, and the dinosaur networks and cable channels will either bleed to death or sign on the dotted line with Apple.

  • 11thIndian

    Any content deal with Starz would likely dissolve upon acquisition by another company.

  • mattack

    I see your point, but presumably up until the existing contract is satisfied, the record company they have an agreement with owns all music they make.

  • adamschoales

    True. But, again, all they wanted to do was post a track (if I’m not mistaken it wasn’t even an album track but a remix) as a small promotion of the album and a thank you to all their fans.

    They later followed that up by giving everyone who attended their concert a free live CD. Cool dudes.

  • http://geekfun.com/ Erik S.

    I’ve been wondering how much working capital is actually behind the TV and Movie industries. More specifically, I wonder how much financing Apple would have to provide in order to get everyone’s attention.

    Near as I can tell, quality 1 hour dramas have production costs of $2-4M an episode. $5B would fully fund 1,250 hours, which would be a significant portion of US prime time programming in the US. For another $5B, they could fund 12 movies with $200M budgets and 52 movies with $50M budgets.

    $10B would seem to give them a lot of influence, particularly when you consider that they wouldn’t need to fund 100% of production costs to get the rights they’d need. Seems like another situation where providing financing to suppliers using ample cash reserves could be used to secure a strategic competitive position for Apple.