The company wants to sell 4K ultra-high definition video on Steve Jobs’ white whale for less than movie studios want
Apple is finding it hard to convince Hollywood to Think Different.
The world’s most valuable company is expected to announce a souped-up version of its Apple TV console at an event on September 12, but it has hit an impasse with Hollywood studios about licensing ultra-high definition content. The new Apple TV will be the first to support so-called 4K video and the tech giant hopes to make a big splash by having major movies available for ultra-HD purchase at around $20. As the Wall Street Journal recently reported however, Hollywood studios are holding out for $5 to $10 more per film.
4K is widely regarded as the next frontier of television. It displays content at a resolution of 8.3 million pixels, when HD screens that many consumers are familiar with have only up to about 2.1 megapixels. Some have compared the jump from HD to ultra-HD to the difference viewers experienced when they went from traditional TV to high-def. 4K TVs, which can cost $300 and up, comprised just 24.3% of all TV sets shipped in the second quarter of this year, though that’s rapidly rising.
Yet, Apple is playing catch-up. Competitors like Roku and Amazon already offer 4K-ready TV boxes at a cheaper price. Apple calls its $149 gizmo, a favorite project of its late co-founder Steve Jobs, the “future of TV” but sales have long been disappointing. Apple doesn’t break out sales numbers for Apple TV, but its CFO has said there was year-on-year decline during the last holiday season.
The plan now is to convince would-be buyers that while 4K screens and Apple TV may be pricy, Apple has coveted content that makes it worth it. “You have to see [4K video] to know how great it is,” says Paul Dergarabedian, senior media analyst at comScore, while acknowledging that there probably isn’t currently enough ultra-HD content to make it a worthwhile buy for most consumers. “But the early adopters want bragging rights and content in its visually stunning glory, so the ability to have it on Apple TV is very compelling.”
Cupertino, Calif.-based Apple has a history of both convincing consumers to shell out for digital content and putting price pressure on media providers. For instance, Apple made 99 cents the de rigeur price for an MP3 single when it launched the iTunes music store. But this time, Apple is not an early mover. Its dominant home video position has also been slipping: the company is said to control between a quarter to a third of that market, down from over half in 2012.
The big film studios aren’t in the mood to make less moolah either. They’re coming off the poorest summer movie season in a decade and a half and facing fierce competition from streaming services like Netflix and Amazon Video, who’ve gotten into the original content game. (Apple is also becoming a partial rival thanks to its recently announced plan to spend $1 billion on original programming.)
There’s also some fear that flogging ultra-HD content at $19.99—the same price that Apple sells HD movies at— will only quickly drive the latter down. That would be good for consumers and could lead to increased 4K TV adoption, but doesn’t immediately do anything for the studios’ bottom lines.
Despite the prevalence of streaming, home video sales and rentals are still a lucrative source of income in La La Land. According to the Digital Entertainment Group, a trade body, the home video market shrunk to $12 billion in 2016, down 7% year-on-year. But analysts say it could even grow once studios decide to sell movies on-demand shortly after release, as some Hollywood execs are mooting.
That would mean “Star Wars” fans could watch the next space opera blockbuster from the comfort of home as little as four weeks after theatrical release. “If you combine premium on-demand video with 4K, there’s a pretty compelling argument” for viewers to pay more, Dergarabedian says.
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