Given its nearly unprecedented financial success, it should come as no surprise that tech giant Apple (NASDAQ:AAPL) is used to getting its way.
Some might describe it as hubris, perhaps not without some merit, but Apple's reputation as a tough negotiator is the stuff of legend in Silicon Valley. And even as Apple has reportedly grown somewhat kinder and gentler with CEO Tim Cook at the helm, it remains as exacting as ever at the negotiating table -- much to its detriment, according to one recent report.
According to recent reporting from The Wall Street Journal, Apple's inability to launch its frequently discussed over-the-top TV service is as much a result of its own hard-nosed tactics as any external forces.
The WSJ report opens with a series of anecdotes detailing the talks between Apple and major media giants The Walt Disney & Co, 21st Century Fox, and CBS. Per the article, the media executives, including Disney CEO and Apple board of directors member Bob Iger, came to the negotiating table optimistic and eager to close a deal with Apple. That is, until the talks actually commenced.
Led by SVP of Internet Software and Service Eddy Cue, Apple reportedly asked for terms that were dramatically more favorable than those of traditional cable content arrangements. Specifically, Cue requested Apple's deal be spared the long-standing practice of baking in annual cable rate increases to any potential deal, a tradition viewed as sacrosanct in the cable industry.
Predictably, Apple's aggressive overtures upset its media counterparts, which directly lead to Apple's broadcast TV plans stalling out before they started. As to what exactly this says about Apple thought is another important and interesting discussion altogether.
What does it mean?
Apple's tactics and their falling on deaf ears brings to the fore a few interesting discussions about Apple and its current place in the media and technology industries.
The first and most obvious takeaway is that the TV industry today, though similar, isn't as desperate for a digital savior as the music industry was in the early 2000s. At the start of the millennium, the internet's deep disruption of the music industry could plausibly have been viewed as a potential industry-killer, a status Steve Jobs deftly leveraged to create iTunes' dominant market position, which still endures today. Echoing this point, the WSJ article quotes a TV executive as saying, "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." Seen this way, Apple seems to lack the relative negotiating power to achieve the same kind of sweetheart deal in TV as it did with music. But is there anything else going on, here?
A more cynical take on this could also be that Apple has in some way become less powerful in recent years. This seems unlike, but since investors should always be willing to examine explanations that challenge their viewpoints, let's quickly examine this perspective as well.
Even as recently as a year ago, it was probably fairly predictable that Apple's handset sales would dwindle this year in anticipation of this fall's iPhone 7, while rivals like Samsung continue their hit of winning Android devices in the Galaxy s6 and s6 Edge. What's more, emerging technologies like virtual reality were already gaining traction as "the next big thing" in tech and media circles, with questions remaining as to how or where Apple would fit into this seemingly inevitable new content format.
Again, my personal interpretation is that Apple simply asked too much from the cable companies. Perhaps it got too big for its britches, if you will, but this alone shouldn't call into question to company's broader strength in media and technology. Apple has apparently failed in securing the over-the-top TV service it has long coveted, but it's probably best for investors to avoid attaching undue meaning to this narrative, either.
Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Walt Disney. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.