Earlier this year, The Wall Street Journal reported Apple (NASDAQ:AAPL) was planning to launch an Internet-delivered live-TV service. Quoting those "familiar with the matter," the service was expected to deliver 25 channels, be priced in the $30-$40 range per month, and be launched in the fall -- to presumably coincide with its Apple TV refresh. It was reported to be a skinny, low-cost bundle such as have proliferated as the cost of traditional pay-TV packages have increased in cost.
This was always considered a test of Apple's market power and brand loyalty. On one end, TV networks have grown increasingly hostile toward streaming-based services in general. More recently, Time Warner CEO Jeff Bewkes has spoken out in favor of limiting the licensing of its content to streaming giant Netflix. As far as live-streaming hostility, Dish Network's Sling TV was initially billed as a cable-killer -- until it was unveiled that the service had a subscriber cap, and networks could pull their content from the service if that cap was exceeded.
On the other hand, as the biggest company, with the most valuable brand, Apple's been able to essentially dictate terms with suppliers and business partners. However, it seems Apple is up against a powerful supplier here and has suspended its plans to launch the service for the short term, according to a new report from Bloomberg.
Content continues to be king, and it wants to stay that way
If anything, Apple's modus operandi of being a late entrant to a market may have hampered this effort. As previously stated, networks are becoming increasingly hostile to subscription-based streaming services. At the same time, however, these outlets continue to propagate. In addition to established streaming services like Netflix and Hulu, Amazon's quickly adding content to its Prime video library.
In addition, the Journal also reports that Alphabet is in the initial stages of acquiring content to bolster its nascent subscription-based YouTube Red service. Simply put, there are a lot of suitors for content, making these networks a powerful supplier. However, they are not without chinks in their armor.
The outlets angling to buy content are not live-TV based, which brings an added level of risk to the network's most-profitable business model -- large, traditional pay-TV packages. As a result of this risk -- specifically, these services will lead to cord-cutters -- Bloomberg reports media executives expect these outlets to pay more for content than traditional TV deliverers. Complicating the negotiations, most media companies have multiple channels, making skinny bundles an anathema to their business model of monetizing multiple channels.
What might it mean for Apple?
This is likely a minor setback for Apple.Apple's services division, where it would most likely book live-TV revenue, is up 11.3% annualized in fiscal year 2015 over its haul two years ago, making it Apple's highest-growth division outside of the company's iPhone business. As background, the division's revenue is now approaching nearly $20 billion on its own, and those figures should only increase in scope as new services like Apple Music and Apple Pay continue to reward investors.
While it seems management is set on a live-TV offering, perhaps there's a better, quicker opportunity to make a video-content service much like its Apple Music one: a streaming-based service to access Apple's considerable hosted content. Of course, this sacrifices the live-programming component, but that hasn't hurt Netflix, and it could be easier to get buy-ins from skeptical media execs.
Jamal Carnette owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com, Apple, and Netflix. The Motley Fool recommends Time Warner. 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.