Apple (NASDAQ:AAPL) has planned an event for 1 p.m. Eastern on March 25 at the “Steve Jobs Theater” in its Cupertino headquarters. There, Apple is expected to announce its full launch into TV.
The announcement comes just as layoffs loom at the new Fox unit of Walt Disney (NYSE:DIS), as streaming overtakes cable as the entertainment of choice, while AT&T (NYSE:T) fights to cut costs at its DirecTV satellite unit at the expense of Viacom (NASDAQ:VIAB).
Interesting times.
How it shakes out into a “new normal” is unclear, but what is clear is that Apple is determined to define the new normal for television, and profit from it.
Apple’s Opportunity
Apple is expected to create a streaming bundle that looks a lot like today’s cable bundle. What will make the Apple offer stand out is 1.4 billion iOS devices, iPhones and iPads. The software bundle that was once in a box under your TV, that Amazon (NASDAQ:AMZN) and Roku (NASDAQ:ROKU) made into a small add-in device, is going to become an app. In the process, all those 1.4 billion devices will become TVs.
This is what is assumed.
There is a model for this, which I wrote about recently — it’s iQiyi (NASDAQ:IQ), a Chinese company that has been exploring the mobile TV space for years.
What works for iQiyi, however, aren’t the same things that work on traditional TV. But turning the one-way world of TV into a two-way channel, driven less by audience reach than audience engagement, is what Apple is in for. Think game shows, interactive contests that create their own stars; shows like Disney’s American Idol, or Comcast’s (NASDAQ:CMCSA) Project Runway.
How Apple Compares to Old Line Media Stocks
For most of this decade, analysts have been debating the value of “media stocks,” or the companies delivering one-way programs into American living rooms since Carl Reiner was a newly released Army veteran. What the markets are saying today is that the glory days are over for these media stocks.
Viacom, which owns Comedy Central, Nickelodeon and a host of other cable channels, is now worth just $11.2 billion (it’s lost roughly 70% since its 2014 heights). CBS (NYSE:CBS), with all its history and its expansion into cable and publishing, is worth $17 billion (down 30% over the past five years). Discovery (NASDAQ:DISCA), which owns a lot of the cable landscape from Discovery to FoodTV, is worth $19.1 billion (down 35% since 2014). AMC Networks (NYSE:AMCX), which brought us shows like Mad Men, is worth just $3.1 billion (down 22% over the past five years).
What the markets are saying is that distribution matters more than production, and that the internet is the medium of choice. To make matters worse for the old line, the internet is in a very small number of hands …
Alphabet (NASDAQ:GOOGL), which owns YouTube, is worth $840 billion. Amazon is worth $872 billion. Apple opens for trade March 25 with a market cap of $900 billion, against less than $50 billion for all the aforementioned programming assets just described.
It’s true that there are three other players to overcome. AT&T, with a market cap of $226 billion, now owns Time Warner. Comcast, with a market cap of $179 billion, owns NBC. They claim to control internet access. Disney, too, is worth $161 billion.
But all these companies taken together, as the whole media and internet access complex, have a market cap of $615 billion, barely two-thirds of what Apple alone is worth.
What the market is saying, as Apple makes it announcement, is that clouds and devices are TV’s trump card. After this announcement, we will see if the market is right.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, Dana was long AAPL stock and AMZN.
