This week kicks off the 2019 Consumer Electronics Show, the annual event where big TVs are always front and center. CES 2019 and its parade of high-tech gadgets comes as something of a relief after a series of gloomy headlines about a faltering smartphone market. However, the need for smartphone market leaders — especially Apple (NASDAQ:AAPL) — to find additional revenue to take the heat off faltering smartphone sales just collided with CES in a big way. On Sunday, Samsung announced that its smart TVs will include direct support for Apple’s iTunes movies and TV shows, without needing an Apple TV streamer.
That’s right, Hell just froze over and in two different ways. The mythical Apple television is finally here after years of waiting. No Apple TV set-top box required. But Apple isn’t making the television itself, instead the company is giving smartphone arch-rival Samsung direct access to its iTunes video service.
Why? First, the details.
Samsung and Apple Surprise With iTunes Video Announcement
Ahead of the official start of CES 2019 where it is expected to unveil a series of 8K TVs and televisions with increasingly enormous displays, Samsung made a surprise announcement. The company’s 2019 smart TVs will ship with a built-in iTunes app that gets direct access to Apple’s iTunes store.
This is a big deal. The iTunes store is a leader in selling and renting video content and claims to offer the largest selection of 4K HDR titles. Up until now, there was no way to access that content (on a television) without buying and plugging in an Apple TV.
Samsung says the iTunes app will be released to for its 2018 smart TVs via a firmware update, so many current owners will get the capability as well. The company’s new smart TVs also include support for Apple’s AirPlay 2 wireless streaming standard. This allows iPhone, iPad and Mac computer owners to stream videos and music directly to a TV — again, no Apple TV required.
Speaking about the new partnership, Apple told The Verge:
“We look forward to bringing the iTunes and AirPlay 2 experience to even more customers around the world through Samsung Smart TVs, so iPhone, iPad and Mac users have yet another way to enjoy all their favorite content on the biggest screen in their home.”
Is Apple Burying the Apple TV?
After blowing an early lead in the video streaming race, AAPL has been unable to catch market leaders like Roku (NASDAQ:ROKU). The release of a 4K Apple TV with HDR support in 2017 didn’t help — its relatively large size and even larger price tag haven’t helped there.
With iPhone sales slipping and Apple stock taking a beating as a result, Services have become a more important source of revenue than ever. Despite the video content lead the iTunes store enjoys, its revenue potential is being held back by the requirement to spend $149 or more for an Apple TV streamer. Partnering with Samsung, which has been the global leader in TV sales for the past 12 years, means a lot more people will have the option of buying or renting videos from iTunes. It also opens up a wider audience for Apple’s streaming TV service, which is expected to launch this year and take on Netflix (NASDAQ:NFLX).
The partnership doesn’t mean the end of the Apple TV, which remains an option for everyone who doesn’t buy a new Samsung TV, but it does likely put a nail in the coffin of the long-rumored Apple-branded television.
And why would Samsung partner with Apple, an often bitter rival? One big reason is that despite being the global leader in TV sales, Samsung has been eclipsed by rivals including LG and Sony (NYSE:SNE) in the premium TV market. Meanwhile, at the lower end, integrated Roku and Amazon (NASDAQ:AMZN) Fire TV capabilities are increasingly showing up in Chinese TVs. Exclusive (at least for now) iTunes access gives Samsung an answer to competition from the low end, and a feature that buyers of premium TVs might be interested in.
Get ready for a non-stop parade of huge TVs, impossibly thin TVs, 8K TVs and possibly even folding TVs at CES 2019. But none of these technical marvels, — which take time to trickle down to the mainstream, is likely to have the same impact on the consumer TV market in 2019 as the partnership just announced between Apple and Samsung.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.