Apple TV: Subscription Model

by Erica Sadun

Apple just had a Q2 2007 Financials conference call and mentioned Apple TV and a subscription model--but for free software updates not for content--would be implemented. From what I gathered, iPhone and Apple TV will use subscription-type accounting to provide free upgrades that will "surprise and delight" customers. If anyone has further details about what this "Apple TV Subscription Model" refers to, please feel free to elucidate in the comments or drop me an e-mail.

By the way, Apple declined to announce the number of Apple TV unit sales to date.


2007-04-25 15:10:22
Remeber the issue recently highlighted by the Airport 'n' upgrade for existing Core 2 Mac's. Apple charged for the upgrade because it was "required in order for Apple to comply with generally accepted accounting principles for revenue recognition, which generally require that we charge for significant feature enhancements"

Maybe a 'free sub' is just a way to avoid making these charges?

2007-04-25 15:36:56
That's exactly what it is. They will recognize AppleTV revenue over an extended period of time (3 maybe 5 years). So it will be handled as if it was a support revenue. This in turn allows them to add features without revenue recognition issues.
Erica Sadun
2007-04-25 17:13:34
I think you guys hit the nail on the head.
2007-04-25 17:58:15
I think the flip side is that if Apple wants to charge for something, they could do that, too. Getting the whole thing set up as a "subscription model", though, gets all the accounting and other ducks in a row.
Dick Applebaum
2007-04-25 19:27:29

I think that this is Apple's variation on the marketing technique called "razors vs razor blades", first used by King Gillette (I think).

In Apple's case, they make available a good/great/0ne-of-a-kind product at a good price-- the razor.

To use this product you need content and services that you buy as needed-- the razor blades.

Now, Apple can supply the "razor" on a subscription basis (all up front or over time) and rake in the "real money" by selling content and services.

They could actually give away the razor and offer free upgrades/replacements just to drive the continued monthly income from the sale of razor blades. But if Apple can sell the razor (coolness factor) for a premium price-- all the better.

Apple has some experience with this with iTunes & iPods.

Interestingly, however, is the roles (razor vs blade) often blur-- where use of one begets the other-- You give an iPod with 3 free songs & the recipient gets iTunes/iTMS to get the free songs, then uses iTMS to buy more content-- and maybe gift some to others.

So, how does this apply to iPhone & AppleTV. These are the razors to make possible the sale of content/services razor blades.

Scenario 1:

I have all my content (Movies, Photos, Work Product, Home Movies, Music, Podcasts, Audio Books, etc.) accessible (streamed form iTunes on 1 of 5 Macs) to my Home TV's via "standard" AppleTV. Now, AppleTV has been hacked/liberated to run a web server... big deal. Well, it may just be a big deal... I can go to another location/town/country where they have an AppleTV (doesn't everyone?). I can access any of my "private home" stuff (over the Internet) as if my Mac was in the next room. I am doing this now (crudely) with a couple of AppleTV hacks-- including your "URL Appliance".

What this means, is that I can have all of my content available, on demand, wherever I go (where there is a computer or preferably an AppleTV).

Secnario 2:

I have just created a knockout movie of the kid's soccer season. I load this onto my next-gen iPod or iPhone & head for the team party at the local pizza emporium.

With a few clicks, the team movie is now being shown on several HDTV's around the rooms we have reserved.

Variations on this theme are for business presos, medical, new product announcements... yadda, yadda, yadda.

Scenario 3:

I am out and about with my iPhone... I can schedule concerts, find (get directions to) nearby restaurants, check my stock portfolio, take the latest French Lesson, watch 24, set the home lights/furnace to come on & all that. I can browse the iTMS (internet Media Service) for content I want to buy & have it downloaded to my Mac/PC at home. Optionally I can stream this content from home to my iPhone or wherever?

All but the iPhone stuff can be done, crudely, by geeks/hackers, today.

Apple will package these devices/services/content so they can be used by those who are non-technical-- or just don't want to be bothered.

It will just work-- and we will gladly pay for that!

So, Apple will give free upgrades to the razors so we will buy more razor blades...

...and these new blades are so cool that we will want to buy more razors to be able to use them (faster/better/smother...).

Whoa, I think that they are on to something!


2007-04-25 21:14:47
From the NT Times:

"Mr. Oppenheimer said Apple planned to regularly add new software features to iPhones after they are sold, at no charge, and would alter its accounting policies to make this possible. In the interview, Mr. Jobs said he believed these upgrades would give the company an advantage in a market where the software in phones generally remains unchanged once they are in use."

2007-05-02 11:45:02
Stephen Weiss
2008-03-30 09:39:22
I have a new apple tv and have been able to synch picture folders but they appear only as a background and I have not been able to figure out how to view them on my TV as a slide show. All the research I have done refers ro iphoto which I cannot find. Please help or refer me to a site that can.
Thank you