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Ovum: Apple video launch will not be a Netflix clone

David Murphy
Ovum believes that Apple's new service will be more than a Netflix copy

Rumours of Apple launching a Netflix-style subscription video-on-demand service have been floating round for some time, and with Apple announcing an event for 25 March, many observers believe that is when the service will make its bow.

But according to the analyst Ovum, rather than launching a classic Netflix-style service, all signs point toward a new and enhanced version of Apple's iTunes store and the associated "TV" app for mobile. Ovum believes it will be more an update than a new service launch, with the new platform hosting Apple's originals and the iTunes transactional video-on-demand (TVOD) store, and aggregating a broad range of third-party TV and OTT video services.

The new service will also be available to non-Apple devices, Ovum believes. Apple is opening iTunes video content for viewing on non-Apple devices through AirPlay 2, which allows playback on third-party smart TVs. Launch is expected in 1H19, perhaps as early as this month, with an international rollout starting in the second half of the year.

Ovum notes that Apple makes much more money selling third-party services than it does selling TVOD content in iTunes. According to Ovum analysis, iTunes' global TVOD market share dropped from 70 per cent in 2011 to 22 per cent in 2018, when it reached $1.8bn (£1.4bn). But Apple has increased its share of global retail OTT video revenue share in recent times, from 5 per cent in 2016 to 10 per cent in 2018.

Ovum believes that Apple's aim with the launch of the new service is to drive device owners back to iTunes, using its original content as a carrot, with originals possibly made available free to Apple device owners, and content possibly preinstalled in the app). Once customers are in iTunes, Ovum believes, Apple will encourage them to browse TVOD catalogues and to sign up for third-party streaming services. The analysts adds that Apple will likely want to partner with forthcoming D2C services from Disney, WarnerMedia, NBCUniversal, and others.

All in all, Ovum says, Apple’s strategy will take bits and pieces from some of the key services, including high-end originals (Netflix); aggregation of third-party services (Amazon Prime Channels), and proactive curation of TVOD content (also Amazon) – to a captive base of over 600m Apple devices. In effect, it believes, the closed Apple ecosystem playback will be replaced with one that promises a much more user-friendly customer experience.

Finally, Ovum forecasts that hybrid services like the one Apple will launch next week will take a 33 per cent subscription market share by 2023. Netflix's global market share is likely to stay stable at around the 20 per cent mark, while Amazon's will increase somewhat, reaching 12 per cent.

Apple has clearly made the decision that rather than building its own Netflix service, re-intermediating pay TV for the OTT is the best way forward to build a strong strategy for the coming online world of the 2020s, Ovum concludes, adding that: “in as far as the 2010s belonged to Netflix and SVODs, the 2020s are going to belong to services that aggregate and allow consumers to build their own entertainment package from multiple on-demand and linear channel services.”

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