Week In Review: Apple Makes Two Smart TV Hires; Are We Moving Towards A Two-Tier System of Advertising?

1. Apple Makes Two Smart TV Hires

We’ve been beating up Apple as of late, so it's time to flip the switch and hand out some kudos for their most recent move. Bucking a trend among tech companies to hire impressive people with zero entertainment experience, Apple announced that they’d hired two impressive people with top-notch entertainment experience.Zack Van Amburg and Jamie Erlicht, Apple's new TV guys, have been co-presidents of Sony Pictures Television, Sony’s studio arm.Studios, to digress for a minute to explain something that’s often misunderstood by people outside the TV space, particularly people residing on that peninsula just south of San Francisco, are the VCs of the TV world. They bet on number of series every year, investing their money to take some of them to pilots that may or may not get picked up by the various networks and streaming services. If a series does get picked up, there’s no guarantee that it will last beyond a season or two. But those rare series that last five or more seasons are where the studios make their money, by selling syndication rights (reruns) and overseas rights (to non-US TV networks), which can total in the hundreds of millions of dollars, more than recouping their initial investment.Why It MattersVan Amburg and Erlicht have produced a string of hits at Sony, including NBC’s “The Blacklist,” ABC’s “The Goldbergs,” AMC’s “Breaking Bad” and “Better Call Saul” and Netflix’s “The Crown.”It’s a pretty diverse list (some execs get pigeonholed into specific content types) for a broad range of networks. That bodes well for Apple and their $250 billion war chest, as they need to step up their TV game. The two shows they’ve released thus far are pretty underwhelming, but with that kind of cash, and two guys who clearly know what they're doing in terms of creating hit programming, the sky is the limit.What’s more of a problem, from our POV, is Apple's distribution method. Tying their TV efforts to the not-wildly-popular Apple Music platform could prove problematic. Or it could be a reason for people to subscribe—if the TV offering is good enough, $10/month will seem like a fair price, and the music will just be a lucky strike extra.That’s a stretch though, as Apple will likely encounter the same problem that YouTube, Verizon, Facebook and others have faced: most of the good syndicated programming, the sort of shows that make for a valuable library, have been spoken for. Hulu, Netflix and Amazon have that market more or less sewed up and there are slim pickings for everyone else. That could stymie Apple’s attempts to launch a more robust video offering, at least for the next year or two, though again, with $250 billion to spread around, that may not be a problem.What You Need To Do About ItThis is a sit back and watch play. See what Van Amburg and Erlicht are able to accomplish at Apple. How much leeway they have. What sorts of shows they’re developing. At the same time, pay attention to Apple’s distribution plans and what they’re thinking in terms of using Apple Music as a video platform. Renaming it something like “Apple Media“ (only more clever) would be a start. 

2. Are We Moving Towards A Two-Tier System of Advertising?

Long-time readers will know that this is one of our favorite shibboleths, to ponder if we are hurling headlong towards a two-tier system where the wealthy and tech savvy will be able to avoid all those nasty banners and interruptive ads that the proles have to suffer through. Think the second episode of Black Mirror, “15 Million Merits.”So we were quite pleased to see a lengthy interview in Recode with Red Envelope founder Scott Galloway, our new favorite guy-most-likely-to-become-a-Silicon-Valley-character, wherein he discusses this very topic. He also more or less called Amazon’s purchase of Whole Foods five days in advance.Why It MattersSo much of the digital economy relies on an ad-supported model. But advertising has devolved and so much of what we see in terms of ad tech and ad models seems geared to short term gains (“click through rates go up 20%!!!”) without stopping to think about long term liabilities (“but after two years of this, 80% of users install ad blockers to prevent them from seeing any more of these ads!!!”)Subscription models of media consumption may soon become the norm as viewers gladly pay for the superior experience, and with so many options out there, finding enough media they can pay for will be pretty easy—compare that to the days of just three networks, where the odds of finding programming you wanted to pay for were pretty slim. People figure if they’re paying $100 or more for pay-TV, what’s a few more dollars to avoid commercials. (And sorry ad world—Harley Davidson riders may indeed enjoy seeing Harley Davidson commercials … but not when they interrupt their favorite show or chasing them around a website.)What You Need To Do About ItBrands need to rethink their long-term advertising strategies—this won’t happen overnight—so that they can compete in a world where people eschew interruptive ads.Networks need to do the same, relying on social media, branded content, native advertising and other formats that annoy consumers less. Finding programming that people will actually want to watch and that creates buzz is a win as well, particularly for smaller cable networks. Just look at that that did for AMC and FX.