A grapple for Apple

Published: Aug 18 , 2016
Author: Sam Macbeth

 

A recent  article in The Wall Street Journal headlines "Apple’s Hard-Charging Tactics Hurt TV Expansion - In search of its new big thing, possibly TV, Apple has alienated cable providers and networks with an assertive negotiating style; ‘time is on my side’" they are saying.

Apparently, they’ve been in discussions with various potential media partners since 2009, with no end in sight. During this period, Apple’s demands have included things such as long term frozen monthly rate per viewer, access to selected premium channels, full ‘on demand’ seasons of hit shows, rights to a vast cloud based digital video recorder, and set top box Apple ID sign in. They haven’t quite asked for the kitchen sink yet.

It’s alleged that in some of these talks, Eddy Cue - Senior Apple VP of internet software and services, arrived 10 minutes late for a meeting with the Time Warner CEO, wearing jeans, tennis shoes with no socks, and a Hawaiian shirt whilst other executives were wearing suits, one cable-industry executive sums up Mr. Cue’s negotiating style as saying: “We’re Apple”, or as Ron Burgundy the legend of Anchorman would say, ‘we are a big thing around here’.

Mr. Cue from his side has said the TV industry overly complicated talks, and has implied “No rush,” to some media executives. Maybe he’s right..

But why has Apple not reached an agreement to date? It might be the fact that the TV business remains a drop in the ocean for Apple. It generates only $1 billion in annual sales, compared with a total of $233.72 billion in Apple’s latest fiscal year – there’s not much risk of losing existing revenue from this situation (even though it could be a vehicle for much needed growth!).

I suspect it could also be about precedent - media companies are worried that ‘agreeing to Apple’s terms could allow traditional cable-TV distributors to demand the same deal and make it harder to recoup their investments in original shows’.

Taking a groundbreaking, innovative stance that challenges the status quo and perceived wisdom has clearly worked for Apple in past negotiations – think iPhones and the music industry. However, they still need to do their due diligence - accurately assessing the power on both sides. They also need to find out what is possible, what isn’t and the reasons why – reviewing their own objectives where necessary.

If for the other side, the fear of creating precedent from which their other partners may try and drive a worse deal with them in the future, is greater than the upside of revenues from the new deal, then it’s very unlikely that an agreement will be reached, regardless of how long Apple take.

Also, there is a danger in crossing the line from an assertive negotiating style to an adversarial/arrogant one – it is unlikely that the other side will be open about their true issues and we may not be informed about the important, legitimate fears and concerns on the other side, and with no informed way of understanding them, we can hardly solve them. 

Although as Mr. Cue allegedly purports, things may inevitably change in time, people have long memories, especially when it comes to behaviour and style (maybe including clothing), Apple might want to consider some of these things if they want to move things on.

Sam Macbeth


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Sam Macbeth
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