Math is a funny thing. It’s inescapable. For example, if the U.S. doesn’t get control of the mounting pile of national debt, the consequences could be decades of economic stagnation.
Likewise, a company’s growth and prosperity depend on revenue and profit. Most of Microsoft’s profit comes from Windows and Office. The company has lost tens of billions of dollars on dozens of attempts to create a new revenue and profit stream. All have failed.
Likewise, Google makes most of its profit from online advertising and data collection and sales. Everything else? Not so much. Android OS has been a huge money loser for Google and may never give the company a return on the investment.
Apple, on the other hand, tends to find a way to squeeze enormous revenue and profit from new product categories. The Mac has been highly profitable for many years. The iPod, the ancient and creaky portable media player, defeated all comers and brought billions to Apple’s coffers.
Apple is no longer the Mac company. The five-year-old iPhone is the company’s biggest breadwinner and commands about 75-percent of all cell phone maker profits worldwide. Even the iPad claims a similar perch and already outsells the Mac in revenue and profit.
What’s next for Apple? According to Nigam Arora in Forbes, Apple has a secret weapon to kill ads and dominate TV.
The analysis is based upon a few new patents granted to Apple, one of which appears to be designed to skip over television commercials in a live video stream, and drop in different video or audio content.
In other words, Apple’s new secret weapon would kill TV commercials. Therefore, in some parallel universe, using that capability would grant Apple unfettered access to the top of all industry players and the company would dominate TV.
Uh huh. Sure. Right.
Except, no. What a pipe dream. A somewhat dissimilar technology already exists that has the same effect and it hasn’t destroyed the TV industry. Yet. It’s the DVR (digital video recorder), used primarily to time shift playback of video and allow users to skip over TV commercials.
Please note that Apple did not destroy the cell phone industry. Apple was required to partner with a carrier to make the iPhone happen. AT&T wasn’t destroyed; only changed (still a purveyor of dumb wireless pipes). Similarly, Apple won’t dominate the TV industry without first partnering with industry players.
Why? The money trail. For Apple to play, and perhaps potentially disrupt the industry in its favor, the company needs partners and the partners need to get paid. One of those partners is network advertisers. How likely are they to partner with Apple when a prime technology the company brings to market is designed to eliminate their advertising revenue? Not likely.
Instead, Apple needs to find a way to muscle into the industry and become a player, while ensuring that other players maintain a share of the revenue pie. Apple may gain partners with the mother-of-all-upgrades AppleTV instead of a television. Apple needs the AppleTV to obtain maximum penetration and eventually take up space between the cable company’s cable and the TV. When that happens, AppleTV achieves a critical mass with a content distribution device (a $199 AppleTV in every home).
Along the way, other players need to be paid if Apple is to take a seat at the table. So far, that hasn’t happened. And a patent that allows users to skip over television commercials in favor of something else won’t be the ticket.