CBS turned down an ad-based Apple TV deal
CBS CEO Les Moonves is known to occasionally drop pieces of information that he's not supposed to on his company's earnings calls, and this quarter was no exception. When asked about CBS's appetite for striking deals with new streaming providers …
Context & Ripple Effects
Apple has been circling internet TV since at least the Financial Times' report of a TV foray in December 2009, with commentators questioning what the Apple TV box was even for as far back as mid-2009. CBS, meanwhile, has shown it will work with Apple on its own terms — it agreed to cut iTunes prices for some shows in February 2010 — but its streaming strategy has leaned toward subscription and ad partners it controls: the CW rerun package sold to Netflix with Warner Bros., Gossip Girl rights on Hulu, and the Clicker acquisition that put Jim Lanzone atop CBS Interactive.
What changed this quarter is that Les Moonves, a CEO known for volunteering more than he should on earnings calls, let slip that CBS walked away from an ad-based Apple TV deal. That puts CBS alongside ABC and NBC, which blocked their web programming from Google TV in October 2010 — a second instance of broadcasters refusing distribution terms set by a hardware platform.
First-order effects
- CBS keeps its content out of an Apple-controlled ad tier, preserving its own ad sales and its leverage to license instead to Netflix and Hulu, where it already has confirmed deals.
- Apple loses a flagship broadcast network from its Apple TV content pitch, leaving the box dependent on iTunes purchases and whatever deals it can still close.
Second-order effects
- Rival subscription services gain relative ground: every network that follows CBS's logic strengthens Netflix's and Hulu's catalogs while thinning Apple's, raising the price Apple must pay — in money or in control — for future negotiations.
- Other broadcast networks now have a public precedent for holding out: if CBS can decline an ad-based split and keep selling subscriptions elsewhere, the default posture toward platform-owned ad inventory shifts from yes to prove-it-first.
Third-order effects
- If the pattern holds — Google TV blocked in 2010, an ad-based Apple deal declined in 2011 — connected-TV platforms stay subordinate to content owners, who dictate whether a service is ad-funded, subscription-funded, or unavailable, shaping which business models hardware companies can offer at all.
- Broadcasters' dual-track licensing (subscription streamers in, platform ad tiers out) points toward a market where the same content is priced differently by channel, entrenching networks as gatekeepers of the living room regardless of which device wins.
The trend: Broadcast networks are selectively licensing to subscription streamers while rejecting ad-based deals with hardware platforms, making content owners the arbiters of which connected-TV business models get to exist.