With Apple potentially releasing its existing video content in UHD, Kantar Worldpanel Analyst Olivia Moore discusses what else the tech giant could do to reinvigorate its position in the market.
Although still a heavyweight in the digital transactional market, over the past few years Apple’s growth has fallen short of competitors such as Amazon and Sky, dropping behind the two in terms of new subscribers. Renowned by-and-large for its ability to innovate and stay not only one, but ten steps ahead of the field, Apple – iPhone and digital music aside – has been left playing catch up in the wake of a TV streaming revolution.
Apple has a number of significant strengths on its side. Its existing customers are extremely loyal to the Apple brand and are particularly engaged, regularly spending £88 per year on iTunes — over double the average spend of Sky’s transactional digital consumers, which stands at only £41 per year. If Apple can start attracting new high-value customers to iTunes then it has a real chance of boosting sales, meaning the odds could be about to shift in Apple’s favour.
Apple stepping up
The rumoured launch of the fifth generation Apple TV could prime the business to wrest back a larger share of the digital transactional market. With Apple’s new media player likely able to show 4K and HDR video content, it’s probable that existing iTunes videos will also become accessible in this format. Should the company make the investment in such an upgrade, this would point to a marked attempt by Apple to reinvigorate its iTunes video sales and could well be the impetus needed to renew interest in the service.
There’s a lot at stake for Apple here. Over five million households – up from 6% last year – actively use 4K TVs in their homes. These consumers are also more likely to buy digital content — over a fifth have made a purchase in the past year, compared with an average of 17%. If Apple is able to snap up these consumers and convert them to high-spending, loyal shoppers, the company could see a significant improvement in its digital revenue. However, while it’s back on the right path, Apple still needs to get ahead of the game and separate itself from the other big names of the digital video market to really make an impact.
Setting itself apart
Price will be a real game-changer. With suggestions that Hollywood studios are trying to up the cost of UHD films for iTunes, this is a battle that Apple needs to win to stay competitive. Almost two-thirds of existing Apple TV owners already pay for a streaming service such as Amazon Prime, Netflix or Now TV, so if the price is right they may be inclined to switch to iTunes instead. However, with Netflix charging only £8.99 a month to view videos in UHD format, Apple will need to watch pricing or offer something the competition doesn’t.
Providing original content may well be the crux that makes or breaks iTunes. With Netflix creating original TV content at an unprecedented rate, from the likes of “Marco Polo” and “The OA” to the award-winning “Narcos”, Apple will have some serious catching up to do to make a name for itself, not just as a provider of content but as a creator. However, a reported $1 billion investment in exclusive content could well see iTunes become the go-to service for the next must-watch TV series.
Focus on existing customers
Even with competitive prices and iTunes-only original content, Apple only becomes the equal of the likes of Amazon and Netflix and it’s worth remembering that original content in and of itself might not be enough to make a fundamental change. To really make a mark the tech giant must focus on its existing Apple customer base as an avenue to increase its iTunes sales. For example, of the 18 million iPhone users in the UK, 20% use their devices to download or stream video content and of this 70% are under the age of 35. Bearing this in mind when developing its service and content, Apple must tailor its offer to appeal to existing demographics and remain responsive to any changes, therefore increasing its customer loyalty and heightening its appeal.
Although Apple has not officially confirmed that its video content will be released in UHD, if these rumours are based in truth then Apple has made headway into regaining a sizeable chuck of the digital market. Even with this update, the business must concentrate on finding new and innovative ways to shake off its key competitors. Focusing on its existing customer base and appealing to current Apple users may be the way in.