Apple’s Hard-Charging Tactics Hurt TV Expansion

Apple executives had every reason for optimism when they approached Walt Disney Co. in early 2015 to join the streaming television service Apple planned to launch. Disney Chief Executive Robert Iger is an Apple director and had said he was keen to strike a deal. Disney, which owns channels such as ESPN and ABC, was stunned, though, when Apple executive Eddy Cue made demands that would have upended decades of cable-industry and Hollywood practices, people familiar with the discussions say. In particular, Apple wanted to freeze for several years the monthly rate per viewer it would pay to license Disney channels. TV channels usually get annual rate increases and rely on them to fuel profit growth. Disney balked.

Similar talks with media giants that included 21st Century Fox Inc. and CBS Corp. also stalled. When Apple debuted its newest Apple TV set-top box last September, it announced no streaming TV service. Television is an important part of Apple’s strategy to reignite growth now that sales of the iPhone, the most popular and profitable product in the Cupertino (CA), company’s 40-year history, have fallen for two quarters in a row. Yet some of the same tactics previously used by Apple to such success have hurt its efforts to revolutionize the TV-watching experience, raising pointed questions about how it can revive its growth.