TIME technology

Why Apple Pay May Be the Company’s Most Challenging Move Yet

For Apple Pay to work, Apple needs to get customers, retailers and banks all in lockstep

Our smartphones have already become our de facto camera, music player, navigational device and personal assistant. Now Silicon Valley wants to make them our wallet, too.

Several tech firms have spent the last few years trying to convince consumers their phone is a more convenient payment method than cash or plastic. Most shoppers have balked. But on Monday, Apple is entering the fray, and experts say that could be a turning point for the long-hyped mobile payments industry.

Apple’s service, dubbed Apple Pay, allows customers to buy goods in physical stores with a simple tap of their iPhone 6, iPhone 6 Plus or Apple Watch smartwatch, when that device hits shelves in early 2015. Apple Pay users load their credit card information onto the phone, then press their device’s Touch ID fingerprint scanner in the checkout line to authenticate the purchase. The process is faster than using a debit card — and more secure. Apple generates a unique ID number for each transaction, meaning users’ credit card data numbers are not shared with merchants.

Apple Pay is launching just as the smartphone is becoming a central point of commerce for the average shopper. Consumers spent $110 billion via their mobile devices last year, according to research firm Euromonitor, and they used their phones plenty more to research products before buying them in stores. Meanwhile, person-to-person payment apps like Venmo have made people comfortable loading their phones with dollars to make simple transactions.

“All of that is really conditioning consumers to trust their phones when it comes to payments,” says Michelle Evans, a senior consumer finance analyst at Euromonitor.

But consumers are still reluctant to give up their credit cards. Mobile payments generated $4.9 billion in sales in 2014, a paltry figure compared to the year’s $4.8 trillion in card transactions, according to Euromonitor. Google’s own mobile payments service, Google Wallet, offers much of Apple Pay’s functionality but hasn’t seen widespread adoption. Startup Square abandoned its much-hyped mobile wallet platform earlier this year, instead pivoting to an order-ahead service like Seamless. PayPal, which is spinning off from eBay in 2015, has also struggled find a mobile formula that works in stores.

“It’s definitely starting to catch on, but I don’t think anybody has quite nailed the overarching reason to pull out your phone to pay,” says Anuj Nayar, PayPal’s senior director of global initiatives.

The transition to mobile payments is a challenging one because it requires buy-in from so many different players. Consumers have to be convinced it’s worth their time to learn a new buying behavior. Retailers have to pay for new equipment so their point-of-sale systems can accept payment from phones and smartwatches. Banks and credit card issuers also have to buy in. “It’s a lot of people to get in lockstep,” says Evans.

Apple does have a few key advantages over its competitors. The company has a knack for convincing people to change their digital lifestyles, whether by downloading MP3s, surfing the web on a phone or using a large tablet to watch videos. And thanks to the iTunes Store, Apple has more than 500 million credit cards already on file. Those customers will be able to seamlessly start using the same accounts they use to buy apps and music to buy goods in the real world when they first boot up Apple Pay. “We’ve never had this large of a base in a starting country” for a mobile payment system, says Matt Dill, Visa’s senior vice president for Innovation & Strategic Partnerships, Commerce and Network Payments.

However, analysts say convincing shoppers to give up credit cards, which are already fairly painless to use, will take more than just offering convenience. The most successful mobile payments platform to date is the Starbucks app, which rewards customers who pay via their phones with free drinks and other perks. Today, Starbucks processes about 15% of all its transactions on the app, or about 6 million per week.

“The customers really feel It’s not just about payments,” says Ben Straley, Starbucks’ vice president for digital products. “It’s also about being rewarded for their loyalty.”

But even if Apple can convince consumers to take their money mobile, some merchants aren’t playing ball. Wal-Mart, America’s largest retailer, won’t support Apple Pay at launch. Instead, it and other big-box stores like Best Buy are developing a competing mobile payments platform called CurrentC, set to launch sometime next year. Such merchants would have to be the driving force behind any effective loyalty rewards program that convinced shoppers to abandon their credit cards.

With so many competitors offering mobile payment options, analysts expect the segment will finally take off soon. Euromonitor projects in-store purchases via phone will rise to $74 billion by 2019 — though that’s still a far cry from the trillions in card purchases we see today. Mobile devices are already becoming a common tool for buying things in the virtual world. It could very well happen in the real world, too. “It’s just shopping, whether you’re buying it in a store or buying it online,” says PayPal’s Nayar. “The lines between what that looks like have started to disappear.”

TIME Media

The Cable-TV Bundle Is Finally Starting to Unravel

The logo of Home Box Office Inc. (HBO) is seen on the exhibit floor during the National Cable and Telecommunications Association (NCTA) Cable Show in Washington on June 11, 2013.
The logo of Home Box Office Inc. (HBO) is seen on the exhibit floor during the National Cable and Telecommunications Association (NCTA) Cable Show in Washington on June 11, 2013. Bloomberg/Getty Images

It's not a matter of if more channels will be sold a la carte, but when

It’s been a long time coming. For years, television viewers have griped about having to pay for a massive bundle of channels that they barely watch. In 2013, the average American TV household received 189 channels, but tuned into just 17 of them. A careful, decades-long dance between pay-TV providers and networks has ensured that, for the most part, you need a cable or satellite subscription to watch live TV.

Two back-to-back announcements this week could threaten this extremely lucrative business model. HBO, which has TV shows so valuable that people have actually been begging to pay for them, announced Wednesday it’s launching an online streaming service in 2015 that doesn’t require a cable subscription. If it’s like HBO Go, that means users will be able to stream all the network’s hit shows as they air on TV. CBS made a similar move Thursday by announcing CBS All Access, a new platform that will allow customers to access much of the channel’s past and present content online for $5.99 per month, including live broadcasts in 14 markets.

By making these channels available for purchase individually, CBS and HBO are embracing the “a la carte” TV model, in which viewers would be able to select the individual channels they want to pay for and ignore the rest. It’s a concept that makes intuitive sense in a world where songs, movies, books and news can be consumed individually, on the go and at little cost.

But the model poses a huge threat to cable operators, network owners and even subscribers. If every network did what CBS and HBO are doing, cable and satellite operators would have the core part of their businesses wiped out. Network owners, meanwhile, would have to convince millions of individual customers to buy their channels instead of negotiating with just a few large pay-TV companies. Greater price transparency would hurt most channels—just ask Netflix, which said a $1 price increase caused it to miss its subscriber growth projections in the most recent quarter. While a prestige channel like HBO could command a high price on its own, more niche channels would probably find it tough to turn a profit individually. Many of them would likely fold, according to one study, and the quality and quantity of content of available on TV might actually diminish.

For these reasons, we’re still not close to a world where consumers can buy any channels they want in any combination. The owners of basic cable channels in particular, which are widely distributed and generate revenue even from subscribers who never watch them, aren’t keen to disrupt the current model. And anything involving high-profile sports is likely to remain under tight lock and key—CBS’s streaming service, for instance, won’t play NFL games.

“It would be absolutely detrimental to their current business model,” Erik Brannon, an analyst at IHS Screen Digest, says of the full unbundling of cable channels. “I just don’t see them being willing to jeopardize future affiliate fee growth for a few bucks here and there on the Internet.”

Still, operators and networks are finally being forced to reckon with shifting consumer habits. The number of U.S. pay-TV subscribers declined for the first time ever in 2013. Meanwhile, the number of households that watch TV content solely through a broadband connection has doubled in recent years, according to Nielsen. These are mostly young adult viewers who will define the way TV content is consumed in the future.

“There’s a shift that’s going on in consumer behavior in viewing video,” says Brian Blau, an analyst at Gartner. “Consumers are slowly but surely moving away from watching linear television on cable. They’re starting to watch these TV shows and movies more on their mobile devices.”

In the near term, analysts say the networks most likely to mimic the HBO or CBS model are their most direct competitors. It’s easy to imagine Showtime offering an HBO Go-like service, Brannon says, or ABC live-streaming its programming for a monthly fee. And while the cable bundle isn’t going anywhere, it may go on a much-needed diet. A growing number of consumers are picking smaller cable packages, indicating they’re tired of paying for hundreds of channels they don’t watch. And new entrants in the pay-TV space like Dish Network are building their business models around offering smaller, cheaper bundles of channels.

What HBO and CBS are doing suggests the future of TV will be messier and more confusing and perhaps less entertaining than the so-called “golden era” we live in now. But consumers will have more choice of what they watch and how much they pay for it. “It’s not a matter of if” more channels will be sold individually, says Brannon, “but when, and for how much.”

TIME Earnings

Netflix Had a Pretty Awful Day

Netflix's logo
Netflix

Online streaming service revealed Wednesday it had missed growth targets, as HBO announces a rival streaming-only service

Correction appended Wednesday, Oct. 15

Netflix stock took a nosedive in after-hours trading thanks to a confluence of bad news for the company on Wednesday.

The streaming service missed its subscriber growth forecasts for the quarter and is one of the companies most threatened by HBO’s surprise announcement Wednesday that it will begin offering its content in a stand-alone streaming service in 2015. Netflix shares fell more than 25% in after-hours trading, erasing more than $7 billion in company value.

Netflix added 3.02 million subscribers globally during the third quarter, well off the 3.69 million the company had projected. In the U.S., the company blamed the stalled growth on a $1 price hike that went into effect in May. “Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the U.S.,” the company said in a letter to shareholders. Netflix also missed the mark in international markets, though it rolled out in six new European countries in September.

The streaming service’s financial results were more positive. Netflix pulled in $1.4 billion in revenue, meeting analysts’ expectations. Earnings per share were 96 cents, beating projections of 93 cents. Overall Netflix generated $59 million in profit.

But the looming specter of a stand-alone HBO that consumers will be able to buy without subscribing to cable may be a greater threat to Netflix than slowing growth. The company did not seem overly concerned, however, about having to convince customers that House of Cards is more worthy of their money than Game of Thrones.

“The competition will drive us both to be better,” Netflix said in its letter. “It was inevitable and sensible that they would eventually offer their service as a standalone application. Many people will subscribe to both Netflix and HBO since we have different shows, so we think it is likely we both prosper as consumers move to Internet TV.”

Correction: The original version of this story misstated Netflix’s total revenue in the third quarter. It was $1.4 billion.

Read next: HBO Will Finally Start Selling Web-Only Subscriptions Next Year

TIME Regulation

More Than 350,000 Customers Have Asked AT&T for a Refund After Bogus Charges

New York City Exteriors And Landmarks
A general view of the exterior of the AT&T store in Times Sqaure on February 21, 2013 in New York City. Ben Hider—Getty Images

Here's how to request yours

Hundreds of thousands of AT&T customers have requested refunds for bogus cell phone charges since the telco reached a settlement with the Federal Trade Commission last week to reimburse consumers, an FTC official told TIME Wednesday. In total, 359,000 individuals have sent in claims to the FTC seeking refunds for unauthorized charges that appeared on their cell phone bills in a practice known as “cramming.” Through cramming, third parties are able to issue unwanted, recurring charges for things like love tips and horoscopes to cell phone users.

Jessica Rich, the director of the FTC’s bureau of consumer protection, said the response from consumers was one of the largest the agency has ever seen. The only case with a larger number of claims that she could recall was a 2012 settlement with Skechers over deceptive marketing for one of its shoe lines, which garnered close to half a million consumer complaints. “We expect this to be a lot higher,” Rich said.

In total, AT&T has agreed to pay $80 million in refunds to customers for cramming charges. The telco giant will also pay $20 million in penalties and fees to the 50 states and Washington, D.C., and a $5 million penalty to the FTC. At the time of the settlement, an AT&T spokesman noted that the company was the first in the telco industry to stop charging customers for premium SMS messages in late 2013. The FTC is currently suing T-Mobile over the same issue.

It’s not guaranteed that all the people who have issued claims will actually receive refunds. An independent claims administrator will review the refund requests to determine if they are valid. “I’m expecting that most of the claims are going to be valid, but if they’re not valid, there will be a way to determine that,” Rich said.

Customers who think they were a victim of cramming can file to claim a refund until May 1, 2015.

TIME Media

6 Crucial Unanswered Questions About HBO’s New Streaming Service

Inside A PCCW Ltd. Store As Purchasing Managers Index (PMI) Data Is Released
Bloomberg—Bloomberg via Getty Images

Here's why it's probably best to be cautiously optimistic

After years of maybe’s and not yet’s, HBO has finally announced that it will offer its content as a streaming service independent of a cable subscription sometime in 2015. People who don’t subscribe to cable have been begging HBO to take their money for years. Now, it seems, a rising tide of cord-cutters getting rid of cable and young adults who never subscribed to cable in the first place have compelled the network to fulfill their wishes.

But the announcement was painfully light on details. We don’t even know whether this service will be the same as HBO Go, the robust streaming app the network currently offers to its subscribers. Here are the questions HBO still needs to answer:

How much will it cost?

They don’t call it “premium cable” for nothing. The cost of HBO currently differs based on pay-TV provider and region but generally falls in the range of $15 to $20. Many cable operators offer the service at a discounted price of $10 per month for the first year. High-definition streaming on Netflix, for comparison, costs $8.99 per month. It’s hard to say where exactly an independent HBO would fall on this spectrum. Time Warner, which owns HBO, currently splits subscription fees with cable operators, but the operators handle the billing, customer service, delivery of content and some marketing. With a standalone service, HBO would have to deal with those issues itself and charge a fee appropriate to recoup those costs. Two years ago, HBO tweeted that a TechCrunch story that pegged the amount people would pay for the service at $12 per month “has it right.”

Will I be able to watch the newest episode of Game of Thrones?

If this service is the same as the current streaming service, yes. HBO Go allows customers to live stream the network’s TV shows on their laptops, mobile devices, and televisions. But it’s worth noting that HBO didn’t specifically say that HBO Go will be the standalone offering. The company has been notoriously reticent to offer its newest content to people who don’t pay for cable. Even the monumental deal to bring HBO content to Amazon Prime Instant Video for the first time doesn’t include Game of Thrones or more recent seasons of current shows like Boardwalk Empire.

Will the service perform well, technically?

Going by HBO’s past track record, this could be a problem. HBO Go crashed during the season finale of True Detective and multiple times during the last season of Game of Thrones because too many people were accessing the service simultaneously. Obviously a standalone service would be even more popular. No doubt HBO would beef up its servers to handle additional load, but that added expense would place more pressure on the network to raise the price it charges customers.

Will Internet service providers play nice with an HBO streaming service?

This year has seen an ongoing debate between Netflix and several ISPs over who should pay to deliver Netflix’s content to customers. Netflix suffered slowed speeds on the networks of Comcast and Verizon until the company agreed to pay them to establish a better connection. As a streaming service that will also stream its content over ISP’s pipes, HBO could face similar costs. It doesn’t help that many of the ISPs are also pay-TV operators that aren’t likely to be pleased that HBO is giving customers an incentive to cut the cord.

Can I finally dump my cable company?

If you were only keeping it around for HBO, and the new service functions similarly to HBO Go, sure. Otherwise, you’ll still need cable to watch a lot of TV content live, especially sports. But the fact that a cable network as prestigious as HBO is willing to break out of pay-TV’s walled garden in such a big way could have implications later. Other channels that already have robust streaming apps, such as FX and ESPN, could follow in HBO’s footsteps.

Does this matter to me if I still have cable?

It might. Cable operators initially offer HBO at a discount to entice customers to subscribe to the service. Now that HBO is becoming a competitor as well as a partner, they may be less motivated to subsidize the channel. And with HBO having to take on new infrastructure costs, the network may pass those expenses along to both cable and non-cable subscribers.

TIME Gadgets

Everything You Need to Know About will.i.am’s Smartwatch

Salesforce.com's Dreamforce 2014 Conference
Marc Benioff (left) and will.i.am participate in the keynote speech at Salesforce.com's Dreamforce 2014 Conference. Tim Mosenfelder—Getty Images

First: There is such a thing. Also, it will play music, make calls and log onto Facebook

Apple is launching its much-anticipated smartwatch in early 2015, but rapper/tech evangelist will.i.a.m is hoping to beat the company to the punch. The artist (who was a guest at Apple’s unveiling earlier this year) is planning to debut his own long-discussed smartwatch Wednesday night at a Salesforce.com tech conference in San Francisco, according to blog Engadget. Will.i.am. will be the featured speaker during a session called “Wrist Power: The Vision of Wearable Computing and Fashion Tech.”

The rapper, who also serves as the Director of Creative Innovation for Intel, has been teasing the watch for a while. Back in April, he said that the device won’t have to be tethered to a phone to function, unlike most similar devices on the market. His watch will be able to make calls, play music, use Bluetooth to interact with other devices, and feature social apps like Twitter and Facebook.

There’s no word yet on price or battery life, but it’s likely will.i.am will try to market his watch as a high-end, fashionable device. He debuted a $475 iPhone camera add-on aimed at “influencers” in 2012 and more recently partnered with Lexus on a car equipped with specially designed cameras to take panoramic photos.

TIME Careers & Workplace

10 Most Lavish Job Perks in Silicon Valley

General Views Inside Zynga Inc. Headquarters
Zynga Inc. employees eat lunch at the company's headquarters in San Francisco, California. Bloomberg—Bloomberg via Getty Images

Living the dream with free booze, ball pits and helicopter rides

Everyone knows by now that tech workers in Silicon Valley get lavish perks such as round-the-clock free food and unlimited vacation days. But as competition to recruit and retain the world’s best software engineers has increased, so has the quality of the benefits. Case in point: Apple and Facebook will soon pay for female employees to have their eggs frozen. The procedure usually costs at least $10,000, according to NBC News, but apparently that’s a cost tech giants are willing to pay in order to attract top female talent.

There are plenty of more unusual perks to go around in the Valley, though. Here’s a look at 9 other real job benefits you can consider bringing up at your next performance review.

Nap Pods – Anyone who’s ever gotten caught dozing at their desk would appreciate these comfortable reclining seats that typically feature a spherical cover to help the user block out external stimuli. The pods are a mainstay at Google, among other companies.

Bike Repair Shop – Access to free bikes is common on the sprawling campuses of Silicon Valley’s biggest companies. Facebook even offers a bike repair shop where employees can bring their own vehicles for a fix-up.

Exercise Classes – Beyond having gyms on-site, many tech companies regularly offer free yoga classes. Fitbit has free kickboxing and zumba classes, and the IT firm ThousandEyes offers free massages every other week.

Booze – A San Francisco startup called Hipster was offering new employees a year’s supply of Pabst Blue Ribbon beer at one point. Though Hipster now seems to be defunct, cloud storage service Dropbox is well known for its Whiskey Fridays.

Helicopter Rides – Security camera company Dropcam offers every employee a voucher for a free helicopter ride with friends. Even wackier—the chopper is flown by Greg Duffy, Dropcam’s CEO.

Barbershop – For those in need of a fresh cut, Facebook has a barbershop on-site to meet all hair care needs.

Car Rentals – Google employees can rent electric cars on the company’s main campus for the day to run errands.

Arcades – Forget foosball—some companies have entire arcades to help employees goof off from time to time. At Eventbrite, a new arcade game is placed in the office once a month, while Facebook’s gaming room features both traditional arcade cabinets and more eleaborate gaming rigs. Other perks that help employees embrace their inner child include Facebook’s candy shop and Google’s ball pit.

Concierge Service – Because Google would rather have their employees writing code than running errands, the company offers a concierge service that will do things like help organize a dinner party or plan a home improvement project.

 

TIME Companies

81 Million People Listened to the U2 Album Apple Gave Away

About 5% of the iTunes users who received the album downloaded it fully, and about 16% at least played a single song

Despite all the gripes that Apple had no right to shove U2’s Songs of Innocence into 500 million people’s iTunes libraries, a lot of folks apparently ended up listening to the album. The new LP, which Apple gifted to iTunes users in conjunction with the company’s iPhone 6 announcement, has been fully downloaded 26 million times, the company said. In total, 81 million people have “experienced” songs from the album, via Apple services including the iTunes Store, iTunes Radio and Beats Music.

For perspective, 14 million customers have purchased U2 albums from the iTunes Store since the digital store launched in 2003. The group’s best-selling album, The Joshua Tree, has sold more than 10 million copies in the United States (across all formats).

Crunching numbers based off Apple’s released figures, about 5% of the iTunes users who received the album downloaded it fully, and about 16% at least played a single song. No data was available on how long users listened to the songs or on whether “experienced” meant the songs were played all or most of the way through.

Songs of Innocence will be available for free to iTunes Store account holders through Oct. 13. A deluxe edition of the album featuring 10 additional songs will be available in physical stores on Oct. 14. Apple has also set up a webpage with specific instructions for how to remove Songs of Innocence from your iTunes library.

TIME Web

The Humble GIF Is Getting a Big Upgrade

The GIF is dead, long live the GIF!

The once-lowly GIF, which has risen to become the dominant format for visual communication on the Web, is getting an upgrade. The photo-sharing website Imgur is introducing a new short-clip format called GIFV that it says is both higher in quality and smaller in size than traditional GIFs.

“The culture is way bigger than any specific file format,” Imgur CEO Alan Schaaf said about GIFs in a press release. “With Project GIFV, we wanted to preserve the experience of the GIF while optimizing it for all the changes that have happened on the Internet since the format was first introduced in 1987.”

GIFs posted to Imgur will now be automatically converted to the MP4 format, which the company is branding as the “GIFV” file extension. The new videos will loop just like regular GIFs, but they’ll have a higher image quality while boasting a smaller file size. The change should help Imgur images load faster on mobile devices. It will also allow the company to raise the file size limit for GIF uploads from 5 MB to 50 MB (here’s a regular 5MB GIF compared to a 5o MB GIF converted to the new GIFV format).

Even web users that don’t frequent Imgur.com will benefit from the change. 1.5 million images are uploaded to Imgur each day, and many of them rapidly spread to blogs, social media platforms and news websites.

TIME Regulation

AT&T to Pay $105 Million Settlement Over Extra Charges on Customers’ Bills

Settlement follows allegations that T-Mobile also engaged in hiding bogus charges in customers' bills

AT&T will pay $105 million to settle allegations brought by the Federal Trade Commission that the wireless carrier unlawfully billed customers for extra charges on their cellphone plans. The practice, known as “cramming,” involves charging customers $9.99 per month for unwanted features from third parties like ringtones, text message horoscopes and love tips.

According to the FTC, AT&T received 1.3 million customer complaints about the bogus charges in 2011 alone. That same year AT&T changed its refund policy so customers could only be reimbursed for two months’ worth of faulty charges, the FTC claims. The charges were listed under a line item called “AT&T Monthly Subscriptions” on customers’ bills, so many did not know they were coming from third parties.

AT&T will offer refunds totaling $80 million to customers who paid cramming charges over the years. The company will also pay $20 million in penalties and fees to all 50 states and Washington, D.C., as well as a $5 million penalty to the FTC.

“This case underscores the important fact that basic consumer protections – including that consumers should not be billed for charges they did not authorize — are fully applicable in the mobile environment,” FTC Chairwoman Edith Ramirez said in a press release.

AT&T stopped billing people for premium SMS content in December 2013. The company says it was the first in the industry to end the practice. “While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services,” AT&T spokesman Marty Richter said in an email.

The FTC has been especially focused on bringing penalties against telecom and Internet companies over the last year. T-Mobile was accused of similar cramming practices in July, but the wireless carrier is disputing the claims in court. Apple and Amazon have also faced FTC allegations that their app store policies allowed children to easily rack up massive charges of in-app purchases on their parents’ devices.

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