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Cable Would Be Apple's Obvious TV Partner

If Apple Inc. (Nasdaq: AAPL) decides to overhaul its Apple TV service, it will have a number of pay-TV providers chomping at the bit to be its partner of choice.

That is, of course, if CEO Steve Jobs decides an Apple TV overhaul is worth it and if it deems a partner appropriate.

"I don't know what Jobs will do, but I certainly know the cable guys would love to partner with Apple," says Heavy Reading cable analyst Alan Breznick. "Comcast Corp. (Nasdaq: CMCSA, CMCSK) would salivate at the prospect."

Comcast and the rest of the cable industry showed their love for Apple at the recent Cable Show, where Comcast CEO Brian Roberts unveiled an iPad app that would turn the device into a remote control for its cable service. This is a service that the rest of the cable industry wants in on too, according to Time Warner Cable Inc. (NYSE: TWC) president and CEO Glenn Britt. Why wouldn't they want more? (See To Xfinity... & Beyond! and Cable Hearts Apple .)

But is the feeling mutual?

In light of Google (Nasdaq: GOOG) getting into TV, and with activity mounting in the over-the-top space, an Apple TV response appears likely, and its Developers conference kicking off on Monday would seem to be a fitting stage. (See Google TV Comes Out, the World Tunes In .)

But, when asked about Apple's plans for the living room at the D8 Conference Tuesday, Jobs replied that "smarter people than us will figure this out." He argued that subsidized business models essentially give customers a set-top box for free, so asking them to pay for another device is a tough proposition, something that both Breznick and Infonetics Research Inc. directing analyst Jeff Heynen agree with.

Jobs also noted that the market is highly fragmented with no national cable operator and a lack of standards. He said that Apple was unlikely to partner with a TV provider as it did with AT&T Inc. (NYSE: T) for wireless.

Mashable pointed out that Jobs has a track record of denying new product launches only to announce them soon after, and Heynen believes this will be the case this time as well, even if Monday's mobile-focused developers conference isn't the stage for a Apple TV unveil.

Partnering is the route that Google chose in announcing a tie-up with Dish Network LLC (Nasdaq: DISH) for its planned service, but Google and Apple have different DNA. On the mobile front, Apple's policy has always been a tight coupling between its hardware and software, while Google will license its software to any hardware maker, Heynen says.

"If [Jobs] wants a cable partner, he would have no problem finding one," Breznick adds. "It'd make sense, but he'd have to give up some control, which Apple hates to do."

A partnerless Apple could give pay-TV providers a run for their money. Breznick says the one advantage that cable has over Apple is the ability to get programming rights, which is always a problem for anyone else. That being said, Apple has a brand cachet that lets it break the rules.

"Apple has plenty of leverage going into any negotiations with any partner," Breznick says. "What they don't have is the big subscriber base. They don't have the same access to video programming that the cable, phone, and satellite-TV guys do."

Another possibility, Heynan says, is that Apple bypasses both the STB and the pay-TV providers and goes straight to Internet-connected TVs. It's a growing, albeit small, market and one with a lot of potential, he says.

"[Apple] will continue to work on it, because there's a lot of churn and new devices and platforms coming to market, so now no one knows how quickly this whole Internet-connected TV business will take off," Heynen says. "We are at the early stages of that. Apple has a little more time to go ahead and work on something, but inevitably, they will get into the TV/living room business with a display or OS that can be integrated into an Internet-connected TV."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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