Significantly, if Apple is hoping to target their service as one that provides individual channels to consumers without the mass bundling that cable offers, their hurdle will begin with securing the programming rights from a content industry.
This is a tricky proposition for Apple because programmers have lucrative contracts with MSOs and other video service operators that support both subscription and advertising revenue, allowing for all that great content to be produced and distributed over the pipelines. Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC) have huge infrastructures that require packaged bundles and provide overall cheaper rates for customers, while supporting the enormous costs of the networks. Many programmers also have contracts with cable that stipulate carriage of multiple channels, and they will be careful not to jeopardize those.
On the other side, just look at iTunes and the wild success it's enjoyed by offering à la carte access to albums and individual songs. Apple may be trying to apply this model to a subscription TV service.
If consumers are willing to pay $30 per month for securing content of their choosing, channel by channel, this may indeed morph into an à la carte model that the cable industry has generally opposed.
Although it's growing obvious that Apple sees a significant market here, the hurdles of securing those key contracts with programmers will be a make-or-break scenario, and I think it will be a difficult challenge for Apple to overcome and change the current market in a meaningful way, at least in the short term.
— Leonard Grace, a cable industry vet, is a telecom strategist and blogger. He can be reached at [email protected]. Special to