Apple’s (AAPL) vision of the future of television is starting to get interesting. According to recent reports, the Cupertino-based company is in talks with cable providers and content owners regarding a future Apple TV that could be used as a set-top box. Key features would include cloud-based DVR service, social integration and the popular iOS user interface, but it is unclear whether or not content companies are biting. What is clear, according to analysts with Sanford C. Bernstein and Co., is that even if Apple is successful in launching the new service, it will never stack up to the iPhone.
“While similar challenges have been overcome in the mobile telephony market, the challenges here are far larger and more complex,” Bernstein analysts wrote in a note following a report in The Wall Street Journal.
The note outlines four main reasons that Apple will not be able to disrupt the TV industry as it did with the mobile industry:
- First, the distributors in video share in the economics of the content that they deliver. Cannibalization matters.
- Second, the Pay TV business has no analogous hardware subsidy model to the one that prevails in post-paid wireless.
- Third, the U.S. cable industry has become accustomed to near complete control over the development of set-top box and cable modem technologies (e.g., all the MSO-sponsored Cable Labs work on DOCSIS and tru2way).
- Fourth, cable MSOs are clearly advantaged over their telco and satellite competitors when it comes to distributing a device that supports both linear and Internet TV – for reasons of both scale and ability to integrate broadband –giving them disproportionate negotiating leverage.
Of course no major industry can be disrupted… until it is.
But that’s not to say Apple will succeed. The company’s plans for the future of television remains cloudy at best. Will Apple be able to convince cable company’s that a significant change to their distribution model — vis-à-vis offering all content on-demand — won’t lead to a slip in ad revenue? Will consumers eat up an Apple set-top box as they did with the iPhone? Is Apple still prepping an own-brand HDTV?
With momentum in its favor, a massive customer base and more resources at its disposal than any other consumer electronics company, Apple may be the only company right now with a chance of initiating the first major shift we’ve seen in years in the TV industry.
Bernstein is right that the hurdles are much taller than they were for Apple’s iPhone though, and the firm says the “successful conclusion to the ‘talks’ reported by the Wall Street Journal is by no means a foregone conclusion.”