What's Holding Back Apple's New TV?
As much as people can dislike change occasionally, industry incumbents loathe it. Even if consumers hate the status quo, companies are usually really stuck in their ways.
That has been the case for virtually every industry that Apple (NAS: AAPL) has revolutionized. The music industry and record labels hated giving Apple pricing power to sell songs individually at $0.99, while also selling them individually instead of bundled with an album that inevitably contained some filler songs, but it begrudgingly went along with Steve Jobs out of desperation in the face of rampant piracy.
It took a different approach by adopting the agency model in its iBookstore, allowing publishers to retain pricing control as they gladly ran to Apple with open arms after years of having Amazon.com force their hands with $9.99 e-book prices. Amazon was forced to change from the wholesale model to the agency model or risk losing content. This time, consumers weren't too pleased with the change, as it resulted in higher e-book prices and have now filed suit.
With a new Apple TV set in the works, content deals will continue to be the biggest bargaining point for interested parties. One of the reasons to buy the new gadget was the possibility of choosing channels a la carte. Similar to how Cupertino changed the music business, consumers wouldn't be forced to buy bundles of content just to get the sliver that they wanted.
You'd be able to pick just the channels you want. Want Comcast's (NAS: CMCSA) NBC Universal for The Office and Parks and Recreation? It's yours. Hate News Corp.'s (NAS: NWS) Fox for I Hate My Teenage Daughter and Glee? Drop it. Your kids love the Disney (NYS: DIS) Channel's Kim Possible or That's So Raven? Make their day.
Sounds great for consumers, but the content partners shun the idea. According to USA Today, content deals are the biggest obstacle for Apple, as it tries to ink deals with Comcast, News Corp., and Disney, among others major content providers.
With music, piracy was the catalyst. With TV content, cord-cutting will be the catalyst. Cable subscribers are bailing in favor of online streaming services like Netflix (NAS: NFLX) , Amazon Prime, and Hulu. Netflix just announced it delivered a massive 2 billion hours of video over the holiday quarter, despite some of its recent subscriber losses. Once Netflix recovers from its missteps in 2011 and continues expanding internationally and inking exclusive content deals, it should resume garnering subscribers.
Time Warner Cable recently reported losing 128,000 home video subscribers, which was only partially offset by 89,000 new high-speed data subscribers. Smaller Cablevision similarly lost 19,000 video subscribers last quarter. DISH Network said goodbye to 111,000 net subscribers last quarter, far worse than the 29,000 lost the prior year.
As consumers ditch expensive cable TV packages for more affordable a la carte online offerings, content partners will have no choice but to give in to Cupertino. Again.
Want to stay up to date when content partners cave in to Cupertino's demands and the Apple TV is cleared for takeoff? Try using our free Watchlist service to get the latest news and analysis. Start by adding these companies.
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At the time this article was published Fool contributorEvan Niuowns shares of Amazon.com, Walt Disney, and Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Amazon.com and Apple.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Walt Disney, Apple, and Netflix and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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