Is This the First Content Provider for Apple's TV Set?
One of the biggest obstacles holding back Apple's (NAS: AAPL) long-rumored TV set, which has already reached mythical status, has always been getting content providers onboard. Steve Jobs summed it up years ago at a tech conference: "[T]he problem with innovation in the television industry is the go-to-market strategy."
Bloomberg reported earlier this month that holdups at the negotiating table are the primary reason why Apple won't be releasing its TV this year. Here's Jobs again: "It's not a problem with technology. It's not a problem of vision. It's a fundamental go-to-market problem." In all likelihood, the Apple TV set is a finished design ready to enter production and is simply waiting for the content green light before Tim Cook flips the switch.
Apple, Amazon.com, Google (NAS: GOOG) , and Microsoft (NAS: MSFT) are all gunning for living-room dominance, but content providers stand between these tech giants and consumers. Microsoft actually just picked up a former CBS exec Nancy Tellem to help produce original video content for the Xbox.
Cable operators already aren't too keen on anything that could encourage cord-cutting and encroaching on their traditional businesses. Just like wireless carriers, they want to have as much control over the value chain as possible. AT&T's (NYS: T) willingness to give up some control to Apple helped it score iPhone exclusivity in the early years, accepting the device before ever even seeing it, while Verizon played hardball.
One negotiating hurdle in the TV talks has been who will control the software and screen interface that dictates the viewer experience.
Giving it up
Time Warner Cable (NYS: TWC) sounds as if it's getting ready to play ball with Apple. COO Rob Marcus recently told investors that the company is "hard at work at a cloud-based [TV] guide experience," and that "in some of those cases that may mean giving up control of the interface" in order to make its services available on a broader range of devices, including iPhones and iPads.
Marcus stopped short of referring to Apple specifically when talking about the interface control, but was also clear that Time Warner won't be sacrificing the overall relationship and viewers will always know that the company is serving up the content. The earlier Bloomberg report had also said that Apple and Time Warner Cable had made the most progress with negotiating a possible deal.
The executive also brushed aside competitive concerns regarding Google's entry into the cable and Internet service business, starting in Kansas City. Time Warner has approximately 100,000 video subscribers in that area, and including broadband subscribers represents less than 1% of the company's total customer base. That being said, a competitive threat is still a threat, and Time Warner still plans on turning up the heat on Big G.
It's different this time
One key difference is that the cable industry isn't in nearly as dire shape as the music industry was when Apple disrupted it a decade ago. The music industry was being eaten alive by pirates, as there were no legal methods to digitally download music at the time, so record labels had no choice but to go along with Apple's iTunes store, which redefined music digital distribution.
Cord-cutting in favor of online video services like Amazon's Instant Video, Hulu, or Netflix is on the rise, and cable operators are certainly feeling that pinch. Marcus conceded that Time Warner has no illusions of seeing video subscriber growth in the near future, in part due to macroeconomic conditions.
By the looks of it, Time Warner Cable may end up being Apple's first cable partner with its TV set, much like AT&T was its first wireless carrier partner with the iPhone. If it plays out like it did the first time around, Time Warner Cable may see video subscribers grow again, much like how AT&T saw smartphone subscriber growth outpace rivals thanks to iExclusivity.
Next thing you know, cable operators all over might be lining up to sign on Apple's dotted line.
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The article Is This the First Content Provider for Apple's TV Set? originally appeared on Fool.com.Fool contributor Evan Niu owns shares of AT&T, Verizon Communications, and Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google, Apple, Netflix, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com, Netflix, Google, Apple, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple, a synthetic covered call position in Microsoft, and a bear put ladder position in Netflix. The Motley Fool has a disclosure policy.
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