Is Apple Hooking Up With Cable?

Apple has a "grand vision" for the TV market, according to Tim Cook. While some investors have come to expect that this may entail a new a-la-carte distribution model where consumers buy individual channels instead of bundles, the industry at large may not be ready for that.

As a result, it's become increasingly likely that the Mac maker will partner with an existing cable operator to provide the service, albeit this approach is less disruptive. To that end, Bloomberg reports that Apple may be preparing to partner with Time Warner Cable , and Time Warner subscribers will be able to access their cable service through the Apple TV.

The report doesn't specify if the deal is for the existing Apple TV set-top box or the rumored TV set that everyone is expecting, but the possibility has broad implications. Apple has been making numerous additions to the existing STB product, adding Time Warner's HBO GO and Disney's WatchESPN last month. The company said that iTunes customers are now buying 800,000 TV shows and 350,000 movies per day.

Time Warner Cable hasn't been shy about its willingness to give up control of the interface. Last year, COO Rob Marcus said the company was working on a "cloud-based" service that could include "giving up control of the interface." CEO Glenn Britt has also expressed that such a concession would be worth it so long as it delivers a good user experience.

One challenge that Steve Jobs directly acknowledged before was that there is no national cable operator. Jobs was responding to a comparison of the smartphone market, where Apple partnered with AT&T to launch the first iPhone. In smartphones, Apple could simply build a GSM phone that would be compatible with a wide range of service providers all over the world. The cable market is far more fragmented. Time Warner Cable is one of the two largest cable operators, but it doesn't cover much of the country. The situation becomes even more complicated when considering international expansion.

Time Warner Cable coverage map. Source: Time Warner Cable.

In order to reach more cable subscribers, Apple may eventually need to partner with other providers like Comcast that may not be as willing to surrender control of the interface. Hooking up with Time Warner Cable would be an important precursor to an Apple TV set, but there's still a long way to go.

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Fool contributor Evan Niu, CFA, owns shares of Apple and Walt Disney. The Motley Fool recommends Apple and Walt Disney. The Motley Fool owns shares of Apple and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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