Apple TV Set Could be Delayed by Cable Companies

    August 24, 2012

Rumors of an Apple TV set have been flying a for over a year now. In recent weeks, some excitement for the product has even been built by rumors that the product is already being manufactured.

Whether or not that is actually the case, it is known that the “iTV” is on the way, and it’s is well-known that Apple is currently in talks with cable companies over distributing their content. An analyst who recently spoke with Apple executives has said that the outcome of those talks, unfortunately, could mean the difference between a sooner iTV release and a later one.

Fortune today quoted a memo by Pacific Crest analyst Andy Hargreaves, stating that an iTV is “extremely unlikely in the near term.” Fortune quotes Hargreaves’ memo:

Relative to the television market, Eddy Cue, Apple SVP of Internet Software and Services, reiterated the company’s mantra that it will enter markets where it feels it can create great customer experiences and address key problems. The key problems in the television market are the poor quality of the user interface and the forced bundling of pay TV content, in our view. While Apple could almost certainly create a better user interface, Mr. Cue’s commentary suggested that this would be an incomplete solution from Apple’s perspective unless it could deliver content in a way that is different from the current multichannel pay TV model.

Unfortunately for Apple and for consumers, acquiring rights for traditional broadcast and cable network content outside of the current bundled model is virtually impossible because the content is owned by a relatively small group of companies that have little interest in alternative models for their most valuable content. The differences in regional broadcast content and the lack of scale internationally also create significant hurdles that do not seem possible to cross at this point.

It’s clear that Apple intends to revolutionize the TV industry the same way it did the music industry. To do this, though, Apple is going to have to break up the huge multi-channel packages cable companies currently offer. These are the same packages that keep many less-watched cable channels on the air. When a-la-carte viewing and pricing finally does come into effect, the cable industry will inevitably contract.

Whatever Apple is offering cable content distributors, they would be wise to take it, as it could be their only lifeline to a new business model. A contraction of the cable industry would be better for it than a future where it doesn’t exist, replaced by individual channels creating, marketing, and selling their own content. As entertainment shifts steadily toward streaming and social content, time is running out for cable companies to change direction on their own.