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Cupertino Invites Cable Cos. Into Apple TV

By John P. Mello Jr. MacNewsWorld ECT News Network
Aug 17, 2012 5:00 AM PT

The introduction of a revolutionary new TV set from Apple may not happen next quarter, but it may be getting closer.

Cupertino Invites Cable Cos. Into Apple TV

Apple is in hush-hush negotiations with some of the largest cable providers in the U.S. to allow their subscribers to replace their set-top boxes with Apple's, according to a report in The Wall Street Journal.

If the meetings are taking place and Apple is successful in getting the companies to buy into its cable box substitute proposition, it could remove a major hurdle to the introduction of an Apple TV set. That's because it could solve the thorny problem of finding content for the Apple hardware when it's introduced.

Apple did not respond to our request to comment for this story. A spokesperson told the Journal that the company did not comment on rumors and speculation.

Backdoor to Content

Since the rumors of an Apple TV first sprung up, the missing piece of the puzzle has been what content will be packaged with the hardware when it's introduced, explained Brian White, an analyst with Topeka Capital Markets.

"If this article is correct, the easy way to get the content is to work with the cable companies," he told MacNewsWorld.

Apple mulled over creating cable boxes before it introduced the Apple TV set-top device, according to the Journal. Apple cofounder and former CEO Steve Jobs nixed that idea for two reasons.

One, cable companies were regional operators, not national ones, making negotiations with them difficult.

Two, the cable companies didn't control the content on their systems.

Cable Cos.' Dilemma

While information abounds about the hardware going into an Apple TV set, very little information has been appearing about content, White explained. "This article provides some color about how Apple may work with content providers," he said.

Of course, meeting with cable operators isn't the same as hammering out a deal. "The biggest challenge will be getting the operators to work with Apple," White noted.

The cable operators, already faced with eyeball defections to programming delivered over the Internet, are caught in a dilemma, he said.

"If you're a cable provider, your business is at risk anyway because of over-the-top [Internet] video," he said. "But Apple could be a big disruptor of your business if you're not working with them."

Shift in Power

Forging a deal with the cable companies will be difficult, but not impossible, according to Trip Chowdry, an analyst with Global Equities Research. "If the right incentives are put in place, when the content providers see the money they'll make, they'll come aboard," he told MacNewsWorld.

Any agreement with Apple, though, will likely result in a power shift in control of the living room, White contended. "Giving more power to Apple is the natural path that we're going to go down," he observed.

"The lesser of two evils is to work with Apple, because you're going to be left behind if you don't," he added.

The cable companies haven't been totally adverse to working with third-party hardware makers, which has benefited Microsoft. Both Verizon FiOS and Comcast deliver premium content to households with Microsoft's Xbox gaming console.

Comcast delivers thousands of On Demand programs from networks and studios to Microsoft's Xbox 360 offering, as well as supporting voice and gesture navigation with the company's Kinect controller.

Verizon currently feeds up to 26 channels to subscribers of Microsoft's Xbox Live Gold service.

Deal or No, It's Coming

While it's unclear when and if Apple will be able to strike a deal with the cable companies, predictions about when it will introduce its TV set are more certain.

"I would be surprised if it's not out in the next 12 months," White said.

"We think that in the middle of next year, in the March to June time frame, we will see something from Apple," Chowdry added.

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