Will Apple TV disappoint the company's fans?
Apple (AAPL) can come off like a veritable rumor factory because of its aggressive use of media, rabid devotion of its fans and the company's oversized impact on the consumer electronics world. And the latest rumor surrounding Apple, via the Wall Street Journal, regards the company's long-anticipated foray into TV.
Walter Isaacson's biography of Steve Jobs mentions that the late co-founder of Apple thought that he had finally "cracked" the TV problem, after calling it a "hobby" for years. Given his track record in music players, digital music, smartphones and tablets, that likely sent a chill not only through every competitor, but also every producer of video.
But this latest update doesn't sound like the impending shipment of some highly diruptive category killer. Instead, Apple has allegedly scaled back its plans.
The hope for Apple TV was that it would center around a simple, elegant device that would offer the same flexible access to programming that the iPod and iTunes originally brought to music, perhaps using a high-speed Internet connection. By closely integrating content delivery, hardware and software, Apple deliver the type of user experience and perceived value that has let it sell hundreds of millions of devices, typically at premium prices.
According to the Journal, Apple would work with existing cable companies rather than compete with them.
Apple’s latest approach is far less ambitious. Instead of asking for full current seasons of shows, it is asking programmers for just the most recent five episodes of current-season shows—the standard for video-on-demand services in the TV industry, a person familiar with the matter said. Apple is also proposing to disable fast-forwarding on shows for three days after they air, which would protect TV channels.
One reason Apple appears to be scaling back its TV ambitions is that likely lacks the muscle to push through the deal it wanted. Even in 2012, it was reportedly in talks with both cable operators and media companies. Apple's problem is is that the media companies largely include the owners of the music labels.
When digital music took off, CD sales -- on which the industry depended to bulk up its revenue though effective forced bundling that made consumers buy entire collections, rather than one song -- took a nosedive.
In video, media companies depend on TV advertising fees to make their money. They also depend on the cable companies to help enforce the type of bundling that occurs there: Consumers buy a slate of programming rather than choosing what might be a relatively few shows.
Forced bundling means that consumers get charged more; so do advertisers, which can't drive down the cost of ads as they do in their online marketing. There was no way the media companies would hand Apple the steering wheel again. Industry moves like the proposed merger between Comcast and Time Warner make it even more unlikely that Apple can get its way.