Broadband Cable Association of Pennsylvania


August 17, 2012

Apple Inc.'s vision for a new device that can be used as a set-top box includes features designed to simplify accessing and viewing programming and erase the distinction between live and on-demand content, people briefed on Apple's plans said. The Cupertino, Calif.-based company proposes giving viewers the ability to start any show at any time through a digital-video recorder that would store TV shows on the Internet. Viewers even could start a show minutes after it has begun. Time Warner Cable Inc. offers a limited version of this feature called Start Over.

Another significant feature of the Apple set-top device is likely to be its user interface, which could resemble the navigation icons on Apple's iPad. While the design may change, the interface is expected to be easier for people to use than existing cable on-screen menus, widely viewed as clunky. Apple's device also may create space on the TV screen for social media features, such as sharing TV shows through services like Twitter Inc., the people said. Apple also wants users to be able to access content from the device on other Apple products like iPhones and iPads. Apple spokesman Tom Neumayr declined to comment on what he characterized as rumor and speculation.

The Wall Street Journal reported on Wednesday (see Thursday's NewsClips) that Apple has been talking with major cable operators, including Time Warner Cable, about letting consumers use an Apple device as a set-top box for live television and other content. In recent weeks, Apple also has approached entertainment companies, which own television content, with an outline of what it wants the new device to do, distributing, in at least one case, a document outlining its capabilities, one of the people said.

Cable operators' existing rights over TV content would likely not be sufficient to allow some of Apple's proposed new services, the people said, particularly the Web-based DVR idea. As a result entertainment companies may need to agree to expand cable operators' rights in order for the Apple box to be deployed. Apple also may negotiate directly with media companies over other features, such as new ways of offering past seasons of shows it already has some rights to through iTunes, one of these people said.

Plenty of hurdles remain. Apple doesn't appear to have any deals with operators to sell the device and getting them on board is likely to be challenging. The relationship between Apple, cable companies and content owners remains tense. Apple has tried repeatedly over the past few years to persuade entertainment companies to grant it rights for various kinds of TV offerings, with limited success. In the past, however, Apple was trying to change the existing pay TV system by, for instance, offering individual rentals of TV show episodes, which TV companies feared could undercut their business models. Apple's current plan involves a less radical path than past ideas the company has contemplated. Still, some in the entertainment industry may fear that letting Apple establish any kind of a foothold in television could give the tech giant more power longer term.

Some of the features Apple has discussed are improvements, but not radical changes, to those already available. For instance, Apple wants viewers to be able to access all episodes of current seasons of TV shows, whereas existing video on demand services from cable operators generally often offer only a few episodes of a current season. Apple's proposed device would also provide access to older seasons of shows, which are already available through Apple's iTunes media store. Even the idea of an on-screen menu with icons has begun to be adopted by cable and satellite operators, such as Dish Network Corp.

The talks come as sales of Apple's current TV hardware, a $99 box called Apple TV, are picking up but are still small. The company sold 1.3 million in the quarter that ended in June. The device allows users to access some Internet video on larger screens but doesn't offer traditional channel line-ups. Apple has struck deals with video providers like Netflix Inc. and Hulu LLC to offer apps for the device. At the same time, media companies are digging in and demanding more money when television distributors want to distribute content in new ways. Whether consumers would pay up for the proposed Apple device, which could be more expensive than renting a traditional set-top box, is another unknown. Wall Street Journal

Remaking the music, cellphone and computer industries was a layup compared with the challenge that still faces Apple in television. To make real headway, Apple may have to put a sizable chunk of its cash pile to work. Even then it won't be easy. After years of negotiating with cable companies, Apple still looks a ways from being able to release a living-room product that will wow consumers the way the iPod, iPhone and iPad have. According to a Wall Street Journal report, Apple appears to be working on a device that can be used as a set-top box to deliver a cable TV feed.

Getting consumers interested may be tough. Cable companies already provide set-top boxes for as much as $15 a month, so it isn't clear why a consumer would want to buy an Apple set-top box for perhaps hundreds of dollars. Nor are cable companies likely to subsidize the sale of Apple's box the way wireless carriers do iPhones.

Reasons to work with Apple would seem to be cable companies' ability to save on the cost of providing set-top boxes in the first place. Plus, Apple could certainly enhance the current, messy cable-TV experience. But those may provide only small benefits when compared with the risk of giving a very powerful potential rival a foothold in cable operators' business. After all, the TV business isn't truly broken yet. Some households are cutting the cable cord or never signing up for cable, but these appear to be a fraction of the total.

When Apple set out to remake the music business, it had already been shattered by piracy. By then consumers had much of their music in mp3 format and were in need of a compelling device on which to play it. After Apple cornered the market with the iPod, the music industry turned to it to help fight piracy and put most music content on iTunes. The TV experience is certainly ripe for disruption, considering, for instance, frustrations created by messy on-screen menus and complicated remote controls. But while sleek hardware and simple software enabled Apple to conquer mobile (with the iPhone) and increasingly computing (with the iPad), it probably needs more to conquer TV. Namely content. And for that Apple will likely have to cut a deal with an entertainment company like Time Warner, Viacom or Disney.

Apple could use some of its $117-billion cash pile to secure content, perhaps by buying a movie studio. Yet doing so is fraught with economic risk. If it made the content exclusive to buyers of its TV hardware, that content would stop earning cash from other sources. To make up the difference, Apple would have to make tidy margins on whatever TV hardware it sells. But again, it is competing with set-top box rentals provided by cable companies already, so its ability to set a high price for its own box looks limited. If the cord-cutting trend snowballs, which is a real possibility given ever-rising cable costs, Apple would likely find it has more leverage to deliver content itself. Until then, its TV fight is still a cage match with the cable guys. Wall Street Journal

Meet Tom Smith. That's a line in a biographical campaign TV ad that Smith, the Republican nominee to challenge U.S. Sen. Bob Casey Jr. in the Nov. 6 general election, is running on broadcast TV in the Philadelphia region from Thursday to Monday. Smith, who turned a lot of heads in the Republican primary by investing just shy of $5 million into his campaign and dominating the commercial war, still has a lot of people to meet in the state. A Daily News/Franklin & Marshall College Poll on Thursday showed that 68 percent of registered voters in Pennsylvania don't know who he is. Casey leads Smith 35-23 percent with 39 percent undecided, according to the poll.

Smith has been running ads on cable television across the state. He hopes the big-broadcast splash - $183,600 to run 168 spots on 6ABC, NBC 10, CBS 3 and Fox 29 - gets people talking about him in the state's largest media market. The ad, called "Big Dreams," starts off with a shot at "Bob Casey's failed record" on unemployment. Smith, who made his money running a coal company in western Pennsylvania's Armstrong County, describes his life as the American dream. "At 40 he was a union coal miner with big dreams, so he mortgaged his family farm to start his own energy company, creating hundreds of jobs so others could realize the American dream," the ad's narrator explains. Not noted: The coal mines he later ran were not unionized.

So Smith, who often touts his role in starting a tea-party group, is playing up his union history here in the big city. Smith appeared Thursday morning on "The Big Talker," WPHT-AM, to discuss his local ad campaign. He had a predictably friendly reception. Fill-in host Larry O'Connor didn't bring up a couple of items that Smith's fellow Republicans found interesting in the primary. Smith was a Democrat for 42 years and served in that party as a township supervisor in the 1970s and as an elected committeeman until 2010. Smith said last month that "the well is not dry" when asked if he would spend another $5 million on the general election. He gave his campaign an additional $1.5 million after the primary, which he won with 39.5 percent of the vote. Philadelphia Daily News