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Summary:

Once again, talking about Apple’s future as a multichannel video distributor is all the rage. But people familiar with the discussions betwe…

iTunes TV

Once again, talking about Apple’s future as a multichannel video distributor is all the rage. But people familiar with the discussions between Apple (NSDQ: AAPL) and video programmers over a possible subscription package say the talk is far ahead of the action, one reason why details are still murky. If the subscription package could be pulled off with an announcement from a single player, I have no doubt Disney (NYSE: DIS), which isn’t commenting about this but multiple sources tell me is open to the idea, would be first in line.

Not because Apple CEO Steve Jobs is a major shareholder in Disney but because Disney liked the publicity — and the results — from being first in the iTunes store with prime-time episode sales and movies. And because Disney CEO Bob Iger is a pragmatic experimenter, open to finding new ways to make money from programming but careful to avoid destroying core value. That’s why you don’t see ESPN full programming offered in a way that might damage its high value to multichannel distributors.

This time, Disney alone isn’t enough for the kind of subscription package Apple wants to offer. Neither is a package of shows from Disney and CBS (NYSE: CBS), also confirmed by us and others as interested in the idea. (Obligatory insurance policy: Enough aspects and programmers could come together to form the basis for an announcement more quickly than anyone expects. After all, this is Apple.)

The conversations have been going on for months, following not too coincidentally the trials of TV Everywhere services with Comcast (NSDQ: CMCSA) and *Time Warner* Cable. The recent Fancast Xfinity roll out to nearly 15 million Comcast households is centered on streaming, not downloads, but it is a reminder that Apple has increased competition on the video front — especially when it comes to households that already pay for multichannel video whether via cable, satellite or telecom.

The talks dovetailed with negotiations between Comcast and GE to form an NBC Universal (NYSE: GE) joint venture with the cable operator owning 51 percent. Some suggest that deal, announced earlier this month, makes NBC a less likely participant. Actually, it could wind up putting Apple in a better position to get access to NBC — and Comcast — programming eventually. That’s because the Federal Communications Commission will be looking at ways the deal might cause issues with access to programming distributed on broadband and could impose conditions that include availability to online multichannel distributors.

What might an Apple TV subscription look like to start? Check out what’s already for sale on iTunes, where single episodes and full seasons of many broadcast and cable shows and you get a clue, one source told me. Apple already sells a modified version of a subscription called the season pass; pay in advance and get episodes as they hit the store. Under the plans being discussed now, for a set monthly fee — $30 is the figure that comes up most — subscribers would have access to a programming library with a mix of choices. from a variety of programmers. Disney, for instance, might include ABC, ABC Family and the Disney Channel. CBS would put in CBS and sonme shows from the CW, but not premium network Showtime. One unclear aspect for now: whether subscribers would be able to customize packages — family, adult, drama, comedy or other variations. According to the Wall Street Journal, which first reported the interest of Disney and CBS, some versions have Apple licensing broadcast nets for $2 to $4 per sub per month and basic cable nets for $1 to $2 per sub per month. That’s considerably higher than most of the fully distributed basics get — and more than broadcast nets would get from retransmission. But it’s also for a much smaller pool of subs to start and could raise issues with current licensees. Put another way, you don’t see pure cable programmers even hinting at an interest in this project. I have no doubt that some will be there when the time comes but they aren’t eager to play the role of lightening rod.

Would it be the cable killer so many assume is on the way? See above. Consumers dreaming of a cable killer are looking for a la carte or a programming palette that can be customized and will deliver for a lower cost than basic cable or deliver more of what they want for the same. They’re going to expect a lot for $30 — and a lot of choice. The initial likely targets are people who already use iTunes, Apple hardware and have already opted for internet video over cable and other distributors. Disgruntled fill-in-the-blank subscribers may also hop on but it will take a while for even a minor dent in cable subs. In the near-time, Apple TV, or whatever it’s called, is going to take away more from new services like Roku and Boxee.

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  1. GUEST APPEARANCE Wednesday, December 23, 2009

    Wake up Mr. Jobs

    Who watches this cra* anyway? Do you really want to but into being a part of wasting the potential of the most powerful method of informing people… TV programming today is the great dumbing down of America. I can’t wait for itunes biggerst loser…

    I’m shorting appl on this news…

  2. The real end game is to cut out the middlemen (network programming executives) and simply sell series to consumers in an upfront process. If I’m paying $40~$50 per month of my cable bill for TV (the rest for broadband), the very least I should insist upon is to pick and subscribe to shows.

    I can imagine an ITunes “Genius” for TV shows, where I can pay the production company directly and watch shows I want, not something a network executive thinks I want to watch.

    I can also avoid the frustration of watching five episodes of V or FlashForward, only to have to wait until MARCH to pick up the story.

  3. Apple TV never caught on big really in the UK, so I wonder how the European experience or uptake will be. Whilst as an extension of iTunes where viewers/subscribers can select video programmes as opposed to music, it will boil down to value for money and the content options would need to be very attractive, in the light of hybrid/iptv.

    James Wood
    HD-Productions.biz
    Online Video Productions

  4. Yes, but the Internet video discussion is defintely shifting from free Web video to Internet distributed subscription TV as per this great piece from Alley Insider http://www.businessinsider.com/coming-in-2010-virtual-msos

  5. I’m not sure the Apple TV caught on really big anywhere. If you were to point to a recent Apple failure you could point there. Apple typically refers to it as a side project or an experiment.

    What I, and I think many other users, really want though is a la cart online TV. I want to be able to pay a smaller fee for the channels I actually care about and not pay for those channels I don’t want or need.

  6. The thing many of you seem to miss is that the MSOs and the Affiliate stations write the biggest checks to the broadcast and cable networks. If the networks start to disintermediate their biggest sources of revenue they are going to have problems on multiple fronts.Not only will they suffer whatever punitive punishments the MSOs will impose but if those punishments result in a loss of revenue for the network as a whole it wouldn’t surprise me to see further (possibly hostile) take overs by Comcast an the like of content providers.

    AppleTV is a joke. The support Apple puts behind this product has been lackluster at best and with the exception to Iger I would doubt that many other networks would take a chance on such a poorly deployed and received platform.

  7. The existing cable TV model is coming to an end, and Apple will just make things worse. I’m moving my family away from TV and blogging about the experience.

    http://www.cheaper-tv.com

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