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Summary:

The rumour mill for a supposed integrated Apple (NSDQ: AAPL) TV set is cranking up, with noted Taiwanese circuits news source Digitimes repo…

Apple TV

The rumour mill for a supposed integrated Apple (NSDQ: AAPL) TV set is cranking up, with noted Taiwanese circuits news source Digitimes reporting Apple’s supply chain companies will start making components in the first quarter of 2012.

“Apple’s schedule (is) to launch the new display products in the second or the third quarter of 2012, according to industry sources,” Digitimes says.

“Media reports in Korea also indicated that Samsung Electronics started producing chips for the iTVs in November 2011, while Sharp will produce the displays for the new TVs.” The screens will be 32 and 37 inches, the site says, citing “sources in the supply chain”.

Sterne Agee analyst Shaw Wu writes this note…

“Frankly, we are not surprised and believe AAPL should enter the TV space as this is arguably the only major end market the company is not currently participating in a bigger way.

“Moreover, we have picked up several data points indicating activity from component makers to manufacturing partners as well as AAPL’s own patent filings from at least 2005.

“We believe it makes sense for AAPL to produce Apple TV in both a set-top box as well as an integrated all-in-one version to give users choice.

“From our understanding, the technology including hardware and software isn’t the issue holding back a real Apple TV from shipping. What is are content partnerships and licensing terms that still need to be ironed out, as we mentioned in late-October.

“Today, iTunes has a rich library of movies and TV shows but it is mostly for downloads and only movies are available for rental (TV shows once were but were terminated in August 2011). What’s missing is live broadcast television.

“One obvious way to offer this is via the traditional way where a user subscribes to cable or satellite. But a more revolutionary, disruptive and differentiated way, is via the internet or IPTV which would be more in-line with its iTunes and iCloud model. Because of the high dependence on content providers, we believe exact timing is difficult to pinpoint.

“We continue to hear what AAPL would love to do is offer users the ability to choose their own customized programming, i.e., whichever channels/shows they want for a monthly subscription fee. This is obviously much more complicated from a licensing standpoint. And in our view, would change the game for television and give AAPL a big leg-up against the competition.”

Google’s Eric Schmidt this month said Google (NSDQ: GOOG) TV would be in the majority of TVs by mid-2012.

Sony (NYSE: SNE) has sold its almost 50 percent stake in its LCD screen-making JV, S-LCD, to JV partner Samsung for $940 million, Reuters reports, noting how analysts say the market peaked last year after many western TV owners have converted to flat-screen.

Various authorities have, in recent years, accused LCD makers of having conspired to fix industry prices. Samsung and Sharp are amongst seven LCD makers who have agreed to pay more than $553 million in relation to the charges, Reuters reports separately.

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  1. This makes tons of sense.  If you live in Atlantis, own a raygun and watch TV while petting your unicorn.

  2. Makes sense that Apple should want to stream/download live TV and improve the interface (huge opportunity given the messy interfaces that are out there right now). The hardware is essentially here (I will want a set-top box) but I’m not sure that this will be a win for the consumer, buying content a la carte could be more expensive than buying a package from one of the existing providers. If not, I’m all for it because there’s so much poor programming out there and I really resent paying for it all when I don’t watch it.

    Sports will likely attract a premium so I would like to buy college basketball content and ignore ice hockey, football, baseball and NBA. Hopefully that would lower my costs. Also, it would be nice to purchase subscriptions to my favorite TV shows and maybe have them download automatically so that I do not have to suffer through streaming problems when network bandwidth demand is high. I don’t mind deleting them when I’m done.

    Negotiating with content providers seems like it could be a hurdle unless Apple can demonstrate that revenues will improve for them. It would be a major game changer, which Apple is famous for. Hopefully, for the consumer, it will allow us to be more discriminating and save us money. I have my doubts about the latter.

  3. Of course Apple wants to allow consumers customized programming, and of course it would be revolutionary and disruptive. The only problem is, content owners have no reason to unbundle their content. Forget all the contract lock ups, Apple would have to pay broadcasters more than they’re receiving from cable affiliates and that doesn’t make any sense. I would love to see it happen but not likely any time soon.

  4. It’s not too hard to make the economics work for Apple and content providers, though some providers would be much more likely to get on board than others. I think it really comes down to Apple’s own assumptions about how many paid subscribers they can get. If they can get to the 4mm+ range then they are the size of mid-tier cable company like Cox or Charter. If they can get 15mm they are the size of Dish. Dish manages to make money on a $30/month package that has some big names in it, and they have to maintain satellites to do it. Apple will have transmission and infrastructure costs, but nothing like Dish or a cable operator. 
    If Apple thinks of this like a “replace your cable” concept instead of “coexist with cable” (what Hulu claims) then they can model a more complete content play. And if they agree to some kind of upfront payment w/ content providers – as a kind of guarantee on the predicted subscribers – it starts to make more sense. Unbundling the standard channel packages only really hurts two people – cable companies and the few networks with big subscriber fees like ESPN – who gets $5 from people that don’t watch sports but get ESPN in their big package. You already see some specific bundles driven by ESPN sub fees – look at Dish Networks pricing, to get ESPN (plus a couple of regionals) you just pay 5$ extra – very close to what ESPN charges. In that scenario, if you think of an Apple TV as just like Dish – what if someone could subscribe to Dish and only for ESPN @ 5$, or even 6$?, how would ESPN suffer? They would get more potential subs since the barrier to entry (for the consumer) dropped. It’s really the cable company that gets hurt the most in the unbundling, since they really need the base fees.Last point – I don’t think Apple needs to make money on the video content, at least not in the beginning. They’ll put IOS on the TV, and an app store, and developers will FLOCK to it, since the tools are already there and Apple has a track record. Consumers buying apps specifically for TV could be huge. It’s all the promise of OCAP but delivered by somebody that knows what they are doing. 

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