11 Comments

Summary:

Apple is reportedly looking to partner with TV operators for the launch of its upcoming iTV product. Why would it? Because doing so would give it more content, enable it to offer a better user interface, and give it wider distribution.

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Evidence is slowly emerging that Apple could be working with operator partners for the introduction of its upcoming iTV product. Last week, Bloomberg reported that Apple may get access to programs through partnerships with carriers such as AT&T and Verizon. And on Tuesday the Globe and Mail reported that Apple is pursuing partnerships with Canadian operators Rogers and BCE. But why would Apple feel the need to partner? Because doing so would give it a more complete lineup of content, enable it to offer a better user interface, and give it wider distribution than if it went it alone.

Interestingly enough, I was discussing the possibility of Apple’s partnering with operators the other day at lunch, before the Bloomberg piece came out. That first piece might seem like a fluke, as it was written based on an analyst note. But with Tuesday’s Globe and Mail story, it seems more likely that the hardware giant is indeed considering some sort of partnership approach to tackling the TV market.

The move isn’t totally unprecedented: After all, Dish Network was one of Google TV’s launch partners, and Verizon has partnered with Microsoft to make its FiOS TV service accessible through the new Xbox Live user interface.

All the content, none of the fuss

By partnering with pay TV operators, Apple would immediately gain access to all the TV content that viewers have come to expect, without having to strike up carriage deals of its own. It is not alone in pursuing this strategy: Microsoft’s Xbox 360, for instance, can be used as a set-top box by AT&T U-Verse and Verizon FiOS subscribers.

In the FiOS case, the program data and channel lineup will be deeply integrated with the Xbox Live service and Bing search engine, which will let viewers discover live TV and video-on-demand content alongside streaming content from services like the Zune Marketplace, Netflix, Hulu Plus, Vudu and YouTube.

I could see Apple’s doing something similar by allowing operator partners to build integrated apps into the new device, which could be used to control channel lineups and program discovery. For Apple, such a move would give it the content it needs to be relevant but allow it to control the overall user experience of search, discovery and navigation.

But what would the operators get out of it? Well, for one thing, integration with the Apple iTV could potentially give them a competitive advantage over their peers. In the U.S., Apple already has relationships with AT&T and Verizon, both of whom could stand to benefit from having the best new iDevice available for customers as they pitch their IPTV services against the more traditional cable offerings. Those operators could be incentivized to push the iTV to their customers and could act as an additional distribution outlet, on top of Apple Stores and the company’s existing big box retail partnerships.

Could AT&T help you buy an iTV?

There is even the possibility that Apple could bring the same subsidy model that exists in the mobile space to TV operators. To a certain extent, carriers already subsidize TV hardware by making set-top boxes available to customers. Assuming an Apple TV product would enable those carriers to deliver cloud- and IP-based programming guides, it could act as a set-top box replacement. Whatever money was being put toward that hardware could be committed to reducing the cost of an Apple iTV purchased by subscribers.

A carrier subsidy could potentially boost adoption for an Apple device’s being launched in a market with traditionally long replacement cycles. Some believe that any introductory Apple TV product would be sold at a premium over existing smart TVs, and a recent Best Buy survey lends some credence to this belief, polling users if they would spend $1,499 for a 42-inch Apple TV device. I personally doubt that Apple would introduce a new product priced so far above existing products, but if there is any premium a subsidy could bring products within parity. And if there isn’t a premium, a subsidy could make the product all that more attractive.

ITV is not just for partners

I don’t believe that any operator partnerships Apple strikes would be exclusive. In the U.S., Apple would likely partner with multiple providers, since their services are only available in certain geographies. As noted above, AT&T and Verizon are the most likely partners in the U.S., but I don’t think Apple would shy away from the same type of deal with a company like Comcast.

Nor would the Apple TV be “broken” if purchased direct from a retailer or if a consumer doesn’t subscribe to an Apple partner. She will get all the same third-party apps and TV coming from her set-top box. There is even the possibility that non-partners could build their own apps for device search and navigation, in the same way that Comcast, Time Warner Cable and others have built iPad apps that can be used as remote controls. But it won’t have the same tight program guide integration. And if there are subsidies involved, it wouldn’t be as cheap as it would be from Apple’s partners.

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  1. I want it to be released so people will stop trying to call it the “iTV”…

  2. I think it’s likely that an Apple TV product will act as a set-top box replacement. When Steve Jobs said “I finally cracked it,” he wasn’t thinking of a TV like everyone else’s.

    I *don’t* doubt that Apple would introduce a new product priced far above existing products, and I also don’t doubt that it will shake up the market, as Steve Jobs surely intended.

  3. “I could see Apple doing something similar by allowing operator partners to build integrated apps into the new device, which could be used to control channel lineups and program discovery.”

    They explicitly broke this mold with the iPhone though – there are no carrier apps on those. Carriers have shown little skill in designing UIs so I’m also confused by the idea that carrier partnerships would “…enable [Apple] to offer a better user interface …”.

    Any Apple TV needs to be to current TVs what the iPhone was to phones in 2007 – a radical rethinking and improvement. A TV with, say, the current Apple TV box UI will not do much in the market. Integrating Siri, gestural controls and more would be a departure… but inflicting carrier apps on such a device will likely backfire.

    1. I suspect they will sweeten the experience by integrating other i-devices. I can already control the channels on my TV via the Xfinity (Comcast) app. It’s a better remote control than the box that Comcast ships.

      However, it’s limited in that it only controls cable channels, not volume, my stereo, DVD etc. If it controlled my entire home video setup, that would be a killer worth paying a premium for.

  4. Frankly, I don’t own a television and haven’t for nearly twenty years. Nor do I have a land line any longer and haven’t since 1999. But, the television could become a value add in terms of computing and entertainment, and provide enough value for somebody like me to purchase one.

    It would have to connect to my computer, or be my home computer, and provide wireless access for things like the Sonos. It is a gateway to home services, and has a lot of potential.

  5. Since Most MSOs have already developed apps that allow you to watch cable programming on iOS5, why not just base the new TV on that OS, allow people to download apps, and then display the programming on the TV alongside other applications voila?

    1. Apple called the telephone iPhone, so I think they will call the television iTele OR iVision….:)

  6. Certainly one way to deal with the “first input” problem. In the US only about 15% of TV households get their TV channels ‘over the air’. The rest use a cable or satellite STB and the TV is little more than a monitor. The remote from their Pay TV provider turns the TV on and off, and raises and lowers the volume and they rapidly forget where the remote for the TV even is.

  7. Darran Clements Wednesday, February 8, 2012

    Why would you buy one when as mentioned Xbox already provides all the mooted features and more? It will also have major problems with the name in the UK as we already have ITV (should that end up being it’s launch name).

  8. It is also because Apple doesn’t own any internet infrastructure.

  9. If they’re going to work with the Pay TV providers, then why is the “Apple TV” an actual TV? Why isn’t it just a much better set top box than the pieces of crap from Cisco and Motorola and even TiVo?

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