Apple Wants To Offer Subscription TV Packages, Analyst Says

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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