Apple TV?

By Chris Marasco - September 11, 2012 | Tickers: AAPL, CBS, CMCSA, NFLX, DIS | 0 Comments

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Just last night I was having a nice steak dinner with a few friends.  One of them is a sports buff who loves watching everything from baseball and football to hockey and professional and college basketball.  He loves his sports, just so long as they are live.

The thing that upset him, though, is that his only reason for ordering cable is to watch sports – he and his wife can stream television shows a day or a week later, and he can use Netflix (NASDAQ: NFLX) for movies.  Netflix has upended the video-rental business as it delivers content via a monthly subscription model, and consumers like my friend love being able to stream content directly to their computers.

But just wants his live news and sports!  So why pay for all that expensive cable?  Because companies like Time Warner Cable, Disney (NYSE: DIS) and Comcast (NASDAQ: CMCSA) have locks (dare we say monopolies?) on the TV cable business.

Now picture this.  Could you ever see yourself walking into your living room and smiling as you fix your eyes on your new, white Apple (NASDAQ: AAPL) TV, 54” in size and prominently displaying the chic Apple logo beneath it?  Consumers would just gobble that up.  Apple may one day make a TV, but firms like Sony and LG make pretty slick TVs nowadays.  So where could the innovation come from?  Programming.

Partner Up

Apple TV does exist, and it lets customers watch Hulu, Netflix, and other content purchased from iTunes through a small unit.  Right now, Apple TV is not a business – it’s not even a product – it’s a feature.  Thus, when I refer to Apple TV, I’m referring to what could be – a new way for consumers to get the content they want through a sleek unit they love.

In order to get this deal to work, Apple would have to partner with companies like Comcast and CBS (NYSE: CBS).  Apple is already familiar with Comcast, as Comcast made an iPad app that allows the Apple device to work as a remote for its cable boxes.  The app also lets its users watch certain TV programming through the Apple device.

CBS is a different story.  Steve Jobs already tried to hook CBS’ CEO Les Moonves onto a deal more than a year and a half ago, but CBS didn’t bite.  Tim Cook’s Apple could be a different story, however, because the company has $51.9 billion in current assets and generated $10.2 billion in operating cash flow as of June 30, 2012.  Cash tends to be persuasive.

Pressing Forward

According to a Barron’s article: “What We Know—And What We Don’t—About Apple TV,” North American cable operators lost 1.9 million TV subscribers in 2011 – representing 3% of their customer base.  Most of the U.S. grows its population at 1.5% to 2.5% per year.  So how could this decline happen?  People are dropping cable for internet streaming. 

Watch out, cable providers, your industry could be ripe for innovation.

Another card in Apple’s hand is its new board member – Disney CEO Robert Iger, who joined the board in November 2011.  Iger could give Apple a foray into either the cable space or the sports arena, as Disney owns some of the most valuable content – ESPN.

Apple has a tendency to succeed when it tries its hand at something.  Jumping into cable would be a major move for the Cupertino, CA-based company, but remember its history.  Apple started into the computer space.  Then it revolutionized mobile phones.  Then it took the lead with tablets.  Oh, and it also shook up the whole music industry. 

So what’s next?  TV is a logical choice.  Apple may be facing its most daunting challenge yet, but if you want to roll the dice on someone, it may as well be Apple.

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