Don?t Think Apple TV Will Let You Cut Ties with Comcast

Comcast and Apple TVIf you thought Apple?s long-awaited television service was going to upend the pay-TV industry and let you break your ties with Comcast, think again.

Instead of competing with the cable companies, Apple seems determined to work with them. What the arrangement will look like is reportedly still very much under discussion. But one thing?s clear: You?ll continue to pay Comcast and the others for your TV service one way or another.

Apple has reportedly been working on a potentially revolutionary new television service, rather than simply developing its own TV sets, and it now may be ready for prime time. The Wall Street Journal reported Sunday that Apple is in talks with Comcast about delivering its service over a dedicated portion of the broadband provider?s wires. Apple would offer users live and on-demand television and allow them to record programs in the cloud via a revamped version of its Apple TV set-top box.

Apple and Comcast both declined to respond Monday to requests for comment, but reportedly are negotiating over how consumers would pay for the TV service and whom they would pay. Consumers would probably need to have a Comcast account of some kind to have the connection needed for the service. And even if consumers paid Apple directly, a portion of that payment would almost certainly be going back to Comcast for the dedicated line.

The promise of Internet-based video services, like the one Apple is talking about, has long been that they would make pay-TV services irrelevant. Consumers could get access to a universe of content without having a cable subscription and regardless of who provided their network access.

But that?s not how things have shaken out. The biggest pay-TV providers are also, in many cases, the biggest Internet service providers. Some 68 percent of the nation?s broadband customers get their service from just four companies ? Comcast, Time Warner Cable, AT&T and Verizon. Those same four companies rank among the top six pay-TV operators.

In other words, even if you cut off your pay-TV subscription in favor of Internet-delivered video, you?re likely to still be paying the pay-TV company to get that video.

But those big providers and their television network partners have increasingly worked to discourage consumers from cutting their cords. In many cases, Internet-delivered videos from those networks are available only to pay-TV subscribers. Much of the Internet video from the Sochi Olympics was available only this way. Likewise, if you want to watch HBO on your Apple TV or Roku box, you need to be paying for HBO from a pay-TV operator such as Comcast or DirecTV.

So it makes a lot of sense that Apple would want to work with Comcast and other pay-TV providers rather than try to work around them. It also makes sense if you look at how Apple got into the mobile-phone market.

Apple worked hand-in-hand with one of the established players ? AT&T ? to launch the iPhone. Apple let AT&T handle the network and was able to tap into the company?s existing base of customers. Eventually, Apple was able to reach more consumers ? but it did so largely through deals with the existing players, not by trying to cut them out.

The pay-TV and broadband markets are different from the mobile industry because none of the providers offers service nationwide. But it wouldn?t take too many deals for Apple to reach a large potential audience. Comcast alone probably has more broadband subscribers than the number of Apple TV boxes that Apple has sold.

Still another reason for Apple to partner with the big pay-TV providers is that that?s where the money is. The Apple TV box costs $100. But many broadband customers pay at least that much every month for their service. If Apple ever hopes to turn its TV service into a major revenue stream, it?ll have to do more than just sell hardware. It will have to get a piece of those subscription fees. And it will be much easier to do that working in partnership with the cable companies, rather than trying to compete against them.

It remains to be seen whether Apple will be able to strike a deal with Comcast or the other big broadband operators. Some analysts are dubious because Comcast would be wary of handing over its customers to Apple.

Regardless, whatever pay-TV service you have in the future, whether it?s called Comcast Xfinity or Apple TV, you can be sure that you?ll be paying Comcast ? or another traditional pay-TV operator ? one way or another.

Source: MCT Information Services