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Can Apple Make It Big in Television?

By Richard Adhikari MacNewsWorld ECT News Network
Aug 25, 2010 2:52 PM PT

Apple is reportedly negotiating with some major entertainment companies for television content consumers can lease to watch on Apple TV for 99 US cents a pop.

Can Apple Make It Big in Television?

These deals might give Apple TV users access to some of their favorite TV shows and would help drive the sales of Apple TVs, iPod touches, iPads and iPhones.

The content will be leased through the iTunes store. The Apple entertainment hub currently sells both TV shows and movies, allowing buyers to keep the content on their hard drives as long as they like. It also "rents" movie files, which self-delete after a specific window of time, for less. However, TV shows can currently only be purchased, and the typical price is $2.

Will iTunes do to the entertainment industry what it did to the music industry, or will Apple TV continue to limp along as it has since it was first introduced three years ago?

Wheeling and Dealing

According to reports, Apple's holding talks with News Corp., CBS and the Walt Disney Company on its 99-cent content lease idea.

Entertainment companies appear reluctant to discuss the negotiations.

"We're not commenting on this," CBS spokesperson Shannon Jacobs told MacNewsWorld.

News Corp. and Turner Networks did not respond to requests for comment by press time. NBC Universal, which reportedly don't want to deal with Apple, declined comment.

Will Apple's plan be a hit, especially as it doesn't seem to include news, which cable and satellite TV companies bundle with entertainment packages? If the plan does draw favor, will consumers reconsider subscribing to cable or satellite TV, or will they just switch to Apple TV? Could cable and satellite TV providers squeeze their content provider partners to restrict the amount of content available to Apple TV?

Viacom, for one, is reportedly not willing to get involved in Apple's plan, though Viacom spokesperson Jeremy Zweig declined to elaborate. "I am not able to address your other questions on the record," Zweig told MacNewsWorld. [*Correction - Aug. 26, 2010]

Lease, Not Lend

Apple's plan supposedly involves providing consumers a 48-hour window to view content they have downloaded for 99 cents.

This might just work, Michael McGuire, a research vice president at Gartner, told MacNewsWorld.

"A lot of the licensing and rights issues could be very challenging," McGuire pointed out. "But this is an obvious move -- more people are probably renting movies on iTunes than buying them. We tend a little more to save music than TV shows, and the notion of being able to pay for a TV show, watch it and have it off your hard drive so you won't have to manage it anymore may be attractive to some consumers."

The key to Apple's success will lie in getting a big enough catalog of content, McGuire said.

"The catalog has to be at least the same as, or better than, what consumers currently have for TV shows being sold per episode on iTunes," McGuire explained.

Is It Fear or Just the End of Time?

CBS, NBC Universal, News Corp. and Viacom are reportedly not too keen on the 99-cent rental idea, while Apple's close to cementing a deal with Disney, according to The Wall Street Journal.

Will the major U.S. broadcast networks -- Fox, ABC, CBS and NBC -- sit back and let Apple move ahead with its plans? After all, they get millions in retransmission fees.

"We're starting to see stresses in terms of existing TV market models," Gartner's McGuire said. "Earlier this year, Time-Warner was fighting with Fox over what it considered the ridiculously high fees it was being charged."

That kind of stress can only help Apple.

"I think the TV market is going through a similar situation now as the music industry went through 10 years ago," McGuire opined. "Apple and Google, with Google TV, are sensing the shift, and in many cases driving it by providing consumers with tools to manipulate the content they get on TV."

In order to avoid the music industry's fate, TV content creators need to go along with changes in their market, McGuire warned.

"Content creators can carefully build the bridge to an online business by building ties to Apple TV and Google TV," McGuire said. "We're starting to see this."

Although Apple TV has been languishing in the three years since it was launched -- when Steve Jobs downplayed it by describing it as a "hobby" -- McGuire thinks it will eventually take off.

"I don't think Apple's convinced all the broadcasters and all the creators to go along with the program, but as you'll recall, not all the record companies were willing to rush in to do business with Apple's iTunes store straightaway," McGuire pointed out. "Over the course of the years, however, they have."

*ECT News Network editor's note - Aug. 26, 2010: In our original publication of this article, it was reported that Viacom spokesperson Jeremy Zweig predicted Apple's plan will take off. In fact, Zweig made no such comment.

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