Is Apple About to Change CableTV and Television Forever?

Apple has been rumored to be developing a television for years now - and we're all waiting to see if that actually becomes a reality, or if it becomes an idea that is soundly shot down by the combined powers of the content and service providers. The excitement elevated when the Steve Jobs biography quoted Apple's then-CEO as saying he had finally "cracked the code" of doing an Apple television. What would an Apple television look like? Certainly it would be far beyond the current AppleTV box, and most definitely it would be incredibly elegant and user-friendly and facilitate streaming media and AirPlay video & audio support. It might incorporate Siri voice recognition and control, or it may feature 4K resolution. We don't know. It would certainly be advanced...

And it would be distinctly Apple. Which is to say, "revolutionary" and slightly ahead of its time - at least that's the hype.

In a recent Wall Street Journal article, Jessica Vascellaro and Shalini Ramachandran revealed that Apple has been meeting with cable TV companies to deliver "an Apple-designed and built cable set-top box".

Whoa. This is big. Let me explain why.

Apple dove into the phone market when phones were merely contact devices with cameras. The most advanced phones, for the most part, included colored icons and lists which were navigated by trackballs or menu control pads. They introduced the touch screen and an entire ecosystem of apps. It changed phones forever - just ask Samsung, who is being sued for allegedly shifting their entire phone direction based on the iPhone's innovations and copying their design. We won't comment on whether those allegations are true (because we don't know). But here's a nice picture for you to enjoy:

So even as Apple changed phones forever, they could, in the same way, change television. And by integrating themselves into the CableTV market, they could potentially take over the living room by making it easy and effective to purchase an AppleTV with the appropriate 2-way CableCard technology integrated within (similar to how you can purchase an iPhone from Apple and then select and purchase your service provider at the same time). Since CableTV rarely has any contracts, Apple could dominate the market very quickly and alter the way TV is consumed. 

Developing a set-top box not only allows Apple to sell custom hardware - which it's good at - at a hefty profit margin, it also allows it to control the entire TV-watching interface and make it desirable enough that people will want to pay for it. How do we know that? Because you can get a phone (a good one with a touch screen) for $0.01 any day of the week when you sign up for or renew a contract. And yet millions of people will pay $199 or $299 for an iPhone. They also avoid the hassle of having to negotiate for live TV broadcasting rights and they are perfectly positioned to meld live TV with streaming media and online content.

It would also give them tremendous leverage, as it has in the cellular phone market.

So what are the hang-ups and potential pitfalls? Competition in both platforms (hardware) and content providers (services/media). Let's look at some:

• Netflix
  By offering original content, Netflix is stepping into a different place from just streaming older shows and those from select licensing deals. But they also have some severe limitations - they don't do live TV and they aren't set up to stream current content on a large scale.
• Hulu
  Hulu is a potential powerhouse, but they are consistently hampered by antiquated distribution agreements that prohibit the release of their full library of content to set-top boxes. They also have select holdouts for such platforms as GoogleTV and they are limited by a lack of full participation by studios (notably CBS among others). 
• Microsoft Xbox 360
  While it's almost hateful that Microsoft charges for XboxLive Gold in order to stream media from services that are free to all other hardware, the Xbox remains a solid piece of hardware (all prior issues having been dealt with). Still, having to pay $60/year to use Hulu Plus or Netflix when you could buy a Blu-ray player for the same amount and stream it for free seems like a major snafu - but one that is making them millions of dollars each month thanks to the gaming community.
• Sony Playstation
  Actually, Sony doesn't seem to be much of a competitive force, having stumbled out of the gate with a quirky interface to its PS3 and a much higher cost of entry.
  
• Amazon
  Amazon has long been a competitor in many of the areas in which Apple competes: Kindle vs. iPad, Kindle vs. iBooks, Amazon VOD vs. iTunes... the list goes on. At the very least we can see that Amazon has an interest in delivery of its content to users. Whether they have any mechanism of getting live content remains to be seen, but as on-demand becomes more and more acceptable, so do consumers views of "Live TV" as essential.
  
• Google Fiber
  Google broke news this year that it had entered the cable television business in Kansas City as a test-bed for its new Fiber-based TV+Internet service. Also notable, Google bought Motorola Mobility, who makes many of the set-top boxes used by CableTV companies across the country (Pioneer and Scientific Atlanta are also other popular OEMs). Combine this with GoogleTV, which just got a much-needed facelift this year and is poised to allow for more and more Android app usage, and you are looking at a platform with, at the very least, a lot of potential.
  

So is television about to change? Will Apple be at the forefront of leading this change? We don't know, but all the signs point to another pending paradigm shift. The consumers are ready for it and the present state of media consumption is in flux. What remains to be seen is the effectiveness of the solution and whether consumers will rally around it.