August 16, 2012 / 9:41 PM / 5 years ago

Column: Cable companies want Apple? Think different

(The views and opinions expressed here are the author’s own and not those of Reuters.)

The Wall Street Journal today reports that Apple may be trying to persuade cable companies to license some manner of Apple TV. If accurate, Apple is almost certainly driving the process to replace set-top boxes that are the Edsels to Apple’s Lamborghini. Reaction ranges from “Sheesh. That’s old news,” to “it will change the world!” The latter is right - with one modification. It would change the world. And that’s why it’ll never happen.

The technology we’re force-fed from cable and satellite companies is simply horrible, designed primarily to sell videos on demand. Minor things like access to a usable programming guide are an afterthought. A cable-company-sponsored Apple TV could fix that.

But the cable companies have no interest in actually fixing ugly menus and improving on-screen navigation - and even more surprising, in an era when the iPhone has spoiled us for great design, their customers aren’t fighting mad. If cable companies actually did care, they would have partnered much more aggressively with TiVo, the pioneer in the alternative set-top-box space which is still getting it right after all these years. (I was an early adopter, own four TiVo devices - three active - and all have lifetime plans.)

TiVo has been around for more than a decade, and even if you don’t have one, you’ve heard of it. But its adoption rate has been well short of phenomenal: TiVo has about 2 million U.S. subscribers in a nation with 115 million TV households, 87 percent of which have cable or satellite. The barrier to entry? Those crappy cable/sat set-top boxes that come with the service and get installed for you.

It hasn’t been all bad news. TiVo and DirectTV have been on-again, off-again, and as of this year are partnering with a national rollout of TiVo’s HD box. With Virgin Media, TiVo has just installed its millionth box in the UK. Only days ago, Charter Communications said it would continue to use TiVo software.

The point is: Apple wouldn’t be the first to try to scale this particular Everest. Doing an enterprise deal with even one cable company would, theoretically, give Apple TV a huge advantage over other pretenders to the living room throne (or couch, as it were). The partnered cable company would market its Apple TV partnership, which would up demand for it among customers of other cable companies. And all of a sudden, Apple TV is the must-have set-top box, without Apple having to sell it one at a time directly to consumers.

That, at least, would be Apple’s fever dream. The reality is that by and large, the vast majority of cable/sat customers are fine paying about $10 a month for bad tech. They just don’t care, and until they do, there’s no incentive for cable/sat to change much of anything. There is simply no disruptive force big enough right now to compel them to make top-flight TV control centers an industry standard.

Moreover, why should Apple want to partner with the cable companies when it would mean that it would have to cut them into its rental business (or worse, block it)? Apple’s iTunes, while losing its top rank last year to Netflix in revenue market share, still makes hundreds of millions of dollars renting and selling movies and TV shows. Sure, it’s a drop in the bucket for a company that booked $108.25 billion in fiscal 2011 revenues. But Apple also sold 2.8 million Apple TV units last fiscal year - a record.

For a side project, that ain’t bad. And without partners Apple needn’t dance to anyone else’s tune as it continues its slow march.

I still think that if cable and satellite companies were looking for a “cooler” alternative to their set-top boxes, they’d have a better shot at partnering with TiVo, which isn’t a media company and is less of a threat to their core business.

Indeed, the best hope for Apple, Google, Roku, etc. may be the obsolescence of the set-top box itself, a scenario that is being pushed along by the latest models of “cable ready” TV sets. Part of the resistance to devices like Apple TV comes from their being a second box you aren’t sure you need.

But the only people who can get rid of those boxes are the ones who work at the cable companies. And that’s why we’ll probably see Apple’s other Apple TV - the oft-rumored stand-alone set - before we see a cable-Apple partnership.

If there was any incentive for the cable/sats en masse to treat their customers to better tech, the companies would have already done so. A great option has been available for years. As fun as it is to imagine Apple breaking out in new ways, this all strikes me as wishful thinking. And I‘m not even sure for whom.

John C. Abell is a columnist for Reuters.

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