Apple looks to blow up the cable TV model

“After years of complaining about having to pay for obscure TV channels they never watch, American consumers might finally be getting their way,” Gerry Smith reports for Bloomberg. “Apple is in talks with broadcasters ABC, CBS and Fox to provide Web-based TV later this year, according to people familiar with the effort. Viacom is also negotiating with Apple, said one person. So is Discovery.”

“The industry buzzword is ‘skinny bundles,’ or Web services from providers such as Dish Network Corp. and Apple Inc. that offer just a few popular channels at a lower price,” Smith reports. “The whittled-down packages are putting pressure on programmers that have relied on the 500-channel pay-TV universe to carry their less-popular niche networks. Apple plans to debut an online service this year with about 25 channels, according to people familiar with the effort.”

“For years, TV programmers have paired their weaker channels with stronger ones to promote new shows and boost revenue. The average U.S. home receives 189 TV channels but only watches 17 of them, according to a report last year by Nielsen,” Smith reports. “Cable companies are already struggling to keep TV subscribers as more Americans watch video online on services like Netflix Inc. The rise of skinny bundles may lead even more people to abandon large TV packages. That poses a threat to networks that aren’t included in the new online TV services, said Paul Sweeney, an analyst at Bloomberg Intelligence.”

Read more in the full article here.

MacDailyNews Take: Apple has the might to blow up and rebuild the cable/satellite paradigm which has become increasingly user unfriendly.

14 Comments

  1. As in restaurants, a la carte offerings quite often are more costly than the prix fixe. Caveat emptor for these choices, at least early on, but we’ll wait and see what boils out of this cauldron.

    1. Part of the disruption is not just about ala carte but the undesirable UI presentation of antiquated cable boxes & DVR’s. Pinpointing stations we want on top of a far better system of access & features would be worth it even if all things are equal. Though paying now about $200 it’d be nice to cut that at least in half.

  2. The ‘à la carte‘ model sounds very tempting, but the current one makes it possible for many obscure channels to get subsidised by the more popular ones. I’m pretty sure that the (seemingly) hundred or so sports channels in my Verizon FiOS line-up represent a better half of my monthly bill, and I’d be more than happy to be rid of them all. The problem is, whatever money is left after the sports channels are removed would likely be insufficient to cover the expenses of carrying all the obscure stuff (Ovation, IFC, Oxigen, various Discovery / Nat Geo, etc).

    The reality of today is that there are dozens of very narrow niche cable channels today that exist only because of bundling. If the individual channel pricing were determined by the channel ratings, their revenue would simply collapse, regardless of how they are priced. As much as someone may love Ovation, it is unlikely that they’d pay as much as they do for a HBO/Cinemax package. Obviously, it doesn’t take as much to produce content for Ovation as it does for HBO, but I’m not sure if $1 per month per subscriber would sustain Ovation if it were offered à la carte.

    The cable TV industry seems to be heading towards a major transformation, apparently lead by Apple. In the process, it looks like some content creators may be left behind. Let’s hope that the end result is better, cheaper and more user friendly service.

    1. Going with a mini-bundle, they could still have some “temp” channels, that company or the subscriber can rotate once a month.
      That would be an easy sell.
      For just one dollar a month, you can keep up with the hottest new channels. If you want to add it to your current list… 😉

    2. This is a fair point to discuss various scenarios how some channels may be marginalized and so forth.

      However, in counterpoint I’ll offer the following:

      a) I don’t know if we really know (or not) just how much (or little) the various ‘obscure’ channels really cost – – specifically, I’m questioning the assumption that a few big/popular channels are being used as cash cows to subsidize the little guys. Sure this sounds plausible, but what also sounds pretty reasonable too is that the little fish are at break-even and the big fish are huge profit centers: let’s not forget that Comcast’s gross profit margin is 70% (and that their 14% Net Profit is as good as Apple’s).

      b) Even if the breakup of forced bundling does cause turmoil for these small ‘niche’ channels, there’s alternate outlets today such as Netflix.

      FWIW, I personally suspect that ‘disruption’ will really only occur if someone (eg, Apple) figures out how to become a viable ISP provider in addition to offering “thin” TV packages, as this is really what’s necessary to disrupt the ‘Natural Monopoly’ of infrastructure costs that currently are dominated by the Cable & Phone duopoloy. The rumors of Boeing Satellite communications in this regards becomes a quite interesting potential chesspiece.

  3. This is beginning to look like how Apple has been changing the mobile phone industry.
    Now we have much greater competition for phone subscriptions with companies willing to buy off contracts and better deals for data access.
    It has happened slowly though and the same pace will happen in the TV industry. Gradually the cable and satellite companies will have to give up their bundled strategy as more alternatives become available.
    I checked my cable bill and realized that I am paying the same price for HBO as Apple will be offering next month. With the added incentive of back catalog access I think I will switch.

  4. Most cable TV content is ruined by advertising. Buying season passes to your favorite shows on iTunes is much better (no ads!) and probably cheaper in the long run.

    Here’s hoping the snazzy Apple TV interface somehow gets rid of noisy commercials!

  5. Since I was a kid in the eighties with less than 20 cable channels, the cable companies have filled their service with more and more crap. I’m saddled with sports channels is that I wouldn’t watch if they paid me, that Comcast delivers in HD. Yet to get Sundance I have to pay extra, and they deliver it in the lowest quality they can (seriously it looks like security camera footage). I’d gladly pay the same for only the 20 channels I watch, and all in HD. I miss flipping through the channels, but with up to 100 channels I don’t watch between the ones that I do, my carpal tunnel would be killing me.

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