Apple: Good Intention, Unlikely Solution

| About: Apple Inc. (AAPL)


Apple has the right idea.

There are big gaps to fill in streaming media.

But there are more probable solutions than the one offered by Apple.

Apple (AAPL) (trading report) is on the right track when it comes to streaming video, but their efforts may be futile. Streaming video is fantastic, and in my house we have a smart TV that is hooked up to Netflix (NFLX) (trading report), Hulu, and Amazon Prime (AMZN) (trading report). We have completely discontinued cable, primarily because we don't appreciate most of the programming. Whenever I travel, the houses we rent always have cable access, and when I scroll through the channels I am sometimes abhorred at what I see.

However, one important thing is missing from the programming offered through streaming media at this time. We have a smart TV made by Samsung (OTC:SSNLF), it is the latest and greatest, with motion control, voice control, and it is completely wireless. There are no set top boxes, and it sits on our wall like a framed picture with nothing else around it to clutter the environment. Not only do we get the benefit of avoiding all of the unnecessary programming that doesn't interest us, but we don't have the clutter in our home like our friends do.

The problem is current streaming media through smart TVs in almost all circumstances limit the content to programming that is offered through application format. On our PC, iPads, or laptop, we can see things like the Oscars, NBA basketball, football, and the Olympics, but unless one of those events is specifically uploaded to an application we cannot see those events on our television.

More importantly, even if we were able to do this, we are not able to do this in real time; they will always be recorded. Imagine watching the Super Bowl three days after the event.

The current limitations to streaming media are very real for people who use smart TVs exclusively. I am one of those people, and I know the industry has a lot to do before I get the content that I really want. A significant benefit could come from Adobe (ADBE) (trading report) if they created an updated version of their flash player that worked on smart TVs (they only offer an older version), but thus far that does not exist. That simple addition would open the door to receiving new streaming content through web sites over our smart TV.

Realistically, most of the content is available online. We can get access to the NBA, NFL, and most live events that interest us, if we were able to play those files through a new version of Adobe flash player that worked on Samsung's smart TVs. None of the newer streaming content (only older content) that is available on a laptop through flash players can be played on any smart TV given this limitation.

One solution to this problem is offered above, but another has been alluded to in recent days as Apple and Comcast (CMCSA) (trading report) discussions were revealed. Unfortunately, that path will open the door to content that we don't necessarily want in our household, but it clearly fills the gap because the current state of streaming media over smart TVs is extremely limited. Apple seems to be in the right mindset, attempting to fill a massive gap in streaming media, and if they are capable of doing this it will open the door to a flood of exclusive streaming media subscribers like me.

The problem is this would strike at the heart of the cable industry. Cable companies charge exorbitant fees, which my family doesn't pay because we use streaming media, but if Apple were to provide streaming Media Services using content provided from Comcast, it could clearly change the cable industry as we know it today. But in addition to biting into the profits of whichever company they might partner with, offering streaming media in regions that are covered by other cable companies could create a flood of lawsuits and prevent the effort from moving forward at all.

In summary, the intention of Apple to provide streaming content is commendable, but there are a number of hurdles that go far above normal business development that could impede this effort. Regulatory issues are involved here, but more importantly cable companies do not need Apple to provide streaming content.

Certainly they need to make a few internal adjustments, but all cable companies need to do is create an application that provides streaming content, that is all Apple's going to do if they get the chance anyway, and in my opinion there is no reason for the middleman to be involved.

In my opinion, one solution is for Adobe to produce a version of flash player that can be used to run modern streaming content through smart TVs, and another is for the cable companies themselves to offer applications to stream their current content, but I do not see the business benefit of licensing that content to Apple, or engaging in a joint venture with Apple, because Apple would simply act as a middleman, fleecing revenue from the bread and butter of these cable giants.

There is certainly a need to improve content through streaming media, especially live content, and I believe that Apple sees that, but the barriers to entry for Apple may prevent it from being a reality for them. The cable giants certainly can do it by themselves.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. AAPL and AMZN have been recommended to clients of Stock Traders Daily as part of our Portfolio Series. Although these positions were in the money at the time this article was written, stop losses are in place for each of these.

Business relationship disclosure: By Thomas H. Kee Jr. for Stock Traders Daily and neither receives compensation from the publicly traded companies listed herein for writing this article.

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