Apple May Be on the Verge of Kneecapping the Cable Industry

By MG Siegler

The cable companies suck. All of them. Some suck less than others. But they all suck. We need someone to whip them into shape. And that someone may be Apple (AAPL).

Apple may be on the verge of gaining two key television network agreements, according to The Wall Street Journal. Specifically, CBS and Walt Disney (DIS) (which runs ABC) are said to be considering a proposal by Apple to offer a subscription-based TV service over the Internet. Presumably, this would work through iTunes like all of Apple-based content, but also presumably it would work over Apple’s Apple TV device (though maybe a new version of it) to bring this content into the living room, where people are used to consuming it. Simply put: This could be huge.

But “could” is the keyword. Just as Apple transformed the music industry in the earlier part of this decade thanks to the iTunes/iPod combination, and the mobile industry thanks to the iPhone, a device that offered all the television content over the Internet could force the cable companies to stop sucking. Of course, Apple already offers a ton of television content over iTunes, but there are a few big problems. First and foremost, you have to buy all of this content. I don’t know about you, but I have no desire to buy 99% of the television shows I watch. I would much rather pay a fraction of the purchase cost to “rent” them, as it were, for a time being. iTunes currently has no such option — it’s all or nothing.

And buying this content has another very real downside: You need enough storage space to keep it all. Seeing as some HD TV show seasons are 50 GB in size, this is an untenable model until Apple moves iTunes to the cloud (which it will do, eventually).

Another problem for Apple is that the Apple TV device has not yet proven to be a hit. But this is just as much Apple’s fault as anyone else’s. No less than Steve Jobs has said time and time again that the Apple TV remains a “hobby” and the “fourth leg” of a stool that doesn’t yet need a fourth leg. Apple could have done a number of things to help the Apple TV, such as opening it up to the Internet for use with Hulu and other services. But it hasn’t done that, instead opting to use it to move iTunes content. And it’s actually quite good at that, provided iTunes has what you’re looking for and again, you don’t mind paying for TV shows. A recent firmware update to the device, also made the UI much more usable for scanning a lot of content.

But the Apple TV, which sells for $229, could be a hit in a hurry if Apple offered its own television subscription service that allowed you to bypass the cable companies. Just think about it: Most people pay in excess of $50 a month (and some much more) to the cable companies. For what? Mostly for a bunch of crap they don’t want and will never watch (nor would they even have time to). The problem is that the cable companies have refused to move towards an a-la-carte offering, even though there is a clear demand for it. (It’s partially the TV networks' fault too since they like to package their cable channels when giving them to the cable companies.) Apple could do that. And I would bet that is the plan. They may have to start out small with just one or two networks, but if it’s proven to work, eventually they would get more on board and people could start canceling their rip-off cable packages.

I did it myself last year. I cancelled all but the most basic cable and just used my Apple TV and things like Hulu to get all my content. It was much easier than I imagined it would be. Did I miss cable? Not one bit.

But I realize that not everyone is ready for that yet. But that’s why Apple’s role is crucial here. They have a proven track record of taking new ideas and technologies that seem complicated for the average consumer and making them appealing.

The networks are likely to play hardball with Apple though. They’ve all seen what happened to their brethren in the music industry when Apple came on board (they got bullied, but possibly also saved). According to the WSJ report, Apple’s proposal to the TV industry has already changed several times. One deal is said to be a $30-a-month package to consumers that would be a “best of television” package that included several shows from several networks, and more importantly, no commercials, according to the report. Not surprisingly, not everyone liked that idea.

Another part of the report has Apple paying $2 to $4 a month to the major networks per monthly subscriber, and $1 to $2 for a cable subscriber. This is more than a lot of these guys get from their current distribution deals. But Apple would also likely put costs on top of that so they make money too — though it might not be all that much. Remember, Apple doesn’t make that much money from iTunes, instead it’s a driver of iPod sales, and now iPhone sales. The same could be true with this model and the Apple TV.

While everyone is busy focusing on Apple’s tablet device, this could actually be the hot thing to watch for from Apple in early 2010. The report says Apple was hoping to launch this service in March, but that could be delayed, obviously, as the networks fight about why they should or shouldn’t join this venture.

There are at least a dozen headaches Apple would likely have to deal with to get the TV networks on board with this, but Apple’s close ties to Disney (which counts Steve Jobs as its largest shareholder) could help. While it may be just a pipe dream for now, I, for one, hope they’re able to blow up the cable industry. For too long we’ve put up with their sub-par service, their crap hardware, and their rip-off offerings. A change of the channel would do us all good.

[photo: flickr/rickremington]

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