Apple Pitches Set-Top-Box Partnership to Cable Operators (Report)

Apple Logo Black - H 2012

Apple Logo Black - H 2012

The tech giant may not look to compete with pay TV giants near-term, but the longer-term risk is that Apple could "create a direct relationship with consumers," one analyst warns.

Apple has held talks with big U.S. cable operators, including Time Warner Cable, about letting pay TV subscribers use an Apple device as a set-top box for live television and other content, the Wall Street Journal reported.

It said Apple CEO Tim Cook met with TW Cable CEO Glenn Britt during last month's Allen & Co. media mogul gathering in Sun Valley, Idaho to discuss the idea.

The discussions mark Apple's latest attempt to create a foothold in consumers' living rooms and play a bigger role in the TV industry. Instead of looking to license content from entertainment companies and compete with pay TV players, it seems now focused on partnering with established providers.

An Apple spokesman declined to comment on what he called rumors and speculation, the Journal said.

The paper said Apple doesn't appear to have reached a deal with any cable companies so far amid pay TV firms' reluctance to let the tech powerhouse .

Other hurdles include getting consumers to pay for set-top-boxes and getting able operators to agree to terms they can live with. Apple in the past demanded a 30 percent cut on certain transactions going through its devices, the Journal said.

However, cable operators could save money they currently spend on set-top boxes if they partner with Apple, it said. Plus, they could offer online video through the same device.

The new Apple approach to the TV business is mindful of its strategy in the mobile phone industry where it is also working with existing service providers that use its hardware and software.

Before his death, Apple founder Steve Jobs argued against the approach of teaming with cable firms, according to the Journal. He emphasized that they only have regional reach and that entertainment companies own most of the content people want to watch.

"In the near term, we view the news as positive for cable operators, as it could indicate that at this point, Apple may not be trying to work beyond the current pay TV value chain, as it develops video-based consumer devices," Credit Suisse analyst Stefan Anninger said in a report Thursday. "As such, Apple may not be on the verge of launching a strategy or technology that is highly disruptive to the current multichannel video content-distribution ecosystem; perhaps because Apple has found it difficult to do so."

In other words, "the traditional pay TV bundle may be more change-resistant than some of us, and Silicon Valley, had expected," he said.

Anninger also explained: "Cable may view a relationship with Apple as a way to avoid disintermediation by practicing the mantra of 'keep your friends close, but your enemies closer'."

But he also cautioned that cable firms must remain cautious.

"Cable should proceed with caution," Anninger said. "The longer-term risk for cable is that a deal with Apple could allow Apple to create a direct relationship with consumers. Over time, these relationships could blossom to the point that that Apple may have enough clout and scale to “go direct” with content providers and consumers, leaving cable’s video business to suffer."


Twitter: @georgszalai