Time Is Running Out on Apple's iTV

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It's really just a matter of time before Apple (NASDAQ: AAPL  ) introduces its own smart television, but the world's most valuable tech company may find the living room to be a bit crowded when it arrives.

Several companies have been introducing new services or jockeying for position to redefine the TV viewing experience.

Let's not pretend that Apple's full-blown HDTV will be about raising the bar on hardware or even software. We would've had the ballyhooed iTV by now if it was just a matter of shipping a super-sized iOS gadget where a touchscreen serves as its remote.

Apple could've done this while Steve Jobs was still alive, and even he told his biographer that Apple had cracked the code when it comes to TV.

The only possible hang up here has to be on the licensing end. Web-tethered high-def TVs have been on the market for years, but the one thing missing is a platform where consumers -- instead of paying more than $100 a month for a boatload of channels that they never watch through cable and satellite television providers -- can actually save money by cherry-picking the content and channels that they actually watch.

Piecemeal TV
Apple is going to want to launch a revolutionary programming service.

It's too easy to simply duplicate what's already out there. Earlier this month it was Intel (NASDAQ: INTC  ) -- yes, Intel -- that became the latest company to announce plans to introduce a Web-based television service.

Intel's media chief Erik Huggers revealed during this month's AllThingsD media conference that Intel will roll out a set-top box and a service that will distribute live TV, streams of earlier episodes, and other online services.

However, even Intel isn't ready to cut the cord completely.

"I don't believe the industry is ready for pure a la carte," Huggers conceded, indicating that Intel will also offer bundled channels. It's hoping to package the bundles more effectively, but once again it means that another TV service thinks you want to pay up for a buffet of largely inedible food.

Cable TV to the rescue
A surprising development is taking place this week as Cablevision (UNKNOWN: CVC.DL  ) moved to sue Viacom (NASDAQ: VIA  ) for allegedly forcing it to carry a bunch of poorly viewed channels if the cable giant wanted carriage rights for MTV, Nickelodeon, and Comedy Central.

Cablevision has to know what it's doing here. It's opening up a can of worms that may very well result in lower rates being charged to its consumers.

Why should someone wanting Comedy Central have to pay for VH1 Classic or MTV hits? Why should folks pay for both Fox News and MSNBC when their political leanings may mean watching one and avoiding the other?

Hey, I have Internet. Can I please get rid of CNN and Headline News now?

Cablevision may not realize this, but if it wins this case it may be what ultimately tears down its very industry. Just as consumers tired of buying PCs loaded with unnecessary pre-installed programs, the public is tired of paying for what they don't need.

Cable TV is bloatware. Consumers deserve better.

Apple's golden opportunity
My youngest son is now a teen. Why must I still pay for Nick Jr.? No offense to the many country music fans, but no one in my family has ever watched a lick of CMT.

Letting cable networks expand their properties -- and letting them get away with forcing cable and satellite television providers to carry them as bundles -- is a disservice to the customers that ultimately pay the tab.

Apple has made a living off of piecemeal models. It sells music and video by the piece. It will be a major beneficiary when the wall comes down -- and it will.

The only digital video smorgasbord that works these days is Netflix, but that's only because it's priced at a reasonable $7.99 a month and it's not tethered to cable contracts.

Apple has all the right ingredients to be the one to lead the piecemeal video revolution. It has the consumer appeal. It has the relationships with movie and TV studios through iTunes. It has a history of stylish and bar-raising hardware and software to bring it all together.

However, Apple can't stay on the sidelines here. It needs to be a vocal disruptor. It needs to telegraph what it wants to do now -- as the pay TV market is finally starting to crack -- instead of hoping that it can be quick enough to respond once somebody else succeeds.

There will be resistance. The music industry resisted iTunes in 2003, too. However, if the cause is right -- and Apple's cause will be -- it needs to be the one to lead the charge before another consumer tech darling plants the flag.

It's primetime for Apple. This better not be a rerun.

Watch closer
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 27, 2013, at 8:18 PM, RipRagge wrote:

    Well, Rick, once again I completely disagree with your conclusion. Your reasoning makes a kind of sense, but Apple is utterly unpredictable. The idea that they'd release a big screen iPad with an iPod Touch for a remote is a predictable call that they won't go near.

    I suspect Apple is reinventing TV under the radar right now. The AppleTV is gradually letting people cherry pick what they want to watch already. Apple is cherry-picking content and providers. All they really need is enough ala carte content to reach a tipping point. That's still a tall order, and it won't attend the unveiling, but in time (like the iTunes store) it will come.

    What are those big data centers in Carolina, Oregon, and Texas all about? Family photos? Apple has a long vision that they aren't explaining.

    Go back to the introduction of the iTunes store for reference. They had only a couple of labels on board. The iTunes store was considered a joke, then. How about the App store? In the beginning, there were no 3rd party apps. "Build web apps," Mr. Jobs said.

    Apple won't wait until all the conditions are perfect, and when (if) they launch a full-blown hardware TV, it will be initially scoffed at and ridiculed. By the time anyone realizes it's the new standard Apple will have redefined another industry.

    The pattern has repeated several times since 1997: iPod, iTunes store, iPhone, App Store, and iPad. That isn't to say Apple never stumbles in the post-Amelio era (dotmac, mobileme), but pattern recognition isn't that hard and their stumbles are rare.

    FD: I'm long AAPL, and have been since 1999.

  • Report this Comment On February 27, 2013, at 9:43 PM, rlhoman wrote:

    Since the hardware has been available for years, we can only assume they have run into a stone wall in getting the producers of the programs to give away the store. No one wants to be the killer of the golden goose, unless they are very well paid to do so. And Apple has never been known as a benefactor of anyone other than Apple.

  • Report this Comment On February 27, 2013, at 10:01 PM, ITnut wrote:

    I agre with your analysis. What I don't get is why is Apple not using its mountain of cash to go acquire the content it needs to negotiate with the content owners on equal footing.

    After the Pixar acquisition, I gave Apple 5 years to make a run for the whole of Disney. Boy, I wonder who controls Steve's Disney shares right now :-)

    In all seriousness, Apple must consider spending big money to acquire a studio. Their philosophy of controlling software and hardware has a major hole in it: people will eventually copy both (evidence 1 and 2: Google and Samsung). Making a knockoff of a Pixar movie is much harder.

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