Apple Takes One More Step Into Your Living Room

In a move that's long overdue, Bloomberg reports that Apple (Nasdaq: AAPL) is getting into digital rentals of television show episodes.

Apple is reportedly in advanced talks with News Corp.'s (NYSE: NWS) Fox and other major networks, aiming to offer 48-hour rentals of previously aired episodes for $0.99 a pop.

Apple already offers digital rentals for theatrical releases. It's been doing so for more than two years. Why did it take this long for Apple to take the evolutionary step into offering piecemeal episodes on a temporary yet commercial-free basis? There are two reasonable explanations.

• Price points matter. Apple sells new full-length flicks for $15 (or $20 when available in HD). Rentals at $4 make competitive sense. However, it's already selling episodes for $2 (or $3 when available in HD). Rentals had to be at the $0.99 price point, even though they are chunkier data files than similarly priced music tracks.
• Freely available streams are common through Hulu and even many of the network sites. When Apple rolled out its iPad earlier this year, it's no surprise that the two most popular third-party applications were Disney's (NYSE: DIS) ABC Viewer and Netflix (Nasdaq: NFLX).

Why now? Well, if the rumor mills are on the mark -- and Apple is readying an iOS-based Apple TV set-top box at a competitive $99 price point -- it may as well make give couch potatoes the cheaper temporary programming that they covet. Since Google (Nasdaq: GOOG) is also lining up heavy hitters to make its own fall splash in this space, Apple can't take any chances. It needs to be the video jack of all trades.

Consumer familiarity with the iOS platform that's already in play in iPads, iPhones, and iPod touch devices will help, but it's going to take more than that since folks obviously aren't going to be tapping and pinching their television monitors to navigate through their home theater setups.

The availability of $0.99 digital rentals is going to make it harder for cable, telco, and satellite television providers. The pay television industry recently suffered its first quarterly decline in subscribers. Now Apple steps in with another reason to cut the cord on those $100 cable bills.

Buried deep in the current "Web is dead" issued of Wired -- on page 142, for those digging at home -- Erin Biba breaks down the cost of a traditional cable package through Comcast (Nasdaq: CMCSA) and satellite television through DirecTV (NYSE: DTV) relative to a digital alternative fed by Hulu Plus, Netflix, a digital antenna for over-the-air local channels, and a $1.99 nightly allotment for Apple TV episodes. By the second year, the digital alternative is less than half of the Comcast Digital Premier Package -- and now that's about to get cheaper if Apple slashes episodes in half as rentals.

The winds of change are blowing, even if I think Apple has an uphill battle competing against free ad-supported streams.

Are you planning on getting an Apple TV or Google TV box this year? Share your thoughts in the comment box below.