Nearly a month after its much-debated acquisition of Time Warner Cable, Comcast (CMCSA 3.20%) may be angling to shake things up further. According to the Wall Street Journal, the media infrastructure giant recently entered into talks with Apple (AAPL +2.08%) to change the way cable TV is delivered to customers.
Looking into a new application style system, the potential partnership could lead to the development of an Apple-branded mobile application in a manner similar (but not identical) to Comcast's current video-on-demand services. Given that the potential system would not be broadband-based, it could allow Apple to stream without being concerned about hiccuping media.
On the face of it, Apple benefits far more than Comcast. Although Comcast gains a strategic partnership with a company with an undeniable presence in the smart phone market (and a strong one at that), the company has been in mobile telecommunications since 1988.
Apple, on the other hand, gains access to an established player in cable broadcasting and new potential revenue streams. The company currently has its Apple TV product out on the market, but with the bulk of TV being watched offline (as opposed to Internet-based services such as Netflix and iTunes), a partnership with Comcast will allow a broader audience to access material.
Such an agreement is not untrod ground for Comcast. Last month Comcast and Netflix reached an agreement under which Comcast would guarantee that Netflix material would stream more quickly than other, comparable material.
Hiccups to a deal
Before investors run to their brokers, let's be clear: the companies are far from a concrete arrangement. With leadership in both companies scared of a bad deal, negotiations will likely take a long time before anything is finalized. Comcast's new relationship with Netflix will likely further complicate the situation as Apple will be looking to expand into newly "marked" territory.
The fallout from the Time Warner acquisition may also slow negotiations as the business community is waiting for a ruling on the legality of the purchase. (There are concerns that a large Comcast will become increasingly less accountable to consumers.) Despite assurances to the contrary, the company's ability to successfully influence events in the political arena have created a unique (and, due to Comcast's 33% market share, unstable) business climate that may lead to the sale being labelled illegal.
If this occurs, Apple may chose to avoid association with Comcast, and negotiate with other service providers including Time Warner Cable. (The Comcast-acquired company was approached by Apple several months ago and were in the process of negotiations at the time of the sale.) Then again, this may not be a stumbling block.
A long-term marriage?
There is something that has been overlooked about this potential deal: if made, would it last? As mentioned, Comcast already controls a great deal of media delivery infrastructure, materials that Apple seems keen to access. But with younger generations becoming more selective about the media watched (hence the success of programs like Netflix), it is possible that a momentary union with Apple may slowly make Comcast irrelevant in a time of so-called cable "cord-cutting."
There is a measure of safety for Comcast however. Although people are increasing the amount of targeted media being watched (that is, they are able to select exactly what is viewed instead of channel surfing), there is one area that Apple has not yet touched: sports. While Apple has a sports-tracking app in its iTunes store, it does not have any interests in developing content in this area, leaving an extremely vibrant customer base available to Comcast alone (as opposed to potentially shared with Apple).
What now?
It does seem that a potential deal will be contingent on the sale ruling. If legal, Apple's potential partnership could pay large dividends as the company expands into newer territory. Comcast could certainly benefit from revenues generated by a distribution deal with Apple, and this could certainly change the fashion by which media is delivered to the consumer.
If illegal, things are far more murky, and, probably, impossibly complicated. With spokespersons for both firms staying tight-lipped, it may be best for everyone to wait things out a little while longer.
