Apple Inc. has been sitting or the fence when it comes entering our living rooms with a television solution. The problems involved have been huge hurdles to get over. Yesterday we were informed that Apple had been granted a patent for a television channel guide UI software. This got me thinking about which way Apple may be heading and the more I think about it the more I see Apple’s fingerprints all over the place. Follow me here , this could be the Game Changer we have all been looking for! Steve Jobs and Tim Cook have made their position clear, both have looked at the issue and realized that two problems exist, First problem is the Go to Market (reaching a nationwide audience). Second is untying the Gordian Knot entangled by content providers and cable companies. The dream of Television has been corrupted by this system. Television it seems has become a subsidiary of QVC. We have reached a dead-end as the result of the earlier blueprints followed by municipalities issuing monopolies to cable companies in geographic areas in return for doing the hard work of wiring neighborhoods, much like the electric and water utilities. This is how things were done back in the day. (topic for another day)
The Go to Market issue that Steve was referring to was the insurmountable logistics concerned with multiple cable suppliers using multiple devices in multi ways each using different set top and channel scrambling technology? It becomes impossible to build one set box that will work across all these cable providers and to do it profitably just ask Tivo. Lots of companies can and do produce boxes that occupy the number two and three spots like Roku , AppleTV or Google TV but the number two or three spots just doesn’t cut it. It is important to be the first spot because research and the market has shown that in order for market saturation that’s all consumers can put up with , they are gone when you ask them switch between inputs.
The content problem is a bit more complicated, individual regional cable companies have been negotiating with the various content providers for channel space and placement who then charge cable companies for each user, whether the users are watching their product or not. You may have noticed these public battles with content providers threatening to pull channels off a cable or satellite providers unless the cable company meets their fee, which in turn the cable company pass on to the consumers. Cable companies are forced to carry lesser quality channels to receive premium content from the content supplier. So lets say The Fox Networks contract with Cablevision expires in January, since Fox provides many channels they ask Cablevision to carry them all or Fox will pull their service from all of Cablevision making them vulnerable to Direct TV, Verizon or AT&T. Most of the time the Cable companies give in , pay the fee and pass the cost to the consumer or cut other services that might be better quality. The result is your television channel grid is full of networks you pay for but never watch. This system is broken. Cable companies are forced to spend money expanding infrastructure to increase channel capacity while trying to keep costs down under competition from satellite and IP suppliers like DirectTV, Dish, Verizon & AT&T. The result is we get thousands of channels with nothing on. I suspect that the aggravation and expenditures on the part of most cable companies are reaching the point of diminishing returns. The cable companies might very well wish to be freed up from these complicated content deals to deal with just providing the technology and building out the infrastructure and being paid for that.
As these problems sort themselves out, Apple has been playing it cool by ” pulling the strings” to see where they lead.
Yesterday we got to look at a patent award to Apple for a television UI, filed in 2006 , by the way, long before Steve claimed he had “cracked it” in his interview with Walter Isaacson. This probably is not what Steve was referring to but who knows, maybe it was and he just revealed it to Walter to insure he received proper credit for it.
The patent calls for Apple to provide a TiVo like device to the cable providers as a number one spot device with a familiar cable like guide UI and DVR capabilities to replace all the units offered by all the companies. Whether Apple is proposing to supply the companies directly, sell to the public directly or some combo like the mobile phone providers do by subsiding the box for a contract from the users. I believe that they will eventually license this software to the television manufacturers. (maybe not Samsung)
The difference here is that the service will be provided over the internet making use of the cable providers access to Broadband. Currently this is one of the sticking point for cord cutters , they must still rely on the cable providers for broadband who see a conflict and are not pricing their internet access only package competitively. The cable companies can then leave the content providers to offer their streaming service to the public directly by building apps and selling them. For instance HBO may provide an app subscription for $7.99 a month like Netflix does or they may offer an app for free for those that will not mind watching commercials. This becomes a game changer in two ways, one it frees the providers to compete on bandwidth by boosting their infrastructure and two, content will have to compete on quality and or desirability. No longer will we have one thousand channels with nothing on unless we want them. I can also see cable providers offering the current type of set-top box for those customers and content providers not willing to experiment, leaving the consumer a choice to either go with the current system or take the Apple box and try joining the wild west providing a win win solution for all.
Apple can make the difference , much the same way they worked with mobile phone network providers to change that dynamic by taking away the things that those providers do not do well freeing them up to do the things they do well. Apple can work the same solution here for the cable providers. Uncomplicated to overly complicated by setting the content providers to compete on content and cable providers to compete on speed and quality.
This is why I believe we see reports of Apple talking with cable providers much in the same way they did with mobile networks ,music companies and book publishers.
This is the game changer Apple and we could be waiting for. Only Apple is at the crossroads of science and art able to bring these parties together as they did with Macs and graphic artist and video production companies , with record companies ,music , iTunes & iPods, mobile phones and now next the biggest of them all , the mother of all media and art convergence Apple Television.
This is the very definition of Game Changing technology.