Apple needs to provide content to users of its rumored television set but how they plan on doing that remains unknown for the most part. Recently, one Wall Street firm sees four potential ways Apple could approach one of its largest hurdles in bringing a connected television to market. The most likely option seems to be a partnership with existing cable providers.
Peter Misek of Jefferies & Co. presented what he called his “what if” analyses related to content on the so-called “iTV” in a note to investors on Monday. He sees the most likely scenario being Apple gaining access to non-exclusive content for its television set and forge deals with existing cable providers. By potentially partnering with carriers and cable operators, Apple can possibly enter the market on a level playing field with everyone else in terms of content. With access to a variety of content through existing providers, along with content already available on the iTunes Store, Misek believes Apple can package everything with a “superior ser interface and ecosystem” and beat out the competition.
According to Misek, the “partnerships with carriers and MSOs are possible whereby they provide the video content, as they already have deals in place (at least to sell video over their own pipes), whereas Apple has to negotiate for new over-the-top distribution rights.”
The most likely options for partnerships seems to be with AT&T, Bell and Rogers, and Verizon combined with the existing iTunes Store. Three other directions Apple could take according to Misek would include simply seeding content much like what Google does with its YouTube Original Channels. In this scenario, Misek thinks Apple could possibly select about 100 groups to create channels and provide upfront financing in exchange for a year of exclusivity. Given Apple’s current weight in the entertainment industry with the iTunes Store, it’s believed that the company can target mainstream TV shows and movies with this method.
In another option, Misek said Apple could buy access to exclusive content, much like Netflix has done for the “House of Cards” program, and DirecTV has done with its exclusive “NFL Sunday Ticket” package. With “headline deals,” such as s a rumored bid on the English Premier League rights, he thinks Apple could possibly gain some traction if they pursue this option. Exclusive content deals for an Apple television could open up the company to scrutiny from the government though as antitrust concerns would arise and limit exclusive content options for Apple.
Misek’s final possible scenario was that Apple could become a Hollywood studio and produce its own content but according to the analyst, this has lower margins and higher risks that Apple is likely to stay away from.
According to Misek, one of the main reason Apple wants to enter the television market is primarily to bolster the company’s “halo effect,” in which consumers buy into the Apple ecosystem and purchase its other products. He doesn’t believe that an iTV with subscription revenue along with gross margins on the sale of HDTVs would have much of an impact on the company’s bottom line.
Source: LA Times