Apple IPTV Box: Potentially Sexy, Definitely Risky for MSOs

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What possible earthly reason would Time Warner Cable or any other operator have for teaming up with Apple — the company that cornered the market on digital music, and clearly has been trying its damndest to disrupt the TV and video entertainment ecosystem?

In a nutshell: Apple makes the sexiest tech on a planet.

The Cult of Apple has a massive following, and cable operators would absolutely love to have that sheen of coolness rub off on them (see Apple In Talks With TWC, Other MSOs On Cable Set-Top: Report and Apple Tries to Enter a Market It’s Taken TiVo 10-Plus Years to Crack).

But cable operators have to think with their heads, not their… hearts. The risks ultimately outweigh the rewards, at least for anything other than an arms-length integration that would provide TV programming to an Apple IP device — the same way pay-TV operators have started to do with Apple’s iPads, Microsoft Xbox, Samsung connected-TV devices, Android devices, PCs and others.

A close partnership between an MSO and Apple is unthinkable, according to VideoNuze analyst Will Richmond.

“The idea of cable operators helping escort Apple into the living room would be like letting the proverbial ‘fox into the hen house,’” he wrote in a blog. “Online viewing may be booming and tablets all the rage, but when it comes to the coveted living room, cable operators (and indeed the broader pay-TV industry) still reign.”

Sanford Bernstein analysts, in a research note Thursday, also identified this risk: “By embracing Apple, the MSOs would necessarily relinquish at least some control of the user interface and branding… and in doing so, they would be opening the door to a Trojan Horse strategy where Apple would increasingly usurp the customer relationship,” the analysts wrote. “Apple could later use that customer relationship leverage as a way to upend the economic sharing model of any initial agreement, precisely as they have done in wireless.”

To deliver a compelling, integrated TV experience — whether that’s through the current Apple TV set-top or some future all-in-one HDTV — Apple must provide access to current TV programming the way people are used to watching TV. The Cupertino crew couldn’t license TV shows from the networks (or wasn’t willing to pay enough) to do its own over-the-top service, as Intel is rumored to be doing.

So now Apple’s hoping MSOs will bite on its pitch to facilitate its whole-TV vision. At this point, though, maybe Apple needs cable more than the other way around.

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Programming Note: Get a read on the future of multiscreen TV at our two events next month — TV’s Cloud Power, Sept. 13 in New York City; and the Next TV Summit, Sept. 20 in San Francisco.

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