Once again, talking about Apple’s future as a multichannel video distributor is all the rage. But people familiar with the discussions between Apple (NSDQ: AAPL) and video programmers over a possible subscription package say the talk is far ahead of the action, one reason why details are still murky. If the subscription package could be pulled off with an announcement from a single player, I have no doubt Disney (NYSE: DIS), which isn’t commenting about this but multiple sources tell me is open to the idea, would be first in line.
Not because Apple CEO Steve Jobs is a major shareholder in Disney but because Disney liked the publicity — and the results — from being first in the iTunes store with prime-time episode sales and movies. And because Disney CEO Bob Iger is a pragmatic experimenter, open to finding new ways to make money from programming but careful to avoid destroying core value. That’s why you don’t see ESPN full programming offered in a way that might damage its high value to multichannel distributors.
This time, Disney alone isn’t enough for the kind of subscription package Apple wants to offer. Neither is a package of shows from Disney and CBS (NYSE: CBS), also confirmed by us and others as interested in the idea. (Obligatory insurance policy: Enough aspects and programmers could come together to form the basis for an announcement more quickly than anyone expects. After all, this is Apple.)
The conversations have been going on for months, following not too coincidentally the trials of TV Everywhere services with Comcast (NSDQ: CMCSA) and *Time Warner* Cable. The recent Fancast Xfinity roll out to nearly 15 million Comcast households is centered on streaming, not downloads, but it is a reminder that Apple has increased competition on the video front — especially when it comes to households that already pay for multichannel video whether via cable, satellite or telecom.
The talks dovetailed with negotiations between Comcast and GE to form an NBC Universal (NYSE: GE) joint venture with the cable operator owning 51 percent. Some suggest that deal, announced earlier this month, makes NBC a less likely participant. Actually, it could wind up putting Apple in a better position to get access to NBC — and Comcast — programming eventually. That’s because the Federal Communications Commission will be looking at ways the deal might cause issues with access to programming distributed on broadband and could impose conditions that include availability to online multichannel distributors.
What might an Apple TV subscription look like to start? Check out what’s already for sale on iTunes, where single episodes and full seasons of many broadcast and cable shows and you get a clue, one source told me. Apple already sells a modified version of a subscription called the season pass; pay in advance and get episodes as they hit the store. Under the plans being discussed now, for a set monthly fee — $30 is the figure that comes up most — subscribers would have access to a programming library with a mix of choices. from a variety of programmers. Disney, for instance, might include ABC, ABC Family and the Disney Channel. CBS would put in CBS and sonme shows from the CW, but not premium network Showtime. One unclear aspect for now: whether subscribers would be able to customize packages — family, adult, drama, comedy or other variations. According to the Wall Street Journal, which first reported the interest of Disney and CBS, some versions have Apple licensing broadcast nets for $2 to $4 per sub per month and basic cable nets for $1 to $2 per sub per month. That’s considerably higher than most of the fully distributed basics get — and more than broadcast nets would get from retransmission. But it’s also for a much smaller pool of subs to start and could raise issues with current licensees. Put another way, you don’t see pure cable programmers even hinting at an interest in this project. I have no doubt that some will be there when the time comes but they aren’t eager to play the role of lightening rod.
Would it be the cable killer so many assume is on the way? See above. Consumers dreaming of a cable killer are looking for a la carte or a programming palette that can be customized and will deliver for a lower cost than basic cable or deliver more of what they want for the same. They’re going to expect a lot for $30 — and a lot of choice. The initial likely targets are people who already use iTunes, Apple hardware and have already opted for internet video over cable and other distributors. Disgruntled fill-in-the-blank subscribers may also hop on but it will take a while for even a minor dent in cable subs. In the near-time, Apple TV, or whatever it’s called, is going to take away more from new services like Roku and Boxee.