Report: Apple Pitches Cable Killer to Content Companies

Written by Ryan Lawler

Tuesday, November 3. 2009 at 11:55 AM EST 1 comment

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Apple Inc. (Nasdaq: AAPL) is reportedly pitching content owners on an over-the-top subscription TV service that could pit it against pay-TV offerings from cable and telco companies.

The planned subscription service, which would cost about $30 a month, would be delivered via iTunes, according to Peter Kafka at AllThingsD. Initial reports say that Apple would like to launch the service early next year, but the company still has plenty of hurdles to overcome before it would be able to do so.

The most significant challenge Apple could face is negotiating rights to the content required to make the service attractive to consumers. So far, despite discussions with a number of content owners, Kafka has yet to hear of one signing up for the service.

"The challenge they have is, 'Are they going to get decent content?'" says Andy Tarczon, founding partner at The Diffusion Group (TDG) . "Content is going to define [the offering]. Unless you have good content, there's no point."

Content companies -- particularly those that get paid subscription fees or retransmit fees from cable and IPTV operators -- may be loathe to offer their content to Apple for a service that would essentially compete with cable-TV offerings.

If any company signs up to offer its programming through an Apple subscription service, it may be Walt Disney Co. (NYSE: DIS). Kafka notes that Disney was the first major publisher to sell its video content on iTunes, and Apple boss Steve Jobs is the largest single shareholder in the company, after its acquisition of Pixar.

But even if it manages to get rights to worthwhile content, Apple will face competition on a number of fronts, including cable operators that are pitching their own online offerings.

Service providers such as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Verizon Communications Inc. (NYSE: VZ), and Time Warner Cable Inc. (NYSE: TWC) are trialing online video services with multiple content providers, seeking to offer on-demand content online as a part of their regular cable subscriptions.

Apple would also face competition from subscription services -- like Netflix Inc. 's "Watch Instantly" service -- and pay-per-view services from Amazon.com Inc. (Nasdaq: AMZN), VUDU Inc. , CinemaNow , and others.