TV Braces for the Apple Tablet

Will Apple's new device be a game-changer for the TV business?

By Claire Atkinson and Alex Weprin -- Broadcasting & Cable, 1/26/2010 7:21:22 PM

Newspaper and magazine executives aren't the only ones buzzing about what Apple may have in store for them Jan. 27, when the company unveils its new media device tentatively known as the Tablet. Television executives, too, are pondering how yet another "over-the-top" platform for TV watching could change the dynamics of their business models.

While the details are still speculative until today's press conference at 1 p.m., the Tablet is expected to be an elegant large-screen device with applications like Apple's iTunes and the ability to act as both a text reader and video player. For TV industry watchers, however, the big questions concern the device's potential to disrupt both traditional TV distribution models and the recent disruptors challenging it.

TV in the Cloud


But more recent reports that the company is looking to change its pricing of TV programs on iTunes have signaled a potential challenge to video streaming players like Hulu.

The Apple TV device, unveiled in 2007, already connects consumers TV sets to the iTunes library of pay-per-download programs. But reports that Apple is talking to content providers about lowering the price from $1.99- to 99 cents-per-show-beyond illustrating yet again the company's desire to force the entertainment industry to accept its model for online transactions-have played into speculation that the company wants to go head-to-head with YouTube and Hulu with a paid streaming service that could include live TV. (Hulu, a joint venture among NBC Universal, News Corp. and Disney, plans to announce subscription offerings this year.)

Apple's acquisition of streaming-media site Lala has added to this speculation and the prospect of an "iTunes in the cloud," which would enable users to store purchased programs on Apple's servers rather than their own hard drives. That, in turn, would allow users to pull down content via a variety of devices-be it a MacBook, iPhone or Tablet-whenever they want to view a program.

An Opportunity and a Threat

Noting that most of what's been written about the Tablet is still speculation, Craig Woerz, managing partner at interactive ad agency, MediaStorm, said, "Like [Amazon's e-reader] the Kindle, this thing will change and revolutionize the print business. But it could also bring the TV business and iTunes to a larger screen opportunity."

Added Woerz: "The people I talk to look at every product that comes out, and ask if it might further fragment the landscape. With every technological evolution there is always an opportunity and a threat. What is the real implication today? Can this device make it more appealing to sample my content via a 10" screen versus a 3" screen, and can this bring HD on the small screen?" 

Media companies may also be waiting to see how the device takes off and wonder whether it's really going to fill a need. Digital marketing expert Ian Schafer, CEO of ad agency Deep Focus, said: "In order for this to work for content companies, it needs to scale first. No one has seen major scale that can compete with TV and that's always going to give TV the seat at the head of the table. Eventually though, that rectangular table will look a little more round."

One Time Warner insider suggested that the company was excited about the prospect of the new device. Warner Bros. already has a deal with Apple to provide content to iTunes and could be considering expanding that to cover the new device. "People gravitate to the most popular brands, and big brands help you attract the talent, reinvest in programming, bigger brands, bigger hits," said the executive. "This could potentially fit in to what we're working on in the digital home entertainment side of things."

What content providers will have to sort through are all the issues they've already been grappling with in terms of new platforms. The executive wondered what the windows would look like and what the pricing might be. HBO, for instance, was the first company that got Apple to accept variable pricing terms for its content on iTunes. And no one in the TV business wants to give up control of their own brands or have someone else decide how it's paid for.

"Apple is trying to reduce the cost on iTunes," said Dominic Caristi, associate professor of telecommunications at Ball State University. "If they can make Desperate Housewives available for 99 cents, that's what people are used to paying for RedBox rentals. I do think a smaller unit price would see more sales."

However, Caristi added a note of skepticism: "I don't see it as that big a shift from what we're already doing. What is Verizon Vcast doing? An Apple Tablet might be bigger, don't see it as big changer."

The whiz-bangs and widgets will also help define the extent to which the Tablet becomes a game changer. "I think this has as much to do with portable computing as it does with portable streaming," added Schafer, "If it comes with built in Wi-Fi and 3G capabilities that's very important for the commerce of content."

Chris Allen, VP and video innovation director for Starcom, wondered how Apple's purchase of mobile advertising firm Quattro might also play into Apple's ambitions to move into the advertising supported content business.

"That move was totally out of left field," said Allen. "It suggests they're looking for some way to tie everything together, to create an ad network, or to promote their own products through Quattro."

While Allen says marketers are always excited about what Apple is bringing to market, there was guarded anticipation, "They're very much about controlling their brand and how others ride that halo.

"Personally," he added, "I can't wait."