TV Braces for the Apple Tablet

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

Reports of Apple's recent talks with CBS, Disney and other
content companies have already fueled speculation about plans to launch a "best
of TV" subscription service. An Apple pay-TV service, potentially featuring
broadcast programming, would pose a dramatic challenge to incumbent providers
and could upend the economics of program carriage. (See related: "What Would An Apple Pay TV Service Look Like?")

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."

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