Apple is drumming up interest for a plan to launch an Internet TV subscription service. CBS and Walt Disney may participate in the move to compete with satellite and cable-television operators, according to a report in The Wall Street Journal.
Published reports indicate Apple is working to organize a subscription service that would offer consumers programming from television networks for a monthly fee similar to what customers are used to paying for cable. Apple reportedly plans to launch the service in 2010 once it strikes licensing deals with content providers.
Apple already sells individual television shows on its iTunes Store, but a full-fledged subscription service would put the iPod maker head-to-head with the likes of Comcast and DIRECTV. A subscription service would give users of Apple's rumored tablet computer something to watch on a screen larger than an iPod but smaller than a laptop.
Apple may be hoping to tap into what Adams Media Research pegs as $1.14 billion in spending on Internet movies and television shows in 2010. Published reports indicate consumers could pay as much as $30 a month for the service, while Apple pays between $1 and $4 a month to the various content holders.
Apple's Impact on TV
How big of an impact could an Apple TV subscription service make on the cable and Internet television industry? It could be enormous, according to Rob Enderle, principal analyst at the Enderle Group.
"This could establish an advertising-free subscription model that represents the next big move of television. When cable emerged many years ago, we certainly saw cable channels that were distinct from the commercial channels," Enderle said. "Apple could offer programming from both traditional television and cable sources advertising-free and on-demand. It could quite literally bypass cable and move us into the next phase of television."
Although Hulu.com has been discussing the possibility of a subscription service in recent months, the site has yet to make a move. Hulu is partially owned by NBC Universal, News Corp., and The Walt Disney Company. But Apple may be able to strike deals with these and other mega-entertainment groups as it already has with iTunes to provide a unique offering.
Will Consumers Pay?
The bigger question may be whether consumers will pay for a subscription service with so many free options available on the Internet -- and with the likelihood that they are already paying a monthly cable or satellite television bill. But Enderle is among the analysts who believe customers may be willing to pay in exchange for avoiding advertising.
"Right now, many consumers are fast-forwarding through the advertising anyway. Apple is trying to find a way to get people to actually pay for the programming. They could figure out a way to make it work," Enderle said.
"I remember when cable first came out, the argument was that people wouldn't pay for stuff they get for free," he said. "Lo and behold, every cable subscriber is paying for stuff they get for free on a regular basis. So it shows that with the right offering you can actually make this work, and Apple is going to explore it."