Elgan: How Apple will kill cable TV

Apple is going to do to your cable TV box what it did to the audio CD: Make it go away

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Recent changes to iOS and Apple TV enable TV shows to be stored in the "cloud" for watching later on any Apple device that starts with the letter "i." This is not so much a technology triumph as it is a negotiating win, because Apple convinced TV studios to allow not only storage of TV shows, but also the viewing of them on any device.

In order to kill cable, Apple needs more leverage to persuade TV studios to make deals. Apple must convince studios that it's more important to make Apple happy than it is to avoid angering cable TV companies.

One source of leverage is already apparent: As more people watch TV on iPads and iPhones, as well as via Apple TV, Apple gains a stronger negotiating position. Apple iPod Touch, iPhone and iPad devices all have icons in the video applications to send the video to another device. As people get used to this setup, and as they increasingly use Apple hardware to watch TV, Apple gains clout in comparison to the cable companies.

Apple is rumored to be working on a physical TV set with Apple TV built in. This would help, too.

But the biggest play could be the one the Journal sources mentioned: new technology for streaming TV, and a new subscription service.

If Apple can offer subscriptions to shows or even entire networks for a reasonable monthly fee, a lot of users would be happy to bypass cable TV altogether. This is especially true if rights holders can bundle programming, including reruns.

If the shows are up to date and offer new technology for swapping ads or localizing commercials, then the revenue models of TV networks wouldn't even have to change much.

At first, only a minority of TV watchers would be willing to dump cable in place of Apple's subscription service. But that minority would be a killer demographic -- most likely better educated, wealthier people who could be served premium advertising in addition to generating actual revenue for subscriptions.

Because the experience of using Apple in place of a cable TV service would be vastly superior -- especially the on-screen user interface and even the remote -- and would include cloud storage, multidevice support and other benefits that cable operators could never match, everyday TV watchers would gravitate in Apple's direction.

This scenario would be a repeat of what Apple did with music. At first, just like the music industry did, Hollywood will resist the change. However, some of the biggest users of the Apple service will be Hollywood people (if you've ever hung out with TV and movie people, you soon realize that most of them are hardcore Apple fanboys). TV executives will realize that the existing cable TV model is obsolete, outdated and broken beyond repair. The final stage will happen when networks realize that they simply cannot succeed without being on iTunes.

Because of Apple's killer strategy for fixing broken content consumption with pretty Apple hardware and easy Apple services, Apple now gets the lion's share of revenues for the delivery of downloadable music, mobile apps, tablet-based magazines and many other content types. And now it wants to deliver TV shows.

Can Apple really kill the cable box like it killed the music CD? I think it can, and I think it will.

Correction This column has been changed since it was originally posted to correct that Apple's profits were twice as high as those of all other phone makers combined. It originally referred to Apple's revenues.

Mike Elgan writes about technology and tech culture. Contact and learn more about Mike at Elgan.com, or subscribe to his free e-mail newsletter, Mike's List.

Copyright © 2011 IDG Communications, Inc.

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