M+E Daily

By Paul Sweeting

The technology press and Wall Street analysts who follow Apple have built a thriving cottage industry out of speculating on the timing and features of what they’re certain will be Apple’s imminent takeover of the TV business. Some, such as Piper Jaffray analyst Gene Munster, remain focused on an Apple TV set, while others offer more of an ecosystem-focused spin.

All should be taken with more than a grain of salt, since actual evidence of Apple’s plans are — typically for Apple — scarce. One new deep dive into Apple TV speculation is worth a read, however. In a long piece on AllThingsD today, Brightcove chairman and CEO Jeremy Allaire speculates about a possible new Apple TV device (and possible TV set) for Christmas 2013.

The actual timing and hardware details of such a rollout are not really important to Allaire’s argument. What makes it worth reading is his discussion of the two pillars of Apple’s likely strategy, which I find persuasive.

The first pillar is that Apple is likely to follow a TV script similar to its initial move into mobile phones:

With the iPhone, Apple created a simple “phone” application on top of existing telephony carrier infrastructure, improving the consumer’s user experience and creating an additional product sales opportunity for carriers. The company will take a similar approach to existing broadcast cable TV and, in so doing, put one or two major U.S. cable operators in the same privileged position that AT&T enjoyed following the iPhone launch. Around the world, cable TV distributors will battle for national sales and marketing rights for the Apple TV [snip].

Cable companies may initially resist supporting this offering, viewing their ability to cross-promote offerings in their guide and VOD menus, and the customer relationship in general, as their provenance. This would be as misguided as the mobile carriers were who thought they could control and customize the home screens, operating systems and bundled apps of mobile phones as a strategic advantage. Smart operators will understand their role as broadband and infrastructure providers, and will continue — for now — to be the primary packagers of broadcast content with its lucrative tolls for subscription programming. For all of the hope that Apple would help to blow up existing cable packaging, for now, the company’s priority is to navigate and establish global partnerships with multi-system operators (MSOs) and multi-channel video programming distributors (MVPDs) to sell their new TV and TV companion devices.

My only quibble would be over how exclusive Apple will make the new devices to a particular cable operator. Unlike mobile phones, where a single carrier like AT&T could provide Apple with national scale, cable TV service is a patchwork due to geographically limited franchises. While exclusivity might be necessary initially to get operator buy-in, Apple will need to structure that exclusivity carefully (i.e. loosely) to ensure it can achieve national scale quickly.

Allaire’s broader point, however, is well-taken. Having been stiff-armed in its direct discussions with the networks about assembling its own subscription or a la carte package of channels, Apple’s best strategy is to focus on building its own user experience atop existing pay-TV services. Apple in fact appears to be well along in those discussions with cable operators.

Allaire’s other focus is on gaming, where he sees a critical opening for Apple.

Apple’s iOS is already the world’s most important gaming platform in terms of new game content creation and the velocity and scale of consumer usage. With new gaming-friendly APIs for controllers and user input, complemented with local CPU, graphics and storage horsepower on the device itself, the new Apple TV is a deeply significant threat to Nintendo, Sony and Microsoft in the console market [snip].

Some have argued that Apple and iOS aren’t for hardcore gamers — but tell that to the teenage boys playing Assassin’s Creed and Call of Duty on their iPhones and iPads. By owning the TV run-time, Apple TV will provide amazing development opportunities for the technical and creative elite and will bring a flood of innovative content creation from major game studios.

Allaire may be overstating the near-term threat to Microsoft, Sony and Nintendo, given their substantial installed bases, but he’s correct that games are the key to dominating the next-generation digital living room. He’s also correct that as gaming increasingly goes mobile, the market is moving in Apple’s direction.

I still wouldn’t bet the house on an Apple TV by next Christmas. But whenever it comes it will follow a path that includes integration with existing pay-TV services and a major push into gaming.