Can Google and Apple Make Cable Obsolete?

Brittney Barrett |

The traditional means by which Americans consume their television has been under attack by internet companies since the arrival of online video streaming. The introduction of Netflix (NFLX) and Hulu, alongside the soaring prices of cable, has prompted a slow leak of market share. The ascent of these online services has yet to result in a mass exodus of cable customers, but the latest developments in the field may change that.

The most recent earnings reports from top cable providers like DIRECTV (DTV) and Cablevision (CVC) indicate that the majority of American households are still paying for their cable television subscriptions. Online options may be wounding into their bottom lines, but the impact of watch-anytime internet programming on revenue is less than one might expect. For the most part, these cable providers continue to turn major profits. This strength of the major cable players may also mean that they have a long way to fall and not much of a safety net should a large-scale deflection occur. But what could prompt Americans to give up their cable boxes? The most recent whispers from Google (GOOG) and Apple (AAPL) indicate that the cable apocalypse could be fast approaching. Both companies have developed reputations for being top innovators and with their sights set on your TV, expectations are high. So what are the technical taste makers up to in their offices?

We’ll start with Google. Google’s initial foray into television with Google TV was uncharacteristically poorly received.  The company’s Google TV-equipped Revue box fell flat with a retail price of nearly $300, but Logitech recently reduced the price of the App focused Revue box to $99. Accompanying the price cut was a free update to the system to allow for 30-plus television optimized apps. The apps are largely focused on screen savers, games or simplistic programming, but it looks to be setting the stage for something bigger. For the moment, Google TV is not at a stage where it will compete with cable companies on a broad basis. In the future though, tech talking heads foretell that Google will begin partnering with content providers. Already, channels including Fox, CNBC and CNN, have Apps either planned or released. Media companies will have the chance to develop applications for the free-to-use system that will allow them to generate either free or advertising supported programming. Depending on the company and their preferences, Google TV users will be able to watch for free, with advertising, or subscribe to the application for a fee. The latest developments, should they come to fruition, could potentially usher in an age where customers have the advantage of paying only what they want rather than 900 channels that they watch only 1 percent of.

It sounds pretty good. But before investors trade in their shares of Time Warner Cable (TWC) for Google, they might want to know what’s on tap at Apple. Similar to Google, a first version of AppleTV already exists. It’s a tidy box, that when not running programming, expends about as much energy as a nightlight. It allows for shows purchased on iTunes to sync to all Apple devices and is convenient, sleek and attractive. Like the original incarnation of Google TV, Apple’s television does not appear fully formed. As evidenced by the recent earnings statements at Cable companies, the majority of Americans are not snapping up the $99 system. As it stands, the streaming box possesses functionality most similar to a Roku and does not appear to be positioned to take a significant marketshare from cable companies. Its future manifestation may represent the future of television watching, or at least that is what Steve Jobs implied shortly before his death.

While it would have been a clever, final practical joke to leave Google shaking in their boots over AppleTV, Jobs’ biographer Walter Isaacson, stated it was the area Jobs was most focused on restructuring toward the end of his life. Television for Jobs, who is credited with reforming the consumption of everything from music to magazines, would have been the final media frontier. Prior to stepping down from his position as Chief Operating Officer, Jobs appeared to have done quite a bit of planning. According to him, the new system would emphasize the integrated nature of the company’s current model, but take it a step further. Not only would it be “completely easy to use” but Apple’s television set “wouldn't need to include complex remotes or a bunch of set-top boxes,” according to the CEO. Some have speculated, on the basis of a NYTimes (NYT) article claiming Jobs mentioned as much, that the new set would employ the recently unveiled Siri technology, with which the iPhone4S is equipped. Voice activation and artificial intelligence could be the first step into making television remotes obsolete, but there remain questions surrounding the functionality of such an addition when considering the competing voices within the television.

The set, which is rumored to be slated for release in 2013, might not necessarily attract mass users on the basis of voice activation alone. It could also be presumed, that the Apple television would come equipped with Apps similar to those employed by Google, given Apple’s proclivity for applications. Naturally, like most of Apple’s products, they would be purchased through the iTunes store. Among the troubles with Apple’s current system, is that the company is reportedly reticent to equip it with Hulu plus, given that it does not want to forfeit the profits it makes from customers purchasing fresh episodes in its own store. Apple is liable to be working on a way to maintain its revenue streams by creating incentives for customers to still purchase content or to profit from partnerships with major providers.

Should the speculation come to fruition, both Google and Apple would be offering something that cable does not: the option for a customer to pay for what they want and only what they want. Unlike current streaming systems, there are not expected to be any pauses made for buffering, or other sorts of inconveniences, that have until now have made the internet streaming experience worse than its cable equivalent. Both the content and the means by which they pertain to it could presumably be customized for the user in a way that is simpler, more efficient and potentially less expensive.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.65 -1.31 -1.15 17,824,301
CVC Cablevision Systems Corp. n/a n/a n/a 0
GOOG Alphabet Inc. 779.62 -1.94 -0.25 608,743
NFLX Netflix Inc. 97.54 0.06 0.06 2,827,655
NYT New York Times Company (The) 12.01 -0.04 -0.33 458,748
SDLP Seadrill Partners LLC Representing Limited Liabili 3.48 0.14 4.19 852,289
TWC Time Warner Cable Inc n/a n/a n/a 0

Comments

Emerging Growth

VirtualArmor International Inc.

VirtualArmor International Inc is engaged in handling the design, configuration and installation of advanced network, cybersecurity, and cloud architecture solutions and serves as an ongoing resource for its clients.

Private Markets

Initial State

Initial State is an Internet of Things (IoT) data analytics & data management platform company. We turn sensor and event data into information that matters by making it easy to…

Cloudera

Cloudera offers enterprises a new data platform built on the Apache Hadoop open-source software package. Hadoop is a data-management platform that can consolidate data in a single repository for comprehensive…