Why Apple TV Won't Happen Any Time Soon

New rumors that won't change anything, because Apple's TV problem isn't a hardware problem, or a software problem. It's a content and delivery problem, and the cable and content cartels see no reason to give up power to Apple. That's not going to change any time soon. 

Rumors about Apple building either a TV set or a than the current "Apple TV" keep coming up because consumers hate the way the cable TV world works. You pay an exorbitant, frequently rising monthly fee, primarily for channels you don't use. You usually don't get to pick your cable box, so you end up with sluggish and difficult UIs, as the boxes are chosen by cable companies for high reliability and low cost rather than ease of use.

The controlling fact of the cable market is that it's a monopoly scenario. Yes, there's weak competition here and there. A few lucky people can get FiOS. Some people can watch satellite, if there isn't a tree in the way. But that's very cozy competition, and it's not all that aggressive.

Apple could make a deal with a cable operator to become its box vendor of choice. But what's in it for the cable operator (or, say, for Dish?) It may grab them some market share, but Apple is notorious for taking power away from its partners in the long run. It's the kind of deal that bites you in the back. The cable companies saw how Apple stole power away from the wireless carriers, and without any aggressive competition, they don't need to sign that Faustian deal.

Cable companies and TV networks have all the power right now. They're not about to give that up to Apple without a fight. And in this fight, the cable and content cartels have big guns, and consumers and electronics firms are fighting with plastic forks. 

Why a TV?
Like our HDTV analyst Will Greenwald, I'm not convinced that Apple needs to build a TV. TV panels are large, expensive devices with long replacement cycles, even longer than PCs. Apple has seen most of its growth recently in iPads and iPhones, devices that cost under $1,000, with one-to-two-year replacement cycles. Its most expensive Macs, the Mac Pros, are a niche market that doesn't get much attention.

So I'm convinced that Apple wants to shatter the living-room entertainment market with something much more like its current Apple TV box than with an actual $3,000, big-screen TV.

But the Wall Street Journal says that Apple is working on a big-screen TV, and who am I to contradict them? In any case, the reason Apple isn't changing living-room entertainment doesn't have anything to do with the hardware involved. The company isn't just about to throw a screen out there to fight it out in a notoriously low-margin business. Apple wants to change the TV experience.

Excelling in Content and Deliverance
If you want to disrupt TV, you're going to have to make an end-run around the established players. You'll need either new content, a new delivery mechanism or both.

The Internet isn't that new delivery mechanism. Remember that the cable companies also control most home Internet access. With net neutrality perpetually failing to get anywhere in Congress, you can guarantee that they'd choke off anything that would actually compete with their core business.

Building out alternative Internet connections has been a non-starter. Verizon tried with FiOS, and then gave up, deciding it was too expensive, and made a deal with the cable giants. Wireless Internet connections (except for Clear) all have restrictive data caps that prevent you from using them for TV. 

I have raged about the crappy state of home broadband competition in the U.S. for years. 2010: "The Failure of Mobile Broadband." Early 2012: "Verizon's Fake Home Broadband Should Fool No One." Mid-2012: "Obama's US-Ignite Plan Ignites Nothing."

The big-name content companies are just as unenthusiastic about disrupting the current regime as the cable providers are. Millions of people would probably pay for HBO or Showtime separate from their cable bills, so why doesn't Apple peel a flagship channel off? Because the current regime works very, very well for content providers. This Quora answer goes into details about HBO (although the writer is more optimistic about change than I am). In short, the current cable regime provides content companies with a cozy, reliable stream of subscription money and no desire to rock the boat.

Remember, the cable channels are getting money from every cable subscriber - even the ones who don't watch their channel. How can you beat that awesome deal? They're being paid when you don't watch them. HBO and Showtime are both very profitable: the Hollywood Reporter estimated earlier this year that HBO will make $1.5 billion in profit in 2013, and Showtime $800 million.

New content? We've been trying that for years. It turns out that people really like high-budget, expensive shows made by professionals. Roku, XBox, and everything with Netflix aren't causing a massive rash of cable cord-cutting. The Atlantic goes into detail, but the upshot is that cord-cutting is a tiny, tiny trend.

CableCard Failed, Too
Even government-mandated disruption can fail. Does anyone remember ? No? That was supposed to let a brand-new competitive set-top-box market flourish, and it shows how powerful the cable companies really are. In 2005, the cable companies were forced by law to accept third-party set-top boxes with "CableCard" access devices, in a brave attempt by the FCC to create competition at least for the boxes.

This would have been great, had it happened. I remember going to Motorola's labs in 2004 and 2005 and seeing cable boxes years ahead of the creaky Scientific Atlanta brick in my living room, with multi-room viewing, IPTV integration and early social media features.

The cable companies "agreed" to support CableCard. Then they didn't advertise it. Sales reps pretended not to know what it was. If you wanted CableCard, you often had to get a special installer to come to your house, and mysteriously, the wait for those installers was much longer than for standard cable boxes. Cable companies upgraded their systems and didn't provide appropriate adapters for CableCards. Finally, the approval process for CableCard-compatible equipment has been notoriously slow and expensive. The result has been very low CableCard adoption.

That's the power you have with monopoly control over the access lines.

No Saviors Coming Soon
The current cable TV regime works, for everyone except consumers. If consumers start cutting their cable subscriptions en masse it could create some change, but Americans like their ESPN and "Game of Thrones" too much for that.

Apple wants to make money, and the TV industry is a pit of vipers. It's controlled by content and delivery cartels that show no sign of breaking. For now, Apple's best bet is to lay low, follow the trends, and grab an opportunity when it comes up. I don't see the opportunity coming up any time soon.