As expected, Apple (NASDAQ:AAPL) has entered into the 99-cent video pay-per-view business via a six-month trial with Walt Disney Co.'s (NYSE: DIS) and News Corp.'s (Nasdaq: NWSA) Fox networks. The deal follows the iTunes model of letting users rent "hit" programs from the two networks--for less than a dollar--and watch them over a new Apple TV device priced now at $99. Unlike iTunes, the programs will have to be returned to Apple within a specified time period.
While doomsayers immediately leaped to the conclusions that this is the beginning of the end of cable--and certainly the a la carte nature of the deal should frighten cable operators a bit--two recent cable trends seem to indicate that the industry expects minimal impact and is prepared to deal with the challenge.
First, there's cable's ongoing emphasis on TV Everywhere, a walled garden approach to delivering TV programs on a plethora of devices--including Apple iPads--to existing, authenticated cable subscribers who are already purchasing products and would like a second source viewing platform. Second, there is growing evidence that cable is not all that interested in subscribers who might leak away to a service like Apple TV. The industry has been hemorrhaging customers but how important those customers are to the bottom line remains to be seen.
Neil Smit, Comcast (Nasdaq: CMCSA) Cable president, offered a glimpse of modern thinking during that MSO's second quarter earnings announcement. When confronted with subscriber loss, Smit said, "These are relatively low priced single play video customers who are very price-sensitive and generally churn at a higher rate. We're not going to chase volume; we're going to remain very targeted and disciplined in how we approach the business."
Read between the lines (which is about all anyone can do with telecom service providers these days) and it appears that the bundled customer rules and if Apple, or anyone else, wants to siphon off the occasional 99 cent user, so be it.
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