Apple in talks with Comcast to develop TV service, reports say

Apple Inc. is reportedly in talks with Comcast Corp. to provide high-quality, streaming television content through the Apple TV box, the latest sign of the Cupertino, Calif. tech giant’s continued interest in changing how we watch TV in the same way the iPhone changed the way we use cellphones.

Negotiations are in the early stages, and many challenges remain to complete the deal, anonymous sources told the Wall Street Journal.

But Apple has long had interest in the television industry, with Steve Jobs telling biographer Walter Isaacson that he “licked it” when talking about Apple’s TV plans and the company rumored to be working on everything from its own flat-screen television to upgraded versions of its Apple TV box to new ways to control TVs with iPhones and iPads. Apple’s strength in combining hardware and software to produce an easier-to-use experience for consumers has fueled intense interest in its plans for TVs, which are plagued by complicated remotes, complex program schedules and convoluted instructions to connect televisions and speakers and receivers together.

“This is going to be the next evolution as the Apple television at some point will be launched not just as a TV box, but a revolutionary way to home entertainment,” said Laurence Balter, chief market strategist with Oracle Investment Research in Hawaii. “Right now, they need to corner the market on content. If they didn’t do this and suppose they launch their TV set, everyone would watch Netflix, and Apple wouldn’t get a penny. This is about keeping the revenue stream flowing in their direction.”

The partnership would essentially take the place of the traditional cable set-top box and allow users to stream live and on-demand TV programs and digital-video recordings stored in the cloud to all their Apple devices. It would also provide a high-quality streaming service and not suffer the hiccups or buffering that can happen when streaming Web video, according to the Journal report.

If Apple and Comcast – the nation’s largest cable company – team up, analysts say, the deal could be huge for Apple and Comcast customers and should strike fear into the Netflixes and Hulus of the world.

“This is all about keeping Apple users inside the ecosystem and revenue that would normally go to a Netflix or Hulu into Apple pockets,” Balter said Sunday. “It’s about the ability to sync between all your devices and watch Comcast, which drives a stake right in the heart of the Netflix subscriber and business model.”

Some companies have forged into the TV industry, including Microsoft Corp. with its Xbox gaming console and Roku Inc.’s set-top box. But neither provides the network quality that Apple is striving for in a fully formed TV service.

Just last month, Netflix and Comcast announced a deal that would improve the quality of Netflix streaming content.

Still, recent rumors of the Apple-Comcast deal have already hurt Netflix stock, Balter said.

“If I were Netflix, I’d be on Google’s front doorstep tomorrow, asking for some sort of exclusivity, revenue-sharing model,” said Balter, “something to enhance the value to the Android user.”

Before talk of the Apple-Comcast deal surfaced, however, Apple had been rumored to be in talks with Time-Warner Cable, the second-largest cable provider, for a similar deal. But just last month, Comcast agreed to buy Time-Warner Cable for $45 billion, a deal that is being reviewed by federal regulators.

“It’s not been consummated, but I do know there’s a lot of discussion of whether it can even pass the scrutiny of regulators,” Tim Bajarin, president of Creative Strategies in San Jose, Calif., told the San Jose Mercury News on Sunday. “If Apple was already down a path with Time Warner, it is only logical that they in this case would go to Comcast to see if the same deal could be struck.”

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