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Apple to cater to 'cord cutters' with streaming TV service

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SAN FRANCISCO, CA - MARCH 07:  Apple CEO Tim Cook speaks during an Apple product launch event at Yerba Buena Center for the Arts on March 7, 2012 in San Francisco, California. In the first product release following the death of Steve Jobs, Apple Inc. introduced the third version of the iPad and an updated Apple TV.  (Photo by Kevork Djansezian/Getty Images)
Kevork Djansezian/Getty Images
Apple CEO Tim Cook. The company could launch an online TV service this fall to compete with cable and satellite providers.

Apple is reportedly developing a streaming TV service. Among the channels it could offer are ABC, CBS, FOX, FX and ESPN— but, for now, not NBC.

At a time when more and more people are opting to “cut the cord” — that is, discontinue their cable and satellite TV service — in favor of a constellation of streaming options, Apple is readying its alternative.

The Wall Street Journal reported that Apple is in talks to launch a streaming TV network of its very own. Among the channels Apple’s service could offer: ABC, CBS, FOX, FX and ESPN. But, as of now, NBC — along with its many sibling cable networks such as USA and Bravo — will not be included.

The Frame's John Horn talked about Apple’s expansion into TV with Shalini Ramachandran, who co-wrote the story for The Wall Street Journal.

What is Apple TV doing that other services have not done?

Apple is trying to put together a bundle of 25 channels or so and wants to sell it in the range of $25-$40 [monthly]. They're talking to CBS, Fox and Disney to try to get their broadcast channels, and try to get their sister cable channels — with Disney it's ABC and ESPN. They're notably leaving out Comcast/NBC Universal from these talks because of a little beef they have with them. Comcast was in talks with Apple all of last year, discussing and trying to put together the streaming service, but things fell apart and Comcast decided to emphasize its own.

How significant is it if Apple doesn't have NBC as part of their service?

Some media executives think it could be hard for them to gain widespread popularity. But then again, some of the newer web TV services have launched without NBCU channels and Fox channels. Sony's View service that runs off Play Station  and is going to be launching commercially soon, will be without Disney's channels, including ESPN. There are holes in all of these offerings today because these media companies are trying to figure out, What terms do we want in this brave, new world of online video. How do we make sure those terms don't hinder us, in our traditional TV business?

There are cable and satellite subscribers who will say, Why am I paying so much for extra channels? Isn't that the natural evolution of this chord-cutting movement?

Right. Interestingly, many of the operators tried to get in on this early. Comcast put out this Internet-plus package that was a skinny bundle of TV channels — they didn't have ESPN in it. But they also are interested in up-selling you, because at the end of the day they want that revenue. These new upstarts like Sony, Dish, Apple — they're all looking to sell you something smaller. It's not the fully a la carte world that the most radical of cord cutters dream of, but it's on the path towards that. 

The problem is that if a service doesn't have a certain channel, then you have to aggregate different ones. If Apple doesn't have NBC, then you get Sling or Hulu Plus. You end up paying more than when you started chord cutting.

That's right. And also, you're going to have to pay the bill for standalone broadband. Standalone broadband, say Comcast's 25 megabits per second service market is about $30. After 12 months, it goes up to $65 a month. Think about that bill — on top of your $15 HBO, your $20 Sling TV — all of that will add up. 

How are companies like Dish Network and DirecTV addressing this challenge? 

Dish has created and launched this online video service, Sling TV, that is a small subset of channels — $20 a month. It has ESPN, TNT and a few other channels. But DirecTV has also struck a deal to sell itself to AT&T. AT&T is a much larger telecom company and once [the deal goes through], DirecTV could probably bundle its television service with AT&T's broadband. 

Two years down the road, even if consumers have more choices, do you think our bills are going to be less than what they are now?

If you think about it in a business standpoint of what operators have to do to make up for the lost revenue — they're going to have to raise those broadband prices. You might subsist on Netflix, HBO and Sling TV, but eventually your broadband prices will probably go up. 

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