Why The Apple, Comcast Deal Has High Hurdles to Face
Updated from 11:04 a.m. to include thoughts from Barclays analyst in the tenth paragraph.
NEW YORK (TheStreet) -- Any time someone writes the words Apple
Last night, The Wall Street Journal reported Apple is talking to Comcast about a streaming service that would use Apple TV as the set-top box, with the streaming service getting preferential treatment on Comcast's pipes, so as to avoid disruption. This all sounds well and good, except the deal isn't anywhere close to being done, according to the Journal, and there's likely to be major hurdles getting to the finish line.
Apple, which has started to tout its Apple TV set-top box more publicly in recent months, has made no bones about wanting to change the television experience. CEO Timothy D. Cook has said in the past TV is "an area of intense interest," noting that the experience is like watching television 20 or 30 years ago. At Apple's recent shareholder meeting, Cook noted Apple sold more than $1 billion worth of Apple TV boxes last year, telling investors it was getting more difficult to call it a hobby, which it has been referred to as in the past.
Shares of Apple were higher in Monday trading, up 1.1% to $538.78, while Comcast shares were up 0.03% to $50.01.
The deal between Cupertino, Calif.-based Apple and Philadelphia-based Comcast would have Apple's users live stream TV programming, making use of the cloud for storing programs. Apple wants to own the last mile, where Internet traffic really gets congested, but Comcast has traditionally been a company that wants to own the entire experience.
The point about using the cloud or kind of digital video recording (DVR) service is important. NPD President Mark Kirstein notes DVR viewing has risen 22% year-over-year, thus placing importance on not only ease of user for the system, but on aesthetics as well, something Apple prides itself on.
Comcast, which has been losing video subscribers (it gained 43,000 video subscribers in the fourth quarter, its first gain in more than 6 years) as more people move to Internet-only packages, would benefit from Apple's user interface and simplicity. However, it would likely require Comcast to make significant investments in its network at a time when the company is focusing its efforts on closing the merger with Time Warner Cable