Apple may have its own TV service by 2010 in the US, later here

Apple CEO, Steve Jobs is hawking around an idea all over the US broadcasting companies, to create iTunes TV, a TV subscription service that will bring TV to any Apple device. The idea, if broadcasters take to it, will happen in the middle of 2010, only 8 months or so away. Like iTunes, that it likely to happen first in the US, and later, after a lot of content licensing work, outside the US.

Jobs has always been brilliant at working out where the sweet spot is in any market. For music he realized that people wanted to keep their record collections forever and be able to buy them one track at a time, and that gave birth to iTunes. Now while trying to revolutionize TV he realizes that in the US, most people pay $30 or more each month to get cable TV, so he’s trying to create a similar, but better experience through iTunes, over the internet. (Pic shows impression of an Apple Touchbook concept - which could allow TV viewing too).

This is the typical, go it alone, cut out the middleman, approach, that Apple loves. The big broadcasters ABC, NBC, Fox and CBS are losing viewers all the time, with a resultant fall in their advertising revenues. The recession has speeded up this decline. These channels are available all over the US but only around 20% of homes can get them broadcast to an antenna, because they prefer to have them carried as part of a cable TV or satellite TV paid service. If Apple can bring the same TV channels over the internet, broadcasters can cut out the middleman (cable TV) and take the lion’s share of the subscription revenue, because Apple would make the service so that it only works with Apple hardware and keep a small slice of the content revenues and all the hardware sales. The debate in the US press this week is whether or not this would be a streamed or downloaded service, but given that Apple’s content delivery partner is Akamai, and it is now saying it can stream HD video all over the world, we thinks streams are likely.

If Apple introduces a tablet format device next year, as is widely expected, a kind of supersized iPod Touch, then this service could be delivered to the iPhone, the Touch, a new tablet, all Macs and the Apple TV product that coverts internet TV to TV signals and stores them. There are some rumours of Apple also getting into the TV manufacturing business as well. Of course through the iTunes application this would also mean that PCs and Netbooks could support the service.

Outside of the US, where we aren’t quite so brainwashed by Apple, there would still be some appeal. iTunes TV would need to have the BBC, ITV and Channel Four in the UK, but why wouldn’t they. It could also add a number of movies, either through its relationship with Disney, where Jobs holds the largest individual shareholding, or by simple negotiation.

Jobs has to convince the US broadcasters, who in many cases also own studios (NBC owns Universal Studios, Disney owns ABC, Fox own 20th Century Fox, CBS used to be part of the group with Paramount Studios in) why this is better than Hulu, but since Hulu is losing money, it might not be too tough a deal to swing. In the UK this would put iTunes TV up against the BBC iPlayer, but also a full service up against Sky and Virgin.

There are around 13 million pay TV homes in the UK, so most of us are used to paying someone for a TV service, and Apple would only have to be able to swing 10% or 20% of those its way to cause mayhem in the market and to have a far better device penetration in at least a couple of million homes. But first it has to make all this work in the much bigger market of the US, where there are over 100 million pay TV homes. And to do that it has to convince content owners (who it is already friendly with through iTunes) and broadcasters (ditto) to go with the plan, and make sure the financial formula leaves them better off than they are today.

Apple recently introduced a new file format called iFrame which is based on the H.264 video codec and AAC for audio, and has a resolution of 960 x 540, perfect for viewing on a PC, Netbook or standard definition or better on a TV, plus perhaps its yet to be released tablet. The resolution could be halved on an iPhone or iPod Touch.

At present cable operators in the US are telling content companies and broadcasters that they should allow their subscribers to view their content for free over the internet if they are already a cable subscriber. This initiative is called TV Everywhere and really it brings little or nothing to the broadcasters. But in any Apple deal, the subscription would be instead of cable, and the bulk of that money might go to the broadcasters and studios directly. However the cable operators in the US have so much content buying power and they would be very upset with their biggest suppliers ganged up on them and partners with Apple.