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Apple and Comcast: Opposites Attract?

Apple and Comcast: Opposites Attract?

Apple and TV. When those words are mentioned in the same sentence, tech and media industry watchers take note. So while it's not the Apple TV news we've been anxiously awaiting, rumors that Apple is in talks with Comcast about a streaming relationship are understandably getting a lot of attention. Thus far, there is a hesitancy to embrace this news as "set in stone"--or to declare it as the driving force behind a massive industry shift.

For example, in a post for VideoNuze Will Richmond notes that Apple has always been driven by quality--rather than price. With most gripes surrounding pay TV associated with cost, it's unclear how Apple would differentiate a hybrid Apple/Comcast model. And, the Motley Fool highlights that Apple's premier customer service reputation is incongruent with Comcast's less-than-stellar relationship with its customers.

We, too, are scratching our heads on this one. Here's why:

If this deal goes through--and the general assumptions are accurate--then it runs counter to Apple's previous iTunes strategy of providing the full stack. In the case of iTunes, it was a player, an online store for media (content) and software. With iTunes, Apple executed a calculated strategy to marry great content, great technology and a digital store that was commercially viable for publishers and consumers.

This TV deal appears similar, except that it underscores the issue that has been a topic with both DirecTV and with the Comcast/Time Warner Cable merger: access. With iTunes, Apple controlled the distribution platform; digital music was small enough that broadband Internet was helpful but not required. With SD, HD and--soon--4K entertainment content, digital video is about a player, a store/library and access--the pipe to the consumer.

And as Netflix and other OTT providers know, pay TV operators (specifically cable) rule the roost. Cord cutters may not need a pay TV subscription, but they will still need to subscribe to a pay TV operator for broadband Internet.

One of the technical aspects of Apple's deal with Comcast is prioritizing the delivery of Apple's content to the consumer--increasing the quality of content, reducing buffering and minimizing wait times. This has been speculated to essentially be a special "managed service"--think of it as an HOV--similar to the recent peering agreement between Netflix and Comcast. However, it's essentially a "pay-to-play," given that these arrangements are needed to maximize the video experience, and both Apple and Netflix (and many other providers) are judged by the consumer experience.

And beyond the issue of pipes, there's still open questions about the key player in this mix: the consumer. Apple has a reputation for "beautiful" user experiences, but it's short-sighted to think Comcast would push its innovations (e.g., X1/X2, RDK, etc.) to the backburner. And there's even been reports that Apple wants users to utilize their iTunes credentials. For TV Everywhere, use of non-MVPD login credentials (e.g., social identity, etc.) has been a topic of discussion. For Apple and Comcast, it's a battle for the direct relationship with the consumer, and that's not one either of these giants will cede.

There are some major players that are paying particularly close attention to this potential deal-in-the-making:

  • Amazon and Google--companies that have both already made their streaming intentions known--will be watching intently. At this point, only Google (with its limited Fiber rollout) has a realistic alternative to Comcast's distribution value proposition but not the scale from a households-penetrated perspective.
  • Verizon--and other wireless providers including Sprint and its intended merger with T-Mobile--must be viewing this news as an opportunity. If they can establish wireless as a technical and commercially cost-effective alternative to wired home Internet, they could be in a position to beat out Comcast for future, similar deals.

What do you make of the Apple/Comcast rumors? I'd love to hear from you in the comments.