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Apple Still Clueless in TV Land: Today's Outrage

Stocks in this article: AAPL DIS CSCO MSFT TWX

NEW YORK ( TheStreet) -- After two failed attempts to reinvent the set-top box and a go-nowhere monthly "best of TV" subscription plan, Apple (AAPL) is now hoping a buck-a-show rental service will be a winner.

But so far, only Disney (DIS) seems willing to play along with Apple's idea to use iTunes to charge users 99 cents for two-day rentals of some TV shows, according to Bloomberg Businessweek and a number of follow-up reports.


Kudos to Apple for repeatedly banging its head against the TV industry, but unlike the sweeping success that iTunes was for the record business, video programming is an entirely different prospect.

Apple, like others before including Microsoft (MSFT), Cisco (CSCO), TimeWarner (TWX) and AOL (AOL), had high hopes of building the ultimate bridge between the Net and TV.

For Apple, which craves control and loathes the anarchy of Internet, the natural solution is to push an iTunes approach.

But here's where Apple's plan hits the wall.

Unlike music, where record companies had no way to sell songs in a market awash in free "stolen" tunes, the TV industry has not lost control of its programming. And more importantly, Internet broadcasts are a source of revenue.

Under the existing system, users can watch current shows free on the networks' Web site or the industry's joint-venture site Hulu. The typical one-hour TV show has between four and seven ads that play during the program. Ads equal money.

It's exactly the same business model that worked for all the prior decades of television broadcasting.

TV isn't broken, yet Apple proposes a fix.

The problem is that Apple wants to be the middle man by charging users and splitting the take with the TV programmers.

Now, you know Disney is totally interested in this plan purely on its merits and isn't just playing along because Apple CEO Steve Jobs is the company's largest individual shareholder -- right? Holdouts like News Corp and NBC Universal are just too timid, you might say.

Prediction: Look for Apple to pronounce its new TV streaming service is still very much a hobby around Sept. 7.

-- Written by Scott Moritz in New York.

>To contact the writer of this article, click here: Scott Moritz.

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