Sports Opens Door for Apple TV

NEW YORK (TheStreet) - Our Carlton Wilkinson wrote a nice piece last week about Apple's ( AAPL) TV. I can sum up his expectations for the product in one word:

Meh.

But there's reason to believe Apple's chances of success are greater than you might think. That reason can also be summed up in one word: Sports.

Almost half your monthly cable bill now goes to sports. Disney's ( DIS) ESPN is the big dog, but the other networks are getting in on the action, and bidding up rights fees in the process.

Comcast's ( CMCSA) half-owned NBC Universal unit recently grabbed England's Premier League from ESPN and News Corp.'s ( NWS) Fox Soccer WOOD-TV for what USA Today estimates is $250 million, spread over three years. That will give it 380 games each year, helping to transform NBC Sports from the bicycling-rodeo channel it was into a soccer-hockey-football franchise, with more to come.

There's a second trend, the specialty team-or-conference channel. News Corp. recently spent $1.5 billion to buy half of the Yankees' YES Network, according to CNN, with an option to take 30% more.

The addition of Rutgers and Maryland to the Big Ten was all about adding markets for that league's WOOD-TV Big Ten Network. The trend is being followed by teams like the University of Texas, which has WOOD-TVa network run by ESPN.

As teams and leagues take control of their own programming, the price of their rights rises. That comes out of the bills you pay for cable or satellite television. You pay whether or not you watch these channels. ESPN has even done a deal with big cable ISPs for its ESPN3, WOOD-TV as Broadband Reports writes -- you pay for ESPN3 on your Internet bill whether or not you watch it.

What does this have to do with Apple TV? Plenty.

Accelerating bills for basic cable or satellite, driven by sports rights fees, create a bigger opportunity for those who can provide an unbundled alternative.

Netflix ( NFLX), Wal-Mart's ( WMT) Hulu, Google ( GOOG) and Amazon.com ( AMZN) are all competing but they can't yet break down the programmers' resistance on more than just old shows, as part of a single-priced bundle.

That's what iTunes can do. The infrastructure is already there. It has already done this with music. A compelling product, with a business model people already support, is something cable networks will have to take notice of, and that's what Apple knows how to deliver.

The physical product is already taking shape.

Think Retina screens in a variety of sizes, up to 40 inches across or more, with the highest possible aspect ratios, brighter than any screen on the market. The new iMac already sports a 27-inch screen, with a full computer inside it, WOOD-TV priced at $1,999. Take the computer out and put that money into the screen.

Imagine a high-capacity DVR inside that screen, connected to the cloud for unlimited choice in programming, with your current iMac, iPhone or iPad used as the "clicker" and WiFi as the glue connecting it all. Now imagine a business model that gives you any programming you want, when you want it, at a fraction of the cost of your existing cable bill.

For a channel like AMC this might be a premium price, compared with what cable subscribers pay. But for subscribers who don't like sports it's a huge savings.

Can Google or Amazon follow Apple through such a market opening? No doubt they could. But they will be followers. It will take something huge to blow through the existing cable business models, and only Apple can offer that something.

My guess is that's what Cupertino is working on right now. It's negotiating with Hollywood, not Korean parts makers.

At the time of publication, the author was long AAPL and GOOG.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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