Comcast, Time Warner Cable Merger Is a Setback for Apple

NEW YORK (TheStreet) -- Now that Comcast (CMCSA) is buying Time Warner Cable (TWC), Apple (AAPL) will likely have to go back to the drawing board in negotiating with cable providers for Apple TV content agreements.

A Bloomberg report suggested yesterday that Apple is getting ready to launch a new version of the device, which connects to any HD television set, and was in talks with Time Warner Cable to negotiate video content. If Apple secured the deal, it would be the first such deal with a pay-television provider, Bloomberg says.

Later, The Wall Street Journal said that Apple appears to be scaling back plans for Apple TV. According to the Journal, Apple is looking to launch a "revamped" set top box, but instead of licensing programming for its own Internet-based TV service, Apple would work with cable providers to provide programming and potentially reach a deal with operators to distribute boxes and lease them to customers. The Journal says Apple was in discussions with several distributors.

But the merger will likely throw all that out the window and question future content partnering.

Apple's latest version is reportedly going to have a faster processor and improved interface to make it easier for customers to navigate between TV shows, movies and online content, the Bloomberg article says.

Still, "Comcast sets the set-top box bar," UBS analyst Steven Milunovich wrote in a note to clients yesterday following the Bloomberg article.

"TWC's involvement with Apple makes sense to us since TWC appears behind in capabilities to develop a cloud-integrated user interface," Milunovich wrote, prior to the merger announcement. "Other press reports indicate that Comcast possibly is supporting Charter Communications' bid for TWC, suggesting a motivation to strike a licensing deal for Comcast's robust X1 interface platform. Recently Comcast noted it has signed an MOU with Cox Communications for a licensing agreement. Should Charter's bid for TWC be successful, Apple may lose out."

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