If one Wall Street analyst is right, Apple (AAPL) is about to make TV buffs very happy in the coming year.
Sterne Agee analyst Shawn Wu notes that the inevitable launch of a full-blown Apple TV in 2012 will also be accompanied by an Internet-based television service for which the channels and shows will be completely customizable. In other words, viewers will be able to choose exactly which cable channels or TV shows they want to watch, and not have to pay for the dozens -- if not hundreds -- of channels that they don't want.
"I finally cracked it," Steve Jobs told his biographer when discussing television, shortly before he died.
Jobs may have been talking about the interface, remote control, or perhaps cloud storage of content, but what if he was already thinking ahead to the biggest gripe that consumers have with their escalating cable bills.
Farewell to the 'ESPN Tax'
Traditional cable and satellite television bills are getting out of hand.
Media tracker SNL Kagan claims that ESPN sets distributors back a hefty $4.69 a month per home. Since ESPN is part of most standard cable packages, it's not as if couch potatoes that don't care about sports can opt out of ESPN without downgrading to the most basic of packages that includes mostly the over-the-air channels that they could get on their own with an HD antenna.
Cable networks also often force cable and satellite companies to carry their lesser channels in order to get the more popular channels. For example, Madison Square Garden (MSG) may require a company that wants its flagship MSG channel to also carry its rarely watched Fuse music video channel.
Letting the customers who ultimately pay the bills for these negotiated bundles decide what they want to pay for -- and what they don't -- is the right thing to do, but even the mighty Apple is going to have a hard time convincing broadcasters to do the right thing.
Apple TV Just Got Even More Interesting
If homes can save money by customizing their channel lineups, it will also mean that the content creators will make less. Audiences for individual networks will shrink, and with that the subscription revenue and -- for those that run commercials -- what advertisers are willing to pay for 30-second spots.
Networks are scalable businesses with high fixed costs. Production costs for new shows aren't cut in half if their audiences are halved. So what Apple is trying to do should be worrying cable network executives, while at the same time delighting the viewers who are left shaking their heads every month when the cable bill arrives.
Then again, if anyone can do this it's Apple. Record executives weren't ready for digital distribution when Apple made legal music downloads cool through iTunes. Nobody wanted a tablet until Apple rolled out the iPad. Apple has been successful because it can see where the market is heading before anyone else.
Cable networks will fight this to the very end, but Apple and its growing army of couch potatoes will get their way -- or abandon the networks altogether.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Madison Square Garden and Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.