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Is This Apple Inc. (AAPL)’s TV Game Changer?

Apple Inc. (AAPL)Tim Cook has already confirmed that Apple Inc. (NASDAQ:AAPL) has a “grand vision” of the TV. Jessica Lessin, who was The Wall Street Journal‘s top tech reporter before spinning off on her own last month, has an idea of what the Mac maker may be planning.

Apple Inc. (NASDAQ:AAPL) wants to allow viewers to skip ads and commercials, and is willing to pay the media companies the difference. The company wants make a “premium” version of television service where users could skip ads. It’s not clear if Apple would share these costs by charging a fee for the “premium” version, or if it would foot the bill itself.

Such a system would undermine the current economics of the industry, which still relies heavily on ad dollars and the TV ratings that drive those marketing budgets.

Time Warner Cable Inc (NYSE:TWC) has been named as one of the cable operators most willing to play ball with Apple, which entails ceding control of the interface to Apple Inc. (NASDAQ:AAPL). The countless number of interfaces that TV users currently have to cope with was always one of the biggest problems that Steve Jobs saw in the status quo, which he detailed in 2010:

Well, you just end up with a table full of remotes, a cluster full of boxes, a bunch of different UIs — and that’s the situation we have today. The only way that’s ever gonna change is if you can really go back to square one and tear up the set-top box and redesign it from scratch with a consistent UI across all these different functions and get it to the consumer in a way that they’re willing to pay for it. And right now, there’s no way to do that.

That’s why Apple Inc. (NASDAQ:AAPL)’s current set-top box mostly uses the same basic interface among all “apps,” even with integrated third-party services like Netflix, Inc. (NASDAQ:NFLX).

Cable operators like Time Warner Cable Inc (NYSE:TWC) aren’t too keen on the idea of giving up advertising revenue, but it might be worth partnering with Apple Inc. (NASDAQ:AAPL) to fight the trend of cord cutting. Service fees from customers are larger than advertising revenue, so if Apple can convey an ad-skipping value proposition that translates into higher service fees, it could be worth it. For example, Time Warner’s video service revenue last quarter was $2.67 billion, much more than the $228 million in ad revenue.

Apple Inc. (NASDAQ:AAPL) has quite a large following of loyal users, and if Time Warner Cable Inc (NYSE:TWC) can piggyback on the Mac maker’s user base, it might be worth making some concessions.

The article Is This Apple’s TV Game Changer? originally appeared on and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Netflix. The Motley Fool owns shares of Apple and Netflix.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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