Content Owners Will Decide Whether Apple Really Has "Cracked the Code" on Internet TV

Steve Jobs famously said shortly before his death that he had “cracked the code” on how to change the TV experience. 

But is it possible Jobs mostly had the insight that a combination of more convenient hardware (tablets or smart phones), easier navigation (no remotes), easier access (seamless integration of Internet and linear TV sources) and the ability to buy programs one at a time for 99 cents would create a dramatically new experience?

It’s hard to say. Perhaps we will understand as early as September 2013; perhaps we will have to wait longer. At least so far, content owners seem unwilling to consider licensing content show by show, as iTunes suppliers now license songs one by one. That suggests the wait for a disruptive TV assault, by Apple or anyone else, is going to a bit longer in coming.

No matter what innovations Apple can create in displays, interfaces and navigation or remote control substitutes, television still is about the content. And without access to a new way of buying programs, the other advances, though incrementally more pleasing, are unlikely to create a breakthrough.

So what we are left with, for the moment, is simply a glacially slow movement away from subscription TV services sold by cable and satellite, market share gains by telcos, but a slight and slow dip in overall market demand.

One might argue that high-definition TV and digital video recorders have been incremental improvements. The ability to display Internet sourced video is another incremental improvement.

Consumers also long ago also signaled a clear preference for flat screen technology and bigger screens. But some might argue 3D has flopped. Interactive TV proved to have almost no demand.

At the same time, Netflix and other streaming services are showing promise, though largely as an incremental complement to linear television. Mobile consumption is growing. Tablet consumption is growing faster.

But nothing so far suggests a major shift in television experience or content distribution is ready to begin in a big way.

The predictable changes we now expect to see are small market share gains by telcos, every quarter, at the expense of cable TV providers, with satellite provider share roughly stable.

That was the story in the second quarter of 2013, according to IHS. AT&T U-verse and Verizon FiOS (with some small additions by independent telcos) added a net 398,000 video accounts during the second quarter, up from 304,000 net adds in the second quarter of 2012.

The U.S. video subscription business as  while lost a net 352,000 subscribers in the second quarter, according to IHS.

In a market with nearly 95 million to 104 million subscribers, that really isn’t such a big deal. That’s a market shrinkage of about one-tenth of a percent, to three-tenths of one percent.

So we might be past the peak of multichannel video subscription rates, if not yet revenue. But the present rate of decline is not alarming, though indicative of the long term trend.

It might not matter so much which provider segments are growing, and which are shrinking. The most important single fact is that the overall market is very slowly shrinking.

That suggests content owners are not yet ready to abandon current distirbution models. And without major changes in licensing, it is doubtful Apple or any other firms can revolutionize television.