Apple Said to Talk With Cable Industry About Set-Top Box

Apple Inc. (AAPL) is in talks with at least one of the largest U.S. cable companies about teaming up on a product to carry live television and other content, a person with knowledge of the discussions said.

Customers would be able to use an Apple-designed device to access their set of channels instead of leasing a set-top box from cable companies for a monthly fee, said the person, who asked not to be named because the talks are private. No deal has been reached, the person said.

An agreement would mark the iPhone maker’s biggest foray into TV after years of calling it a “hobby.” The company’s $99 Apple TV product doesn’t carry live network broadcasting and is mainly used for downloading movies and shows from the iTunes media store or streaming content from such services as Netflix Inc. (NFLX) and Google Inc.’s YouTube.

By aligning with cable companies, Apple would get access to the variety of channels now available to cable subscribers, instead of having to strike independent licensing deals with media companies and program owners.

Tom Neumayr, a spokesman for Cupertino, California-based Apple, declined to comment. The discussions were previously reported by the Wall Street Journal.

Earlier Comcast Talks

Apple, the world’s most valuable company, has talked with cable companies about a TV partnership in the past. When the company was preparing to introduce Apple TV in 2007, executives reached out to Comcast (CMCSA) Corp. about striking a deal, according to a person familiar with the talks. D’Arcy Rudnay, a spokeswoman for Philadelphia-based Comcast, declined to comment.

Apple executives, led by Senior Vice President Eddy Cue, have long been talking with media companies about ways to get more content for its TV product. Walt Disney Co. (DIS)’s ESPN sports network has talked with Apple about giving subscribers online access to programming through Apple TV, executives said in May.

In 2010, Apple also tried unsuccessfully to get some networks to offer subscriptions to their channels for Apple TV users, people familiar with the plans said at the time.

Time Warner Inc. (TWX) Chairman and Chief Executive Officer Jeff Bewkes said in July that he planned to talk with Apple CEO Tim Cook about Apple TV. Apple may forge a partnership with a cable provider, similar to the way it originally struck a deal with AT&T Inc. (T) on the iPhone, said Bewkes, whose company owns HBO and other channels.

Affiliate Fees

That’s because Bewkes said Apple most likely wouldn’t be interested in cutting deals directly with television programmers, which would charge costly affiliate fees.

“I don’t know if that’s Apple’s style to pay programmers,” Bewkes said at Allen & Co.’s annual media conference in Sun Valley, Idaho.

One challenge Apple has faced is that cable companies such as Comcast have invested heavily in developing a new user interface for their own set-top boxes that they lease to customers for a monthly fee. Cable companies also may be reluctant to cede control to Apple in the way record labels and telephone carriers have.

Apple co-founder Steve Jobs had expressed skepticism to other executives about the company’s chances in television if they weren’t able to get more content, especially live broadcast rights, said two people familiar with the company’s TV efforts. Jobs also had been wary of working with cable companies because each provider only controls certain geographies, limiting what would be available to some customers if any of them didn’t team up with Apple, these people said.

‘Simplest Interface’

Before his death last year, Jobs became more upbeat about the company’s chances. He told biographer Walter Isaacson that he had “finally cracked” how to build a TV device.

“It will have the simplest user interface you could imagine,” Jobs told Isaacson in the biography “Steve Jobs.”

The comments fueled speculation about Apple’s aspirations to reach customers in the living room. Gene Munster, an analyst for Piper Jaffray Cos., has said that the company has built a prototype TV for release by next year.

It isn’t clear whether a deal with cable companies would involve use of Apple’s existing TV product, which plugs in to a television set, or the release of a new device.

Cable companies have begun embracing the popularity of Apple devices in other ways. Comcast, Cablevision Systems Corp. (CVC) and Time Warner Cable Inc. (TWC) offer apps so subscribers can watch TV on an iPhone or iPad.

Besides Cue, who leads Apple’s negotiations with media companies, another executive leading the product design of Apple’s TV effort is Jeff Robbin, who helped create the iPod and build the iTunes store, people familiar with the project said last year.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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