CBS Corp. and Walt Disney Co. have reportedly been in talks with Apple about the company’s possible subscription television service offering.  According to the Wall Street Journal, anonymous sources revealed that the talks were preliminary and an agreement had not been signed.  None of the parties in question have since confirmed or denied the talks. Though all speculation right now, the possibility of an advertising-free subscription television service has TV broadcast companies a little nervous.

According to rumors, Apple may pay its media partners $2 to $4 per month per subscriber for a broadcast network and $1 to $2 per month per subscriber for basic cable networks—a rate considered to be much higher than what the networks currently get from distributors.  But will payment alone be enough to attract enough major networks to make Apple’s subscription TV service worth the purported $30 month fee?

Apple currently offers more than 50,000 TV episodes for sale through iTunes, priced from $0.99 to $2.99 each.  These episodes can be viewed via a personal computer, the iPod, or the iPhone.  In addition, the Apple TV, a wireless STB device that connects to the TV, broadcasts iTunes and Internet content, and users can make purchases and rentals directly through the box.

It would seem, then, that Apple possesses a well-established hardware platform for bringing subscription television content to the living room.  It’s time for a refresh for the AppleTV product anyway, and a new content service could finally drive demand for it.

However, it’s not very likely that Apple will be able to convince enough of the big networks to come aboard in order to make this service compelling.  One in particular–NBC Universal–is now owned by Comcast, and there is little reason for the company to fuel competition by offering shows like The Office and SNL in an ad-free, all-you-can-eat environment through Apple. NBC also has a stake in Hulu, an ad-supported TV content site, and Comcast recently launched its Comcast/Fancast Xfinity TV offering.  Add to this Apple’s somewhat discordant relationship with NBC in the past and it is difficult to envision a revenue or marketing scenario that would make a subscription agreement plausible.

Though we would never say “never,” especially considering the dynamic evolution of media over the past ten years.  However, if Apple succeeds in inking the content agreements its needs for this service, will it ultimately be able to convince consumers to fork out another $30 a month for content they are likely already paying their cable provider to receive?  Will Apple possibly subsidize the cost of the the AppleTV in order to make such a proposition more attractive?  Will consumers pay for the service just to access it with their iPhones?

As it happens so often in the consumer market, the viability of any new endeavor ultimately relies upon the whim of the consumer.

Filed under: Cable Operators, Content, Internet, Market Developments, VOD, Video by Tim Deal | Social tagging: Apple > AppleTV > CBS > Disney > NBC