Wells Fargo Discussing Potential Apple TV Service; Talking 'Balance Of Power' At Apple

In a report issued Tuesday, analysts at Wells Fargo provide some initial thoughts on a potential Apple TV service. Sources cited by the Wall Street Journal say that Apple Inc.

is in talks with several networks to offer a 25 channel online TV service. According to the Wells Fargo report, media executives think the service will be priced between $30 and $40 per month. They expect the company to announce it in June and launch it in September launch. The service will allegedly be available on all iOS devices, offering broadcast from names like ABC, CBS and FOX. Analysts also believe that NBCUniversal will be excluded from negotiations "due to a fall-out between Apple and parent company Comcast who is believed to be working on its own web-connected set-top box." Separately, the NY Post reported that Apple plans on sharing viewership data to allure more broadcasters to its offering. While the firm believes this could help revenue, they think "margins may be low when taking content and other costs into account." Rather, the analysts believe "this strategy could be to drive further lock-in to stem any threats of attrition and potential to gain share (i.e. hardware sales)." They add that they consider that "the amount and quality of the content will dictate Apple's success though inversely cost Apple more to procure making critical mass more important to absorb the costs. While this could be a prelude to an Apple television set, we believe the company will have to gain more service experience as well as subscription volumes and, hence, believe any television set is unlikely over the medium-term." So, what does Wells Fargo think about Apple as a whole? They believe "the positives of the current 6 cycle and perception as a relatively defensive stock to be offset by gross margin pressures and secular issues as it relates to a limited market cap opportunity in the existing product segments, and a potential balance of power shift back to wireless operators from handset vendors."