Market Overview

Apple's First TV: Would You Pay $12 a Month to Watch Free Content?

It could be the most Internet-friendly television in history. But would you pay more to enjoy it?

There's a new startup in town that might attempt to answer that question. Aereo is attempting to bridge the gap between traditional TV viewing and Internet streams by combining the two, allowing it subscribers to watch over-the-airwaves content (NBC, ABC, etc.) on a multitude of Internet-connected devices.

It's a great concept, at least in theory. This is especially true when you consider the tiny antennas that the company is using to deliver an individual stream to each viewer. The service is too new to be tested, and it won't go live until March 14. At that time, it will be exclusive to New York City residents. But the company promises that viewers will receive “awesome HD reception.”

So far, so good. But we haven't gotten to the price. Instead of charging a flat rate for the app, Aereo is going to charge consumers $12 a month to watch a small number of TV networks on their iPads and computers that they can normally get for free using a standard antenna.

Why would anyone pay a monthly fee for free TV? Aereo is banking on a few different elements here: first, the company knows that a small number of consumers already pay for free TV by subscribing to a low-end cable service. (Most cable providers charge a nominal fee to those who want local channels without the hassle and picture inconsistencies of an antenna.) Second, Aereo's streams can be received from any location. While it is unclear if “anywhere” means “anywhere in the world” or simply “anywhere within this country,” the prospect is fairly intriguing. Wi-Fi is becoming more common than TV signals, and thanks to 3G and 4G, telecommunications companies are making it easier to stay connected.

Third, Aereo will let you DVR shows without actually having to download a thing. This could be a huge selling point for the company. I myself would have been completely sold on this feature when Lost was still on the air. It would have been an invaluable feature; instead of waiting for the show to appear on ABC.com, Hulu and iTunes 12 hours after it airs, I could have recorded it and watched it the night it aired. Granted, I rarely had to skip a live airing of Lost, and was fortunate enough to tape it locally most of the time. But as a diehard fan of the show, I had to see every new episode right now. Waiting for Hulu was never an option. (I imagine that there are other TV viewers out there who feel or have felt the same way about a particular drama, comedy, or sporting event.)

Finally, Aereo is hoping that if you want to “cut the cord,” as they say, and leave behind obnoxious cable companies like Comcast (NASDAQ: CMCSA), you'll sign up for its service. This might work if it weren't for the simple fact that most of the over-the-airwaves content from Aereo is also available on Hulu and Netflix (NASDAQ: NFLX). Unlike Aereo, neither service offers a live TV option, but something tells me the average Netflix subscriber does not care about that.

The Apple TV Connection

Aereo – or services like Aereo – could become an important part of the Apple TV strategy.

When the Mac maker launches its first television set in the next 6 to 18 months, the company is expected to offer a unique content distribution model (possibly a la carte programming), fewer cords and attachments than the competition (no more cable boxes! No more VCRs and DVRs!), and a plethora of unique apps. The latter element will rely almost exclusively on the development talents of the developers. But content distribution and cord reduction will rest with Apple and the content providers it can bring on board. If the company can't secure a stellar deal in time for launch, it may initially rely on existing video delivery systems – such as Netflix – to give consumers what they want.

But with a price tag of $8 each for Netflix and Hulu, and Aereo coming in at $12, consumers are looking at a $28 monthly fee to acquire some of what cable companies currently provide. Hulu Plus has more TV shows, obviously, and Netflix streams more films than HBO and Showtime. But $28 is a sizeable monthly fee, especially when all of this content relies on a steady Internet connection, which goes for an additional $40+ per month. Unlike cable TV, broadband comes with a data cap, which could prevent diehard TV viewers (or large families with many viewers) from getting the most out of their services.

While Apple might be perfectly fine with the idea of having an Aereo app available for all of its devices, it seems unlikely that the company will launch a new TV without something more prominent.

Follow me @LouisBedigian

Posted-In: ABC Aereo Apple TV HBO HuluNews Rumors Tech Best of Benzinga

 

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