Friday, January 18, 2008

Television 2.0: Can Apple TV replace cable?

When I watched the Stevenote the other day I was suddenly struck with a notion. Over 125,000 Podcasts, a huge number of YouTube videos, a thousand movies, and 350 TV shows are available through Apple TV's new interface. Then Elgato recently released a new version of their EyeTV software for TiVo-like functionality on a Mac. Do the economics and content availability make enough sense that people could replace cable?

The first question is whether there is enough content for this idea to be feasible. Further, how much can be viewed for free versus how many movies and TV shows would be purchased. The numbers above seem impressive. Add to that the fact that an Elgato tuner will record HD video (which all broadcast signals are supposed to be by February 2008) and stream it to the Apple TV, and you have all broadcast networks, all video Podcasts and iTunes U content, and all of YouTube available for free. The answer then boils down to how much of the free content is of interest to an individual, and how much of what they want is only available on cable networks. If a person is big on movies they may find the 1,000 available on iTunes to be pretty paltry compared to NetFlix's 90,000 DVDs for rent, plus 5,000 available for viewing on demand (on Windows only).

If content is not an issue, the question remains whether the cost makes sense. Of course markets vary, so I will be using my personal experience to estimate the costs involved. First off, cable. Most of the cable companies currently offer bundle deals with basic cable, internet, and home phone in the neighborhood of $100. Assuming that you can use all those services, that puts the cost of basic cable around $35. Add another $10 for DVR rental (TiVo service costs $12, plus the initial purchase of the hardware), and you have around $45 per month. This buys you programming on all the non-premium channels that can be recorded and played back easily via DVR. It does not include any pay channels like HBO or any HD programming, and it probably a very conservative estimate for a cable bill.

In contrast the initial hardware expense of the Apple TV/Elgato solution is around $330 (40 GB Apple TV: $229, Elgato eyetv hybrid: $99). This assumes an existing Mac and wireless high speed internet. Shows from cable networks cost up to $1.99 per episode. A daily show like, well, The Daily Show, can be purchased as a multi-pass for $9.99 per 16 episodes. Obviously the point at which a person breaks even, if ever, depends on how much paid programming they consume. The average American watches around 30 hours of TV per week [link]. The $45 basic cable expense would not go very far on the iTunes Store toward acquiring 120 hours of programming. For four-hour-a-day television viewers then, this will not be a solution.

The viewing habits of me and most of my friends, however, are much more modest. There are two or three shows I try to catch regularly and maybe ten others that I know I enjoy but don't make a point of seeing. In addition, I probably watch two movies per week on average. I believe I could easily satisfy my video entertainment cravings for $40 per month. This would buy me four movie rentals ($2.99 x 2 + $3.99 x 2 = $14), a month of The Colbert Report ($10), and eight assorted cable programs ($1.99 x 8 = $16). This would total about 20 hours of television, plus as much broadcast TV, Podcast and YouTube'd video as I care for. The leftover $5 per month would take five and a half years to pay off the initial hardware investment ($330 / $5/mo = 65 mo).

Would it be worthwhile? The best thing about moving toward the Apple TV/Elgato solution would be an increased democratization of media consumption. I'm sure there are many worthwhile Podcasts that are just waiting to educate and entertain me. Likewise, I have spent hours browsing YouTube videos with perhaps less education and more entertainment. The cable TV shows and movies would be accessible on demand. The broadcast programming would be predetermined by having been recorded, but once captured would also be on-demand. Suddenly the world of video entertainment changes from flipping through "100 channels with nothing on" to making choices from thousands of available options. The old favorites would always be there, but a new breed of programming by independent film companies or John Doe's with camcorders would be equally accessible. For someone like me who values education, diversity, and novelty, this could be the prescription for a video media revolution.


Michael B. said...

Have you heard about the cable company that is trying out the new policy of charging for downloads over a certain number of gigabytes? This is a trial run in Texas somewhere, but the idea is to charge people who are using the internet to supplant cable television for the majority of their viewing. It would certainly change the equation if a movie costs $3 to watch on cable pay-per-view and $3 on iTV plus the extra charge for using up more gigabytes than you were allowed. Just a thought.

Crass Pip said...

@michael b.
You have a good point. I think it shows that the cable companies are afraid. They are probably already losing business to torrent downloaders, and now that content is legally downloadable they have even more to fear.
Hopefully the mandatory cable competition will keep this idea from getting very far.