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Comcast, Apple reported to be in talks about a TV service

Comcast Corp., which inked a deal last month with streaming service Netflix Inc., is now talking with Apple Inc. about advancing that company's long-cherished dream of entering the streaming TV business in a big way, according to sources and a published report.

The Apple TV was originally released in 2007 then again in 2010, shown here. The device grabs movies and TV show rentals from the Internet and displays them on a TV. (AP Photo/Mark Lennihan)
The Apple TV was originally released in 2007 then again in 2010, shown here. The device grabs movies and TV show rentals from the Internet and displays them on a TV. (AP Photo/Mark Lennihan)Read more

Comcast Corp., which inked a deal last month with streaming service Netflix Inc., is now talking with Apple Inc. about advancing that company's long-cherished dream of entering the streaming TV business in a big way, according to sources and a published report.

The recent Comcast/Apple discussions are considered very preliminary.

Apple, manufacturer of the iPhone and the iPad, also is speaking with programming companies about acquiring additional entertainment or news content. Apple TV's current content includes free movies, TV reruns, and music.

The talks' dual track suggests that the Cupertino, Calif., tech icon is getting more serious about the television business as Comcast, the nation's largest residential-Internet provider, faces regulatory reviews of its proposed $45.2 billion deal for Time Warner Cable.

A combined Comcast/Time Warner Cable could control one-third of the nation's broadband market, and its network would reach almost 60 percent of U.S. homes, Buckingham Research Group analyst James Ratcliffe said Monday. He viewed a potential deal with Apple as "broadly positive for Comcast."

Any loss of Comcast cable-TV customers to an Apple TV service would likely be erased by higher broadband revenues at Comcast, Ratcliffe said.

Apple had previously been talking with Time Warner Cable, discussions apparently suspended during takeover speculation. Apple has periodically spoken with Comcast over the years.

A new Apple TV service could take one of two forms, multiple sources said: An Apple set-top box that costs about $99 and delivers the TV service of Comcast or other cable-TV providers, or an Apple set-top box delivering Apple's own TV service over the Internet.

Comcast itself has blurred the lines between traditional cable-TV and Internet-based video with its X1 set-top box and cloud-based channel guide.

A Comcast spokeswoman had no comment Monday. Apple's media-relations department did not respond to requests for comment.

The Wall Street Journal reported the talks between Comcast and the secretive Apple, which research firm SNL Kagan described Monday as the nation's largest-revenue and most profitable media company. Apple revolutionized the music business with its iTunes service, and some believe it would like to be equally disruptive to the TV business.

"The developments make a ton of sense because it's the direction where all this is heading - more Web-video distribution," said Scott Cleland, president of the consultancy Precursor L.L.C. and chairman of Netcompetition.org, an advocacy group supported by broadband providers.

"It's not surprising," Cleland said, "that there would be discussions between any [Internet service provider] and any potential tech or media company interested in video distribution online."

Two months ago, the U.S. Court of Appeals in Washington overturned rules on so-called net neutrality imposed by the Federal Communications Commission.

The court action, some said, could lead Comcast and other Internet service providers to make deals with Amazon, Netflix and others to stream products on an Internet express lane - a huge advantage for Apple and other content companies with the resources to pay for it.

In its deal to acquire news and entertainment giant NBCUniversal, however, Comcast agreed to follow through 2018 the FCC's open Internet rules - the ones overturned by the appeals court. Comcast and Apple would have to work within those rules.

In February, Comcast and Netflix, an on-demand entertainment service, announced an agreement that allows Netflix to connect its streaming servers directly to Comcast's Internet backbone. The companies said it would result in drastically improved Netflix video-streaming into millions of American homes. Comcast has said the deal is not a faster Internet lane but is similar to hundreds of other interconnection agreements.

Industry observers say Comcast could be willing to reach deals with Internet video providers to appease potential critics of its Time Warner Cable acquisition. A hearing on that deal is set for April 2 before the Senate Judiciary Committee.

On Monday, Comcast shares rose 0.6 percent, or 30 cents, to close at $50.30. Apple shares jumped 1.2 percent, or $6.23, to $539.10. Netflix, which could face new competition with a Comcast/Apple deal, slumped 6.7 percent, or $27.09, to $378.90.