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Apple Inc. (AAPL) TV Bets On American “Incredible Willingness To Pay” [Update]

Apple inc (NASDAQ:AAPL) Apple TV

Apple Inc. (NASDAQ: AAPL) is going to jump on what Pacific Crest analyst the American consumer’s “Incredible Willingness To Pay” when it brings its television service to market. The financial analyst says that the Cupertino Company will offer customers much more than a “skinny bundle” and investors should expect the service to arrive this year.

Apple inc (NASDAQ:AAPL)
Later this year the american public will get an opportunity to exercise it’s “Incredible Willingness to Pay” for Apple Inc’s (AAPL) TV Service.

 

Mr. Hargreaves says that the service will be welcomed by network owners like Walt Disney Co (NYSE:DIS), 21st Century Fox (NASDAQ: FOXA), and Time Warner (NYSE: TWX) because it will give them a way to generate large amounts of revenue on the back of that willingness to pay for television.

Apple goes after wallets, not hearts

Apple is not planning to cut the cord, according to Pacific Crest, so much as it’s trying to replace it. Mr. Hargreaves says he expects Apple to launch a high quality Multichannel video programming distributor rather than a streaming service. He expects the company, unlike Netflix Inc. (NASDAQ: NFLX) to go head to head with Comcast Corporation (NASDAQ:CMCSA).

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Hargreaves is expecting Apple to offer a package that costs $40-$50 per month, but that includes more attractive hardware and more effective content discovery. Apple is, if rumors are right, set on releasing an upgrade to its Apple TV hardware at WWDC. The conference will take place between June 8 and June 12.

Apple offers an old paradigm

Apple is, if Hargreaves is correct, not going to blow the TV industry wide open with its subscription service and it’s not going to lend a hand to the “price disruption” that companies like Netflix Inc. (NASDAQ: NFLX) have been trying to force into the industry in recent years. Apple is going to hold the prices relatively constant and, in doing so, it’s going to forge a compact with content providers, the movers and shakers of the industry.

If Tim Cook can convince Walt Disney Co (NYSE:DIS), 21st Century Fox (NASDAQ: FOXA), and Time Warner (NYSE: TWX) to hand over their content in exchange for a payday it will be a coup for Apple and it may well result in your next cable bill being couriered from Cupertino, but won’t disrupt the industry.

Apple brings new revenue streams

“Apple’s service could also benefit network ad revenue by accelerating the move to dynamic ad insertion” according to Hargreaves. That’s the kind of innovation that he expects Apple to bring to the TV industry.

Baird Equity Research reckons that Apple could capture around 10% of US broadband households with its TV subscription service. The report on the possible service from the Cupertino company said that there’s a $90 billion opportunity if Apple could capture more than $300 in revenue per customer.

Pacific Crest is betting on closer to $500 in annual revenue, but most of that is going to be transported back to content creators in order to keep them happy. The actual effect of the subscription service on earnings may be small as a result according to Hargreaves.

The net effect, however, may be great as an Apple subscription TV service makes owning Apple products that much more attractive. With the American, and global, “Incredible Willingness To Pay” for Apple products, that could be worth quite a bit more than any “disruptive” TV service pricing.

Update 13:03 EST: Patently Apple author Jack Purcher caught a bunch of new features that could attract users to the Apple TV today. Patents awarded to Apple could let engineers at the Cupertino company create a 3D gesture control system to make user interaction with the Apple TV based on gestures.

If those patents are due to be included in the Apple TV released at WWDC in June, though that is unlikely, rumors that Apple is planning to upgrade the remote may not be far off. The company may try to convince users to utilize their own arms in order to interact with the Apple TV.

As we all know, however, speculated uses for patents from tech companies rarely come true. It’s more likely that Apple is patenting this interface simply because an engineer put it down on paper.

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