Alan Graham proposes that Apple's Apple TV is aiming at the heart of the cable TV business model:
Is Apple Out to Kill Tivo? by ZDNet's Alan Graham -- Yeah, I'm calling it. I think Apple (and others) are about to send Cable TV and Tivo a clear message…your time is almost up. The Web 2.0 world is about to kick the door in and escort the old methodology to pasture. And I think it is going to happen pretty quickly. Don't let the [...]
It's well argued, and there's no question that Apple TV is a TiVo competitor, but he's wrong on the cable front, so his numbers just don't add up. Alan's most compelling argument is that cable TV + TiVo is considerably more expensive than simply buying the shows you're interested in off of iTunes. However, this business model requires consumers to give up their cable TV, and that simply isn't happening en masse. For starters, cable TV allows you to discover the shows worth buying in the first place. Cable TV allows you to watch live events, like sports, or the Academy Awards, SNL, moon landings, war/terrorism coverage, and murderers driving very slowly. There are plenty of other options for getting news, but sports events have deliberately limited distribution, and generally must be consumed live (watching a game 24 hours later is like reading yesterday's newspaper. For some it is 'reference material,' for others, it's the video equivalent of what you wrap fish with).
There are other advantages to having access to live (or only slightly time-shifted) content. Speaking as someone who watches a lot of TV via Netflix, the gap between watching something live on cable and watching it a day/month/year later kills the sense of community and continuity - you're completely out of touch at the water cooler. I admit that being out of touch is not as big a deal as it used to be, given the fractured TV landscape (TiVo, TV-on-DVD, TV-online, TV-on-iTunes) and work environment (I work out of a home office where there is no "water cooler," unless you count Instant Messaging). But at least with TiVo -- ReplayTV and XP Media Center in my house -- you have the option of watching live. If you turn off cable, you're at the mercy of whatever content Apple gets and when they get it.
Apple TV will be additive for most people, purchased in addition to cable. Yes, it could replace a TiVo or Netflix subscription (though both have uses that the iTV does not currently address). And perhaps it could replace extended cable packages (in my own household we downgraded to basic cable several years ago and filled in our entertainment gap with TV-on-DVD via Netflix). But to make Alan's numbers work, you need to drop cable entirely... and that's just not going to happen.