Musings on a Comcast set-top box, Apple's streaming service, and acquiring a content provider

Over the Thanksgiving weekend, I installed a new X1 set-top box from Comcast, mainly because the big cable company kept bugging me to do so and it didn't cost me a penny. I was able to replace my old cable box and a second piece of equipment with the X1, and it gives me a voice-controlled remote that isn't as handy as the Siri Remote of the Apple TV -- but close -- and improves on the discovery of channels, movies and shows out of the thousands available on Comcast. It's also a cloud-based DVR that does away with the limited capacity of the hard drive-based boxes of the past. Setup was incredibly simple; the only thing I needed to enter was an all-numeric account number that was entered in seconds, and everything was up and running perfectly in less that five minutes. 

Compare this to Thanksgiving Day, when I decided to use my third-generation Apple TV and AirPlay to show a slideshow to my relatives. Or I should say, TRIED to use the Apple TV and AirPlay.  Although I had the slideshow on an iPad and had watched it a few months before using the same Apple TV, the streaming box just didn’t show up as an AirPlay target. I tried rebooting the Apple TV. Nope. Tried restarting the AirPort Extreme. Nope. Even tried to get to the Apple TV from two other iPads and two Macs. Nope. Finally, I gave up and we all watched the slide show on the nice big screen of the iPad Pro. I still have no idea why the Apple TV isn’t working properly. Is Apple giving me a subtle nudge to buy a fourth-generation box?

For a company that prides itself on creating devices that “just work”, the Apple TV — even the new fourth-generation box — has a lot of shortcomings that we’ve heard plenty of gripes about. Dennis, in his review of the new Apple TV, noted that there’s no 4K support, no optical out port for audio, and worst of all, you still need to use the onscreen keyboard to enter text. 

Did I mention that I can use iOS apps on either my iPhone or iPad to search for content, set up DVR recordings, and even watch live content remotely? Yep. Can't do any of those with an Apple TV yet. These are the Xfinity TV X1 Remote and Xfinity TV apps -- oddly enough, the latter even has an Apple Watch app for setting DVR recordings with a few taps on the wrist.

If that X1 set-top box craps out like my Apple TV appears to have done, I can call Comcast and have someone come to my house to replace it for free. For the Apple TV, I pretty much just have to continue troubleshooting it until I lose hope or patience, then go buy another one. Yeah, despite the horror stories about Comcast's customer service, at least they have a way to send a body to my house quickly to fix issues.

The X1 box also runs apps; there are a few built in already -- Pandora, the Weather Channel, Facebook and Traffic, for example -- but my guess is that Comcast is waiting for the population of these set-top boxes to reach a critical level and then boom, they’ll start selling games and other apps through their own app store. 


While it’s not perfect — and neither is Siri — Comcast’s voice search does a pretty decent job of letting me find and record movies and TV shows. Last night, for example, we decided to watch Ratatouille. I just punched the microphone button, said “Find Ratatouille” and within 10 seconds we had rented the movie in HD for $3.99. 

So, here I have a cable box that’s ridiculously simple to set up, gives me voice search capability, has every channel I’d ever want to watch (plus a few hundred I’d never want to watch) and thousands of movies on demand. In addition, I have access to a in-home support structure that I can't get from Apple. But for the fact that I can’t stream my own music, photos or videos to it, the Comcast X1 box is doing a lot that I need for it to do. 

Now, Apple’s fourth-generation Apple TV is supposedly being primed for a streaming video service that will offer a bundle of stations for a set price, plus premium channels for a bit more. This service has been rumored for years, and will apparently hit the market in 2016 if all of the rumors and hoopla are correct.

Given that for many people, the good old cable company set-top box will do everything they need for it to do, what will Apple be able to compete on with its streaming service? Price. To give you an idea of the ridiculous monthly charge I pay Comcast for internet service, phone service, and cable, our bill is currently about $230. About $75 of that bill is for the high-speed Internet, which I would have to continue paying in order to use an Apple TV for a subscription streaming TV service. The phone service could be dropped in favor of mobile service, which is cut about $30 of the total. So the gap Apple will have to play with is, in my case, about $125 per month. That's a pretty good range that Apple could play in. Bring in several hundred channels of streaming HD video at even as high as $75 per month, and I'd drop Comcast cable in a minute. 

But that's where I find the entire idea of a successful Apple streaming service falling apart. Apple has never competed on low price in any of its businesses. It's always been the high margin player in each and every business it gets into. When PC manufacturers are in a race to sell the cheapest personal computer, Apple sells expensive Macs and sees growth when the other companies are watch sales fall. When other smartphone manufacturers try to compete by selling cheap Android smartphones while Apple's pricey iPhones command an increasing share of a huge market, Apple ends up pulling down 94% of global smartphone profits. Remember when the iPod was Apple's big market surprise? The company was selling more expensive media players while everyone else was once again in a race for the bottom price. 

Can Apple compete on price? It all depends on two things; volume of sales and what Apple ends up paying to the networks and other content providers. Apple will have a lot of competition -- the big cable companies are not going to stand by and watch the world's largest consumer electronics company tap into their longstanding revenue streams. There are also companies who are already beating Apple at the game: witness Hulu, Netflix, and Amazon, although none of them have a true cable substitute subscription streaming service. If Apple can bring a near-cable experience to Apple TV, it's going to bring a flood of price cuts from the competition as well as a rush to grab more network contracts.

One big area that Apple is lagging in is content creation. Apple might have difficulty making deals with every network, so it's going to need to start creating its own content. While the other streaming providers are already creating Emmy Award-winning content, Apple has... nothing. A really smart move that could help Apple get a jump on the competition would be to buy a studio, or a group of them. 

My pick for a merger or acquisition of a studio (probably a merger) would be Disney. The company is really an entertainment conglomerate now; Disney Media Networks (Disney Channels Worldwide, ESPN, ABC, and a number of radio stations), Disney Parks & Resorts, The Walt Disney Studios (Disney, Disneynature, Pixar, Touchstone, Marvel Studios, Lucasfilm), Disney Consumer Products, and Disney Interactive. 

Why Disney? Why not? Apple and Disney have some interesting ties; Disney CEO and Chairman Bob Iger is on the Apple Board of Directors, the estate of Steve Jobs is the single largest shareholder of Disney, Jobs sold Pixar to Disney... It would give Apple one of the big three American networks (ABC), the leader in sports programming (ESPN) and a collection of studios that is continually cranking out blockbuster hits.

Could Apple buy Disney? Let's say Apple makes an offer of ten times EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) for Disney. That figure for the twelve months ending October 31, 2015 was $16,487,000,000 - ten times that is about $165 billion. Apple has that much cash on hand, but a lot that is overseas. I have no finance background, so I won't venture a guess as to whether or not Apple could make an acquisition of Disney without incurring some huge, nasty tax penalty.

Enough of this rambling about Apple, the Apple TV and competing against Comcast and the other cable and satellite carriers, as well as the rest of the streaming world. What do you think about Apple buying or merging with Disney or another studio? Do you think Apple can really compete with the likes of Comcast or Time Warner in terms of offering a ton of channels to the public? Leave your thoughts in the comments below.