Apple Preparing an 'Assault On Your Living Room'

By Tracey E. Schelmetic April 13, 2011

A Wall Street analyst claims that Apple is about to assault your living room. Perhaps not in the literal sense, but according to Peter Misek of Jefferies, a securities and investment banking firm, Apple is readying itself to launch “a new far reaching “cloud-based service” focused on video.

In order to accomplish its new venture, theorizes Misek, Apple will pull out its big guns: a giant new data center the company’s building in North Carolina is expected to be up and running very shortly (if it isn't already). Long theorized to be a planned hub for some sort of streaming entertainment service, the new data center may be the “mothership” from which Apple can offer an advanced Web-based video subscription product that rivals Netflix, writes Business Insider. Apple may also be planning to build a second data center next to the original.

Though the news is still speculation, many analysts are confident that Apple is headed to try and take some of the subscription-based streaming entertainment market.

Other highlights from Jefferies report on Apple, reports Business Insider, include how Apple could be building a few other data centers elsewhere in the U.S. and then in Europe. Misek writes, “We can envision Apple creating the service first in the United States and then rolling it out internationally.”

These “super data centers” are going to be used to deliver video to Apple devices. Misek reasons the centers must be for video, since Apple would not need so extensive a center for music.

Further supporting his overall video hypothesis, Misek says, “We find it notable that the content companies, citing a lack of domain license, asked Cablevision to remove channels from its iPad app. We believe these same companies are negotiating some sort of deal with Apple.”

Here's Misek's thoughts on how it could work: “In terms of content we think some sort of subscription model also makes sense ... We believe Apple has learned much from having Netflix on the Apple TV and we cannot help but feel Apple will try to improve on this model somehow. So how does Apple convince Hollywood and other content creators to license it? In our view, the best way to do that would be the model they use for App developers: let them take the vast majority of the revenue while you use the content to drive device sales and monetize it that way. We are huge fans of iTunes, but that cannot be it from Apple. There is another level coming here and we see this as one of the most fruitful potential uses of Apple’s enormous cash hoard.”

Misek also speculates Jobs could be stepping down soon, and wants to revolutionize video as a final act.

The big advantage of building an inclusive video service for Apple: It can drive sales of iPads, iPhones and other Apple gadgets. If it works, it's an Apple-specific software service that Google can't offer with Android.

This is rough news for wireless networks and cable providers. It would be more bandwidth consumption for both. For cable providers it would be another “cord-cutting” style threat.

Jefferies believes Apple will launch either a new set top box or an actual television in 2012 or 2013. While the TV business is usually pretty crappy from a margins perspective, Misek argues Apple's years of supply chain management, software and hardware design could be a big advantage.

So there it is. Of course, it's all speculation at this point. But it's really the only explanation that fits the need for so much data storage. Time will tell.


Tracey Schelmetic is a contributing editor for TechZone360. To read more of Tracey's articles, please visit her columnist page.

Edited by Janice McDuffee

TechZone360 Contributor

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