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What Apple wants with Time Warner TV deal: services

The Apple TV set-top box is shown, Wednesday, Oct. 6, 2010 in New York. The device grabs movies and TV show rentals from the Internet and displays them on a TV. It does much the same thing as the older Apple TV, but is smaller and costs much less, at $99.

Mark Lennihan/AP

It looks as if Apple really is serious about improving its software and services. And it's using its foray into television as the platform.According to Bloomberg, Apple is nearing a deal with Time Warner Cable to bring Time Warner Cable's live television channels to its Apple TV set top box, in what is the first potential deal Apple has struck with a cable company. Sources close to the situation said that an agreement could come within a few months.

It's not yet known if the potential deal would be similar to Apple's other deals for Apple TV and be app based. Time Warner Cable already has apps for both the iPhone and iPad that allow its customers to watch live television on those devices.

Apple could not be immediately reached for comment for this story.

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A deal with Time Warner Cable would mark a huge strategy shift for Apple, which in the past has added older content to the set top box. Most recently, Apple plugged a huge hole, adding content from HBO GO, a division of Time Warner, and Watch ESPN, a division of Walt Disney.

Adding a potential deal with Time Warner Cable to these demonstrates that Apple is serious about increasing its software and services that are of value to its consumers.

It also marks a change that Apple is willing to work with the cable companies on enhancing the television watching experience. In the past, there have been reports that Apple was working on its own television set, something that former CEO Steve Jobs hinted at in his biography, just before he passed away in 2011.

Both Jobs and current CEO Tim Cook have previously said that the television watching experience is outdated. "When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years," Cook said in an interview at the end of last year. "It's an area of intense interest. I can't say more than that."

Apple has continued to tout the success of its $99 Apple TV set top box, announcing recently it's sold more than 13 million units. By potentially partnering with Time Warner Cable, as well as the recent hiring of Pete Distad from Hulu, Apple is serious about changing the television watching experience.

Apple shares were lower in early Wednesday trading, off 0.32 per cent to $417.15, while Time Warner Cable shares were not active in pre-market.

More consumers are watching television when they want to, as opposed to being subject to a live television programming schedule. By adding HBO GO, WatchESPN, as well as live programming from Time Warner Cable, Apple is placating to this trend.

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It's becoming clear that Apple is focusing more on delivering content to users, with Apple TV and iTunes becoming an increasingly important part of the company's business. Apple recently said more than 1 billion TV episodes and 380 million movies have been downloaded from iTunes. Over 800,000 TV episodes and over 350,000 movies are being bought per day. That's serious revenue for Apple, even if it pales in comparison to the money it makes from the iPhone and iPad.

In recent months, Apple's Cook has focused his attention on showcasing Apple as more of a software and services company than simply hardware. Deals such as this continue to stress that focus.

That may play to investor sentiment, which has soured on Apple over the past six months. Shares are down 21.36 per cent year-to-date, trailing the 13.7 per cent gain in the Nasdaq, as earnings and revenue growth have slowed dramatically from 2012.

Apple is set to report third-quarter earnings after the close on July 23. Analysts polled by Thomson Reuters expect Apple to earn $7.33 on $35.16-billion in revenue for its fiscal third quarter.

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