Apple’s iTV Finally Coming Thanks to Comcast? Here’s Why It Would Be Smart. Very Smart.

[UPDATE -- I share my views in today’s article in USA Today]

Tantalizing news you may have missed over the weekend -- Apple and Comcast allegedly are negotiating a potential mega-deal to offer an OTT “TV” service.  If true -- and if a deal ultimately happens -- this has the potential to be massive.  It would likely be THE critical missing ingredient that has prevented Apple from releasing its long-anticipated all-in-one flatscreen iTV (and its much-needed new product category).

I have predicted an iTV well before it became conventional wisdom to do so.  And, I have always felt -- and written -- that Apple can only follow its integrated hardware/software-services playbook if it was able to offer full compelling “TV” programming, including critical “must have” live television (especially ESPN).  Well, Comcast can solve that problem -- since Comcast, of course, already offers all that content/programming (and may have those rights to distribute that programming nationwide).  Mega-cable/broadband company Comcast also has the power to optimize the quality of service of any such OTT programming (a la Comcast’s recent deal with Netflix).  So, rather than Apple needing to negotiate one-by-one with the major broadcasters and studios (who are increasingly wary of Apple), the iTV would get all of the programming it needs in one-fell swoop.  And, does Apple really care about being the actual programming “packager”?  No!  For Apple, the programming is just the means to an end -- the means to deliver a great overall customer experience -- and sell more hardware (in this case, iTVs). THAT is its business model.  Always has been.

Think of such a mega-deal as being analogous to Apple’s break-through into the phone world several years back with AT&T.  AT&T enabled Apple to do this.  Apple made the beautiful hardware (iPhone).  AT&T provided the necessary service to make the iPhone functional.  And, Apple wrapped the overall hardware/software/service in a beautiful and seamless user experience -- and the rest is history.  That deal was good (massively good) for all involved (and not so much for the other service providers).

Similarly, an Apple/Comcast deal not only would be good for Apple, it could be very good for Comcast.  Comcast -- as well as all other cable companies -- understand that the world has changed, and that OTT services are here to stay.  Comcast and others also understand that OTT premium video services require more bandwidth -- and, in fact, are massive bandwidth hogs -- which require consumers to upgrade to more expensive broadband packages (for which consumers are already accustomed -- and willing -- to pay).  And, providing “fatter pipes” is a more compelling business proposition as compared to providing the content services -- since margins are significantly higher.

But, the single biggest potential mega-benefit for Comcast is that Apple -- given its passionate base across the land -- has the potential to expand Comcast’s now limited geographic footprint nationwide via a new iTV.  Again, Apple provides the hardware (the iTV itself); Comcast provides the programming out of its geographic footprint (and has the direct customer relationship a la AT&T with the iPhone); and other cable companies actually enable this “competing” reality via their own pipes (the broadband).

Tantalizing indeed.

And smart for Apple and Comcast.  Very smart.  Two behemoths.  Both hungry for -- and in need of -- a new mega-growth story.