Apple Said Developing Ad

Apple Inc. (AAPL) is developing ad-skipping technology that would let owners of its Apple TV set-top box and future television devices watch shows without commercials, people with knowledge of the matter said.

Apple executives have briefed at least two owners of broadcast TV networks and cable channels, as well as some of the biggest U.S. pay-TV systems, said the people, who asked not to be identified because the talks are private. One proposal is for Apple to reimburse programmers for skipped ads, they said.

The company is seeking to develop TV products with broader appeal than Apple TV, a set-top device purchased by 13 million consumers, Chief Executive Officer Tim Cook said in May at the D: All Things Digital conference. Apple TV is more appropriate for "hobbyists" than mainstream viewers, he said. Apple continues to work on a "grand vision" to update TV-viewing that remains "much like 10 or 20 years ago," Cook said.

Jessica Lessin, a technology writer, reported on July 15 that Apple was working on the ad-skipping initiative.

With advertising accounting for the largest share of their revenue, commercially supported TV networks have resisted skipping technology.

Dish Network Corp. (DISH) introduced ad-skipping for broadcast network TV shows in its Hopper TV set-top box in March 2012. 21st Century Fox Inc., Comcast Corp. (CMCSA)'s NBCUniversal and CBS Corp. (CBS) sued, claiming the service will destroy free, over-the-air prime-time television. Dish sued the networks in New York, seeking a court ruling that it isn't infringing copyrights.

DVR Popularity

Almost three-quarters of consumers in a survey cited the ability to skip commercials as a main reason to use a digital video recorder, Google Inc.'s Motorola Mobility unit said in its annual media engagement barometer released on March 19.

Apple has also been working to license more content for people to watch via Apple TV. In June, it announced deals to offer apps from Time Warner Inc. (TWX)'s HBO and Walt Disney Co. (DIS) 's ESPN to customers who already receive those channels from cable or satellite pay TV services.

The maker of iPhones and iPods is also reaching out to cable services, which buy content from media companies such as Disney. It is nearing a deal with Time Warner Cable Inc. (TWC) that would let subscribers of that cable system watch channels on Apple TV, people have told Bloomberg. The companies plan to announce an agreement within the next few months, those people said earlier.

Accessing content from the Internet on a TV has become common since Apple introduced Apple TV in 2007. According to Leichtman Research Group, 44 percent of U.S. households have a TV set connected to the Internet through a video-game console, Blu-ray player or streaming devices such as Roku Inc. and Apple TV. That's up from 38 percent a year ago, the researcher said.

Looming Competition

More competition is coming. Intel Corp. (INTC), the world's largest chipmaker, plans to begin selling a set-top box with Web-based pay-TV service by the end of the year.

Google has also held discussions with media companies about licensing content for an Internet TV service, people with knowledge of the matter said yesterday. The news was reported earlier by Dow Jones.

Apple, based in Cupertino, California, rose less than 1 percent to $430.54 at 9:59 a.m. in New York. The stock had fallen 19 percent this year through yesterday.

To contact the reporters on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net

Enlarge image