Aug 17, 2012 10:00 AM EDT
New Apple TV 2012: Features, Rumors

Forget the iPad, the iPhone, and the iPod. The future is in the box.  

Or, so Apple's recent activities seem to confirm. According to The Wall Street Journal, Apple has been meeting with various cable providers about letting consumers use an Apple device as a set-top box for live television and other content, according to sources familiar with the matter.

Apple, however does not appear to have reached an agreement with any cable operators. And with good reason - this is a complicated arrangement, and many obstacles for both sides remain.  One such hurdle may be operators' reluctance to allow Apple to establish a firm foothold in the television business.

Apple would need to convince consumers to pay for a set-top box for possibly hundreds of dollars, rather than renting one from their cable companies for around $15 a month. Similar set-top boxes sold by TiVo and Samsung so far have made only a minor impact on the market.

These meetings illustrate that Apple might be seeking a more traditional approach in its expansion into television than it has practiced in past talks, specifically its coordination with existing service providers rather than licensing content to compete with them directly.

By building a set-top box that could be used with cable operators, Apple would be following a similar playbook that it used to transform the mobile-phone industry: convincing existing service providers to marry their service with Apple's hardware and software.

Apple Chief Executive Tim Cook met with Glenn Britt, chief executive of Time Warner Cable Inc., in Sun Valley, Idaho, last month, during the annual media conference hosted by Allen & Co. Time Warner Cable is one of the operators talking to Apple, the people say.

Two people briefed on the matter said the technology involved could ultimately be embedded in a television. Apple has worked on prototypes for televisions in the past, according to people briefed on the projects.

Cable executives have said that the historically weak sales of the Apple TV have made striking a deal to put live programming through the box a low priority. Operators have put more emphasis on apps for the popular iPad tablet.

Apple's demand for a 30 percent cut on certain transactions going through the box has also been a huge turnoff for cable providers, according to a source familiar with the situation.

For cable operators, the advantage of a deal with Apple is that it could allow them to reduce the money they spend buying set-top boxes, which are leased to customers for a monthly fee. It could also help them hang on to customers who can watch video through a growing array of Internet alternatives, as both traditional TV and Web video would be available through the same device.

Apple was granted various patents by the U.S. Patent and Trademark Office Tuesday morning, some of which point to new technology for Apple's television software and a new method for packaging touchscreen technology.

In United States Patent 8,243,017, "Menu overlay including context dependent menu icon," Apple describes ways to display onscreen menus and video for its Apple TV set-top box. What's most interesting about this patent, which was originally filed in 2006, is that the patent illustrations show that the Apple TV either was originally designed to work with cable TV, or that Apple is primed to collaborate with cable providers in the future.

The set-top box (described in the patent as a "video device") would employ a number of elements that are already familiar to users of TiVo and other DVRs, such as the ability to record live TV.

Apple already sells a $99 Apple TV box that allows users to access some Internet video, and "channels," like Netflix, and Hulu on their television sets, much like other similar devices such as the Roku, but not live channels supplied by cable operators.

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