Exclusive: Apple Pitches Ad-Skipping for New TV Service

Apple has a new trick up its sleeve as it tries to launch a long-awaited television service: technology that allows viewers to skip commercials and that pays media companies for the skipped views.

For more than a year, Apple has been seeking rights from cable companies and television networks for a service that would allow users to watch live and on-demand television over an Apple set-top box or TV.

Talks have been slow and proceeding in fits and starts, but things seem to be heating up.

In recent discussions, Apple told media executives it wants to offer a “premium” version of the service that would allow users to skip ads and would compensate television networks for the lost revenue, according to people briefed on the conversations.

Consumers, of course, are already accustomed to fast-forwarding through commercials on their DVRs, and how Apple’s technology differs is unclear.

It is a risky idea. Ad-skipping would disrupt the entrenched system of television ratings—the basis for buying TV ads. In fact, television broadcasters sued Dish Network when it introduced similar technology last year.

On the other hand, it is no secret that fewer and fewer people are watching commercials thanks to DVRs; networks may very well be eager to make, rather than lose, money off the practice.

Television-rights owners have been reluctant to embolden Apple’s push into the living room, and compensation for skipped ads seems unlikely to be enough to convince them.

What other carrots and sticks Apple is offering in the negotiations remains unclear.

Apple wants to strike deals with cable companies like Time Warner Cable to allow cable subscribers to watch television using an Apple device as a set-top box and with a software interface designed by Apple.

But the company has also been talking to television networks, which sell cable companies rights to their content, about rights for the service and issues such as ad-skipping. 

A patent Apple was granted last year may offer a clue about Apple’s ad-skipping system. The patent describes technology that could swap in a different stream of video during a commercial break.

Apple already sells a $99 set-top box for watching iTunes and Internet video but has been trying to launch a more ambitious service that offers live television for some time.

Discussions have been highly secretive. CEO Tim Cook and senior vice president Eddy Cue held talks with some media companies last week at a conference in Sun Valley hosted by investment bank Allen & Co., the people briefed on the discussions said.

When asked about the talks at the time, Cue quipped: “There are cable companies here?” Apple’s marketing chief Phil Schiller has also been involved, a sign that the effort is broadening.

An Apple spokesman declined to comment.