The Internet created transparency in retail, advertising and travel pricing, driving down prices in all of those sectors—and now it is poised to do the same for cable television, RBC's lead Internet analyst said Tuesday.
"We have yet to see it in content, but we're right on the cusp of it now," Mark Mahaney said in an interview on CNBC's "Squawk Box."
Mahaney made his comments after The Wall Street Journal reported Apple is in talks to launch an Internet TV service. The service would cost $30 to $40 a month and launch with about 25 channels that would deliver content from ABC, CBS, Fox, ESPN and other networks. Apple declined to comment on rumor and speculation, Reuters said.
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The service would reportedly not carry NBC content due to a dispute between Apple and NBCUniversal-parent Comcast. CNBC is owned by NBCUniversal.
The development builds on the cord-cutter movement, Mahaney said, referring to people who opt for a la carte viewing options powered by streaming Internet video rather than traditional cable bundles. The trend is especially prevalent among millennials, he added, noting that some of them have never purchased a cable package.
He said content is currently being sold inefficiently, forcing consumers to buy bundles of hundreds of channels. Meanwhile, consumers consider very few networks—ESPN being one of the exceptions—indispensable enough to warrant a price premium.
"If content is king, why has it been forced bundled to consumers?" he asked. "Certain parts of content are king, not all content is king, and it's been sold as if all content is king. That's the change."
Aspen Institute CEO and Steve Jobs biographer Walter Isaacson told "Squawk Box" that content was never in fact king under the old model because cable providers relied on expensive bundles to sell it.
"Now when you can get whatever you want on whatever device you want—and Apple, and Netflix, and Amazon are in it—people who make good content will be in demand."
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While he acknowledged Apple is joining an existing trend of cord cutting, he said the company's entry into the space is more like a big splash in the bucket than a drop. He anticipates it will be only a matter of weeks after the service launches before cable customers begin abandoning bundles in significant numbers.
The shift to television service such as the one Apple will reportedly launch will be good for some content producers because they will reach a broader audience, Mahaney said. However, he added, they must have truly compelling content.
As for whether such a model will yield lower profit margins, Mahaney said the best players will get more distribution and reach audiences that would not have seen their content in the past. Since costs are fixed in Internet distribution, margins should improve with increased distribution, he said.