ESPN’s deal to pay $15 billion for Monday Night Football could incite a revolt against the cable industry’s basic business model.

FORTUNE — The idea that American television viewers should be free to buy just the TV channels they want has always proven a pipe dream. It’s a silly idea, cable and satellite operators have convinced politicians and regulators: selling channels in packages funds a wider variety of programming, actually leaving consumers better off.

Regardless of the merits of that argument­ — whether cable industry pricing does more to benefit cable companies’ customers or their shareholders — it hasn’t mattered as a practical matter. Over the past decade, cable companies have always gotten their way in Washington, easily batting down laws and regulations aimed at forcing them to sell TV channels a la carte. But while the pricing system of the cable business has proven impervious to government attack, it’s starting to show signs of weakening from within. As more and more cable channels pile higher and higher fees on subscribers, the foundation of the industry’s hefty profits may fracture.

The critical question: How high can ESPN and other networks raise their “subscriber fees” before it makes sense for one major cable or satellite company to tell them to go jump in a lake? Right now ESPN charges Comcast (CMCSK), DirectTV (DTV) and their competitors about $55 per subscriber per year to carry the main ESPN channels. But the sports network, which is owned by Disney (DIS), just signed a huge new deal to carry Monday Night Football through 2021 at a staggering cost of $15 billion. There’s no question ESPN is going to use that cost to justify further hikes in its subscriber fees.

The incentive to tell ESPN to shove off may already have arrived, as the reliably blunt chief executive of Dish Network (DISH), Charlie Ergen, mused in an earnings call earlier this year: “I guess strategically, I would say it this way, if you got 3 competitors and they all have the sports programming and only 15% of the people actually watch the sports programming…to not carry sports programming would have a great strategic advantage for certain customers.”

To the cable industry, that’s heresy. The notion that dropping unwatched channels would be an advantage for customers is precisely the idea that the industry has fought for years. (According to studies the cable lobby cites, allowing subscribers to by channels individually would result in both less choice and higher prices.)

There would be obvious disruptions as angry sports lovers left a distributor who gave up sports channels, Ergen admits. Presumably sports lovers would drop the cable or satellite system quickly, while it would take longer for the non sports-lovers to realize they can save money by moving to the sports-less competitor. Says Ergen: “I think there might be some short short-term pain, but they probably do pretty well long-term.”

In the earnings call Ergen was careful to keep his discussion hypothetical, and a Dish Network spokesman is quick to emphasize that the company is not planning to drop sports from its lineup.

Dish is currently in a longterm contract with ESPN. The company won’t say exactly what it pays in subscriber fees, or when the deal expires. When the contract does come up for renewal if Dish was to refuse to pay fees for its 14 million subscribers and drop ESPN, the company would save roughly $750 million a year.

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* Amazon (AMZN) is reportedly planning a Netflix-like ebook rental service where users will be able to pay a fixed monthly fee to get access to a digital library. (The Wall Street Journal via The Next Web)

* CBS News severed its relationship with What’s Trending and its blogger Shira Lazar after the web site Tweeted a false report that Apple CEO Steve Jobs had died. (Fortune)

* Yahoo’s board is prioritizing a potential sale of the company over finding a new CEO to replace ousted exec Carol Bartz, who also just gave up her board seat. Meanwhile, tech entrepreneur Jason Calacanis on how he’d improve Yahoo (YHOO) if given the chance. (The Wall Street Journal and Launch)

* One iPad app developer reveals how far they and Apple went to keep the first iPad secure pre-launch, an intense process that involved (among other things), having a room without windows, chaining the tablets to a desk, and taking pictures of the desk’s wood grain. “If any pictures leaked out, they could trace it back to which desk they came from.” (Business Insider)

* TechCrunch has the inside scoop on several announcements reportedly coming from Facebook’s f8 conference, including “track unification” for its upcoming integration of music service likes Spotify, MOG, and Rdio, which could mean users could listen to songs from say Spotify without having to actually be a Spotify user. (TechCrunch)

* It’s official: real estate on Silicon Valley’s Sand Hill Road is the priciest in North America, even trumping Manhattan’s Fifth Avenue and Greenwich, Connecticut. (The Huffington Post)

* Three startups trying to disrupt sports. (Entrepreneur)

* Companies like Dropbox and Spotify are leaning on it for it revenues, but does the freemium model have flaws? Paul Sawers over at The Next Web dives in. (The Next Web)

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The network has dropped the celebrity blogger whose site issued the erroneous report

Shira Lazar. Source: Facebook

Hours after a false report Friday that Apple’s (AAPL) CEO had died set newsrooms around the world scrambling for confirmation, CBS News severed its relationship with both What’s Trending, the site that issued the erroneous tweet, and the celebrity blogger who produced it, according to The Hollywood Reporter.

Shira Lazar, 28, a Canadian-born actress and TV personality, launched the daily Web report and a companion weekly webcast on CBS.com in May.

CBS executives stressed Friday that What’s Trending was produced independently by Lazar’s Disrupt Group and had no news-gathering relationship with CBS News.

But the network that once hosted Edward R. Murrow had clearly hoped to benefit from Lazar’s online cachet and access to Web celebrities. It paid the price Friday when an unchecked tweet from her What’s Trending’s account was let lose on the Internet and attributed — at least by some headline writers — to CBS.

It’s not clear who wrote the original tweet. It was quickly removed, but not before being widely reposted. Lazar’s initial response —  ”Apologies — reports of Steve Job’s death completely unconfirmed. Live on.” — struck many as flippant.

She issued a second, more heartfelt apology from her personal account: “On behalf of all of us at @disruptgroup we sincerely apologize for the inaccuracy of what was tweeted earlier today. – EP/Host @WhatsTrending.”

Murrow must be turning over in his grave.

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Ripe target, easy to spoof, smack in the middle of his demographic sweet spot

Source: The Conan O’Brian Show

The Conan O’Brian Show Thursday night aired yet another mock Apple (AAPL) video — its fourth this year, by our count. (See here, here and here.)

This one picks up where news stories about the lost iPhone 5 left off, with Cupertino’s crack engineers devising ever more fiendish punishments for whomever took the secret prototype. (Tag line: “You have no idea who you’re messing with.”)

Why does TeamCoco keep doing this?

First, I assume, because it’s good comedy. The story of the iPhone that walked out of a tequila bar is intrinsically funny. Also, there’s a pomposity to those Apple videos — the form that’s being spoofed here — that’s asking to be punctured. But most of all, the demographic that buys iPads and iPhones and follows Apple news is a perfect fit for Conan’s Twitter-driven comeback: young, hip, well-heeled and wired.

Conan’s spoofs are not without their clout. Plenty of Final Cut Pro users protested the release of Final Cut Pro X (and the withdrawal of its predecessor), but none so effectively as the post-production crew of the Conan O’Brian Show. Last week, two months after that video aired, Apple started quietly selling Final Cut Pro again.

Below the fold: The iPhone 5 torture video.

Via Forbes’s Brian Caufield.

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The videogame retailer has started accepting trade-ins of used Apple products — and that may mean a bigger change for their business.

By Daniel Roberts, reporter

FORTUNE — The news that GameStop stores are buying used Apple devices alongside traditional consoles and video games hit the Web this week and went viral almost immediately. Many bloggers began stating outright that the chain will also sell new Apple devices, such as the iPod and iPad, but the company has not confirmed this.

Why the fuss over what seems a benign change to a game retailer’s inventory? It may be the endless appetite for Apple (AAPL) news, but GameStop (GME) CEO Paul Raines told Fortune he sees the move helping evolve the company’s business. “We’re selling refurbished iPod Touches like crazy,” he said. “What everyone wants to know now is whether we will become a distributor of Apple products, but that’s something we don’t want to answer yet.”

The retailer has made a business out of taking in used game systems like Microsoft’s (MSFT) Xbox 360 and Sony’s (SNE) Playstation 3, refurbishing them and selling them back to consumers at a discount. GameStop does the same with video game software designed for consoles by independent publishers like Activision Blizzard (ATVI) and Electronic Arts (ERTS) as well. It has created a lucrative secondary market for all manner of digital products, boosting its coffers and driving traffic to its stores, even as it has sometimes complicated relationships with manufacturers and software publishers. Now it hopes to do the same with Apple devices, estimating that U.S. consumers have some $7 billion worth of them in their homes.

The Grapevine, Texas-based retailer has been looking for ways to boost its business. Its stock is hovering between $22 and $24, a fall from a high of $28.21 in late-May, its two-year peak. Shares have seen a slight spike in the last week on the Apple news, but the company failed to makes its numbers for the second quarter. During the second quarter, GameStop sales declined 3.1% to $1.74 billion, where estimates had been $1.83 billion. Wedbush analyst Michael Pachter notes that the industry at large is down, though. “The stock struggles mostly because there’s a widely held investor perception that packaged products are going away, and that’s hard to overcome. But I don’t think they’re going away completely for a long time.”

This latest development with Apple devices may prove beneficial. Pachter says the GameStop move is “a really smart business. I don’t know that it even matters if [they] make any money from this, as much as they become a new destination for a whole bunch of households looking to sell their old iPods.” Pachter is skeptical, however, of whether or not GameStop will soon sell new iPods, iPads and iPhones. “Apple doesn’t have any need to distribute new devices through GameStop. I don’t think it would even be a particularly high-margin business for GameStop.” Instead, the likelihood is that trade-ins of Apple devices would boost purchases of used games at the retailer.

GameStop first began accepting Apple devices in its Dallas-Fort Worth stores last April as a test, but will go national on Monday, September 12. Members of the company’s PowerUp Rewards program received early notification via an email last week. “Did you know that GameStop now buys your old iPod, iPhone and iPad devices?” it asked. “Trade them in at GameStop for in-store credit… Plus, you’ll score PowerUp Rewards points on every item traded.”

Raines said the idea appealed to him as one more way to strengthen its already large buy-sell-trade business, through which the company gave customers $1 billion in trade-in value last year. “If you think about GameStop, our vertical strategy is gaming. What we’ve also learned is that our stores are exceedingly good at buy-sell-trade, so a horizontal strategy is emerging around that,” he said. Launching the program now, he noted, will also allow the company to get ahead of the upgrade cycle spurred by a new iPhone model, widely expected this fall.

Aside from Apple devices, a spokesperson did say that the company “will have a curated offering of tablets by holiday.” Whether that offering will include iPads remains uncertain. Raines suggested the possibility of a GameStop-specific tablet that comes pre-loaded with games selected by the retailer. “What’s happening in tablets is there’s an excess of production, and lack of distribution,” said Raines. “We believe that leaves big potential for gaming-specific tablets. You have your whole gaming library on there, it becomes very appealing.” GameStop bought the casual gaming site Kongregate in late July 2010, another strategic move aimed at cornering the digital market. The purchase price was not disclosed.

The Apple-related news comes at a time when the company is making an effort to have a net of zero new store openings this year, as the industry moves toward DLC (downloadable content) gaming. Rob Lloyd, GameStop’s CFO, explained that although the company still does the bulk of its business from in-store purchases, “The challenge we gave our real estate team this year was, get as good at closing stores as you are at opening them.”

Perhaps, if the welcoming of used Apple devices proves a big success, they’ll want to open some new stores after all.

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Hasty revisions three weeks before the end of Apple’s last fiscal quarter of the year

It happens every three months. As the end of Apple’s (AAPL) fiscal quarter approaches, the small army of analysts that cover the stock dusts off its spreadsheets, finds them overly conservative and starts issuing revisions. If history is any guide, the numbers will be revised again — upward — when the company reports its Q4 2011 earnings in mid-October.

Here are the reports we’ve seen so far this week:

• Sterne Agee’s Shaw Wu: Sees “remarkable” strength in iPhone 4 sales despite expected release of iPhone 5 in October. Ups iPhone estimate to  18.5 million (from 15.7 million), iPads to 12 million (from 10.4 million) and gross margin to 41% (from 39%). Staying pat on Macs at 4.1 million.
• Jeffries’ Peter Misek: iPhone sales are “surprisingly strong”  he says, but back-to-school demand for Macs was “weaker than expected.” Ups iPhone estimate to 18.9 (from 18.4), lowers Mac to 4.4 million (from 4.9 million).
• BMO’s Keith Backman: Raises iPhones to 20.4 million (from 19.5 million), Macs to 4.31 (from 4.27 million) and iPads to 11.0 million (from 10.5), adding that he “sees upside tension to 11.5 million units,” whatever that means.
• Pacific Crest’s Andy Hargreaves: Sees “significant upside” to the numbers in his spreadsheet but doesn’t seem quite ready to change them. Could easily imagine iPhone sales going to 24.05 million (from the 18.7 million in his model) and iPad sales going to 16.5 million (from 11.1 million).

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* Ousted Yahoo CEO Carol Bartz had some choice words for the company’s board – ”These people f—ed me over,” she told colleague Pattie Sellers — despite having a non-disparaging clause in her employee contract. (Fortune)

* Google (GOOG) bought restaurant and travel guide Zagat, presumably for less than $66 million. (TechCrunch)

* Meanwhile, Google also introduced a new music discovery service, Magnifier, that introduces music to new users based on their preferences. (9 to 5 Google)

* Reports speculate that Facebook will launch a music service of its own later this month in cooperation with streaming services Spotify, MOG, and Rdio. (CNN)

* Twitter CEO Dick Costolo held a company “State of the Union” yesterday highlighting some new user numbers. There are now 100 million active users — users who log in at least once a month — with half of those users signing in at least once a day. (Fortune)

* Entrepreneur and Sling co-founder Blake Krikorian has joined Amazon’s (AMZN) board. (All Things D)

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FORTUNE — When Steve Jobs stepped down in August as Apple’s CEO for health reasons, it got us thinking about the arc of his spectacular career. His product presentations became rock star events that continually disrupted the industry. –Anne VanderMey

Photographs are culled from launches, expos, and Jobs’ other appearances with new products. Sources: Apple; The Fortune Archive; The Computer History Museum in Mountain View, Calif.

Here are a few of our favorite facts about Steve.

1.7 MB: The memory of Apple’s Lisa in 1983 — enough for one or two photos. The PC’s price tag? $10,000. Go, Moore’s law.

‘i’: What does the “i” stand for in iMac and iPod? In Steve’s iMac introduction in 1998, he said the “i” stands for “Internet, individual, instruct, inform, inspire.”

$10 million: What Jobs paid director George Lucas to buy Pixar in 1986. Twenty years later Jobs sold the movie company to Disney for $7.4 billion. Today Jobs owns 7.4% of the entertainment giant, worth roughly $4.5 billion, or more than twice his Apple (AAPL) stake.

$4,032: Revenue per square foot five years after the first Apple store opened in 2001. The next best that year? Tiffany, with $2,666.

This article is from the September 26, 2011 issue of Fortune.

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The rapidly growing social network held a so-called State of the Union to reveal new stats about its ongoing rise.

FORTUNE — This week, Twitter CEO Dick Costolo hosted a small gathering at Twitter headquarters in San Francisco to give a brief update on the social network’s growth. His self-described “State of the Union” highlighted a number of new user stats. The overall message? That Twitter thinks it is in a good spot right now.

There are now 100 million active users — users who log in at least once a month — with half of those users signing in at least once a day. Fifty-five percent of them access Twitter via mobile; 40% actually don’t Tweet but simply dip into their Timelines to keep tabs on what people are saying.

The site’s users are breaking records too. During the World Cup last year, the number of Tweets peaked at 3,300 per second; that number jumped to around 8,900 per second two weekends ago when Beyonce Knowles announced her pregnancy live on MTV’s Video Music Awards.

Part of that is due to a growing userbase, but Costolo also says the company has been focusing on shifting over to a new infrastructure that could properly scale and keep up with that growth. (For a complete chronicle of Twitter’s growing pains, click here.) He admitted the notorious “Fail Whale” screen that pops up when ever servers crash may be the most popular of its kind in Internet history for all the wrong reasons.

On the subject of Promoted Tweets, or sponsored Tweets, users currently only come across ones from brands they’ve decided to follow. That will change moving forward. Users will eventually see Promoted Tweets in their Timeslines from brands they don’t follow based on what he calls user activity, including who and what they do follow. To that end, the company will roll out a self-service feature companies can use to generate their own Promoted Tweets.

What about Twitter’s newest competitor, Google+? “No doubt they’ll get massive users,” Costolo, a former Google employee, said of the company’s latest social effort. “They’re bundling it with the Android platform. You can’t not see that red number [update] on the upper right hand side. That’s going to draw an incredible amount of usage. But how we see ourselves differently, is how can we simplify the UI and what we can edit out. I think these platforms will add [features], but we’ll try to edit ours down.”

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At this point, the ultimate fate of the beleaguered Internet company is anybody’s guess. But here are some of the executives that may get a chance at taking the top spot.

FORTUNE — It’s impossible to guess who might be Carol Bartz’s replacement at Yahoo because it’s impossible to guess what Yahoo might look like when a replacement is named. It could be a totally different company before a CEO is even chosen. Or choosing the replacement might be part of the transformation if, for example, the struggling Internet firm decides to sell itself.

Yahoo’s (YHOO) board complicates matters. Given its history — including its surprising choice of Carol Bartz in 2009 — it’s hard to know what it might do now. “I think HP and Yahoo are probably running neck and neck for the worst board in corporate America,” said Eric Jackson of Ironfire Capital in an interview with Bloomberg TV.

Jackson, like everyone else who is speculating on who might lead Yahoo, has former News Corp. (NWSA) executive Peter Chernin near the top of his list. Chernin, Jackson said, is “hungry” to “make his mark outside of Rupert Murdoch’s shadow.”

Chernin left News Corp. in 2009. He launched Chernin Group, a production and investment group that recently had success with the movie Rise of the Planet of the Apes. Chernin’s companies also produce TV shows and invest in media and technology firms in China and other Asian countries.

At News Corp., Chernin was the main force behind Fox Entertainment’s participation in Hulu, the video site that is owned by News. Corp., Disney (DIS), Comcast’s NBC Universal (CMCSA) and Providence Equity Partners. Hulu is selling itself, and Yahoo is among the bidders along with Microsoft (MSFT), Amazon (AMZN), AT&T (T), Google (GOOG) and others.

Even before Bartz’ ouster, Chernin was reported to be considering an acquisition of Yahoo as part of a group of investors. If he is indeed “hungry” to make his mark on the Internet under his own name, he might be persuaded to leave behind the Hollywood glamour.

Another possibility: Jason Kilar, the CEO of Hulu. The former top Amazon executive is ad-savvy (something Yahoo desperately needs) and, obviously, knows a lot about Internet video. If Yahoo, which refers to itself as a digital media company, gets deeper into video, with or without Hulu, Kilar might be a good choice.

Jack Ma is CEO of China’s Alibaba Group, in which Yahoo has a 43% stake. He has battled with Bartz and would like that stake back — and maybe all of Yahoo. His company is worth far more than Yahoo is, so a stock deal is a possibility. Ma would then likely break off and sell pieces of Yahoo.

Yahoo’s board could decide to promote from within, though not without risk. In firing Bartz, the board named CFO Tim Morse as interim chief. It seems unlikely he’ll be installed permanently since he was hired by Bartz and, though he’s well-regarded as a cost-cutter, is also associated with Yahoo’s revenue slide. A clue to his prospects might be found in Kara Swisher’s description at AllThingsD of Morse’s presence at Yahoo’s “all-hands” meeting on Wednesday, where he was apparently nothing more than a supporting player to company co-founder and former CEO Jerry Yang. (Yang insisted that Yahoo is “not for sale,” but there’s little reason to believe him given the company’s distress.)

A more likely internal candidate is Ross Levinsohn, Yahoo’s executive vice president for the Americas. He’s in charge of Yahoo’s faltering display-ad business and its popular news, sports and finance properties — in other words, Yahoo’s most important businesses. Levinsohn came to Yahoo a year ago from Fuse Capital, an investment fund focused on digital media. As a News Corp. executive, he was in charge of that company’s acquisition of MySpace, which went on to become a spectacular failure.

A strong candidate is Jonathan Miller, News Corp.’s chief digital officer. He was CEO of AOL for four years until 2006. Miller won a gold star when he unloaded MySpace from News Corp. earlier this year. He was once a considered for the top Yahoo job, but was blocked by Time Warner, former owner of AOL, because of a noncompete clause. Given all the situation at News Corp., the timing perhaps could be august.

The timing probably couldn’t be worse for another potential candidate, though: Tim Armstrong, CEO of the beleaguered AOL (AOL). Not only is he struggling to make the disparate parts of his company work together, he’s also facing heavy criticism for his handling of the mess surrounding Michael Arrington and TechCrunch. Still, if Yahoo and AOL were to partner in some way, Armstrong could come out on top.

Yahoo has to endure some major changes no matter what, but nobody seems to know what they should be. It could be acquired, or it could sell off major chunks of itself — perhaps its Asian businesses including Alibaba and Yahoo Japan — and use the cash to make acquisitions of its own. For years, people have been asking: “What is Yahoo?” Any new leader has to be able to answer that question in a single, concrete, believable phrase.

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