• Business Week, Thursday, May 31, 2007 10:49 AM

A day after Fortune canned Apple TV as "a dud," it announced a landmark deal with Google to show YouTube videos on the interactive TV device. Business Week wrote that by joining forces, "the electronics maker and search giant just extended their lead" in bringing Internet entertainment from the PC to the TV.

For Apple, the obvious upside is that Google content could help sell more Apple TVs. While no official numbers have been released recently, the response so far to Apple TV is understood to be tepid. Tim Bajarin, president of technology consultant Creative Strategies, says that YouTube clips should help Apple sell more of the iTunes-compatible devices. "With YouTube, [Jobs] might have struck a new nerve and in the process gotten more interest," he says.

Future cooperation between Google and Apple, the two hottest stocks in the media and technology sector today, is a definite possibility. Also, as the quality of video from YouTube improves, the partnership will become even more valuable. Imagine on-demand sports highlights from the NBA. Now imagine it in HD. The deal will no doubt get the attention of other content owners. If sales are good enough, Web-based TV services like Joost, the NBC-News Corp. joint venture, or the CBS Interactive Network might be tempted to partner, too. That would create an instant leader in the nascent Web TV field.

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