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Get rid if cable channels? As much as we'd all love for that to happen, you KNOW there are too many special interests to make a product like that work the way it really needs to right out of the box. Not unless you plan on buying all of your content from iTunes, and that can get rather pricy if you aren't careful.
The same was said about the potential of Apple releasing a phone. Too many special interests in the telecommunications business. How did that turn out?
An AppleTV is near ready to come to market with the pieces put in place in the iCloud wave of releases. iTunes in the cloud is already making this happen. When you buy a tv show or a movie or a song on any of your devices, it becomes available on your TV. No downloading, you bought the rights to it, stream it whenever you like. Simple.
For live tv, partnerships with networks for live news. A CNN app is entirely possible. Some networks already have live streaming to iPhone/iPad with AirPlay putting it on your big screen.
For sports, partnerships with each major league/association. It's happening with NBA, MLB and NHL apps already available on AppleTV. NFL is missing but will quickly fall in line once this takes off.
The basic principle is that instead of paying cable operators for a ton of channels with stuff you don't watch, you pay the actual content creators for their particular product (i.e. movie studios, news channels, sports leagues).