Add in free Hulu and the bar for media delivery on the Internet has been set - $10 per month is about what Apple needs to do if they want to capture any more of the market than their existing base of users.
Especially when you consider there are 74+ million Nintendo Wii and 60+ million Xbox systems out there which already stream Netflix and Hulu. That's an installed base that Apple will need to consider - about half of the households in America already have this capability. Selling yet another box to duplicate that functionality - especially at a higher monthly cost - will be a VERY tough sale, other than to the existing Apple adherents (who are, in fact, a small minority of the market).
I think you’re right on the $10 bar for a mass sign up. Netflix has really built a lead here. I have no idea if Apple will come up with a premium service for the high end that finds a niche. Perhaps it will be the hardware/software and integration into all media that it aims for (as it is in its offering now).
As I said, I’m not really the market, and I don’t know except anecdotally how well their current tv offering is doing.
Last time I checked out Hulu, they didn’t have the content - for me anyway. But something like that, perhaps the networks and other content providers will find an internet subscription - or advertising supported like Hulu - model.
And PS3 for Netflix.