Here's what they would have to offer:
1. Full HD Content, as in 1080p. Without broadcast constraints, there's no reason that a computer-based TV service should not have 1080p content as an option.
2. Premium content at no extra charges. That means HBO, Cinemax, etc. No additional fees. Should all be included in subscription cost and should be accessable without restriction.
3. Sports. If you're asking to replace cable television as an option, you MUST MUST MUST have sports options. Again, this should be inclusive.
4. Access to live as well as "on-demand" content. No one will adopt a cable replacement unless they can access things like 24 hour news networks, etc. There is no use for this content unless it's live.
5. Local content. Again, if you're replacing cable as well as making your computer the media centerpiece of a household, you need to provide live access to local/regional content.
6. Exclusive content. If you want to set yourself apart from cable you have to offer something it DOESN'T offer. That means exclusive content to the iTunes service. Webcasts, behind the scenes, digital shorts, commentaries and even eventually original programming. Otherwise people will... not... switch.
7. Adult content. The adult entertainment industry has decided much in the way of economic entertainment infrastructure, such as formats (VHS/Beta) and the like. Capture this market and people will come (quietly) in droves.
If Apple can bring all that to the table, they may have a chance.