Archive for May, 2012

May 31, 2012

The One Ring to rule them all? Just ask Siri.

My comment on the story in 9to5 Mac (from the original in BGR) of a “control out” API to allow peripherals to work with the Apple TV, to be revealed at the Apple WWDC (Worldwide Developers Conference) in June.

As usual, we look backward to try to see where we are going and end up surprised by the new. It’s not just about a TV, it’s about everything. This is the ONE RING TO RULE THEM ALL.

Apple isn’t just going for the TV, they are going for the entire house, for every consumer product. It will be more than HDMI CEC controls, though it might include those to control some legacy TVs and peripherals. HDMI also includes Ethernet on the cable, so they could do much more with peripherals that support an Ethernet-based protocol. But why limit it to the HDMI cable? If it also works through other connections like Bluetooth and powerline, it can control the lighting, the thermostat, security, the oven and other appliances. Cars and their components can support the “control out” API. Even PCs and Macs might be controllable. Even apps running on devices.

Why would third parties add “control out” to their products? Siri. If you want Siri to be able to control your product, just support “control out”. Apple is overselling what Siri can do now to build demand for Siri integration.

Maybe they should call the API “game over.” Sony and other top-line TV compoenet makers might balk at handing the keys to Apple by supporting the API. But second-tier makers in China and Korea will see it as their chance to leapfrog the big names. Sharp might support it too, because they’re so dependent on Apple for future business opportunities. They’ll have to cave, or become irrelevant. If they delay while developing their own alternative, they risk losing their hotness to Apple again.

Apps will also have to support a Siri API to be controlled by voice. The same API set willalso allow Apple to build a UI for all of the streaming apps from Comcast, HBO, etc., without having to sign content deals. It’ll be the simplest interface you can imagine, layered over the most complex jumble of apps, peripherals, etc the consumer has ever seen. But Siri will promise to make it all work together.

trilliondollartv.wordpress.com

It’s a quick take on a topic I’ve been planning to write about for quite a while. But the news stories didn’t seem to connect the dots, so I jumped in. I apologize for the typos.

May 15, 2012

Where would Apple sell a TV set? Not in an Apple store.

Andy Hargreaves, analyst for Pacific Crest questions whether Apple would want to dedicate any space in its own stores to an Apple TV, based on a key retail calculation: gross profit per cubic foot.

“An Apple television would be a terrible use of retail space relative to iPhone, iPad or the Apple TV set-top box. A 46″ Apple television would likely produce less than 1/200th the gross profit per cubic foot as an iPhone at retail, and less than 1/50th the gross profit per cubic foot of an iPad. We believe this is critical given the limited inventory space at many Apple and partner stores.” (via Fortune Tech)

Profit Problem? Maybe.

Hargreaves assumes that Apple’s margin percentage would be far lower on a TV set than on an iPhone, effectively the gross profit of selling one TV = selling one iPhone. This is in line with the small margins for other high-end TVs. A 50″ TV box I measured at Costco a few months back has about 200x the volume of an iPhone 4S box so the basic calculation is quite obvious. Mr. Hargreaves does not consider the lifetime value of the Apple TV, which could be much greater if there is a monthly service contract attached to the TV. (That’s how Microsoft can justify offering an XBox for $99 with a 2-year contract.)

Apple may feel a TV is so strategic that a lower GP/CF is acceptable, and I think the margins for Apple can be made to work over time. But there is a more basic problem – space.

Real Estate Problem? Definitely.

Apple stores currently sell lots of little boxes like the iPhone, a moderate number of medium size boxes, and a few of its largest boxed items like the iMac 27 inch, which has a box less than half the volume of a 50-inch TV. A successful TV set will sell in the hundreds every week per store. Apple doesn’t have stores big enough to store sufficient TVs for a week’s likely sales. And they aren’t building stores that big or remodeling to get that kind of storage space. Even setting aside space to demo an Apple TV set would be hard in many Apple stores, unless the TV area replaces an existing segment like the third-party product section, or they cut down other sections by 25% or more. And imagine the increased crowding in the stores.

So where would Apple sell an Apple TV set? In the US, Best Buy has that kind of space, as does Wal-Mart, which is rolling out Apple mini-stores now. Costco sells a few Apple items, and lots of TVs, so that’s another potential outlet. We may have to assume that an Apple TV set would sell through big-box stores.

In that case, sitting next to a bunch of other TVs without an Apple employee to show it off, how does an Apple TV set stand out?

What Does This Tell Us?

Does the lack of expansion space in its stores mean Apple doesn’t plan on building an Apple-branded TV set after all? It’s not definitive, but it’s a clue we’ll consider as we go. It could mean that Apple would sell a flagship TV in small volumes to promote its set-top boxes, or license the functionality to another TV set makers. Polling suggests that the market opportunity may be too big to resist.