Archive for June 9th, 2012

June 9, 2012

What if Apple TV makes TV sets cheaper, not more expensive?

Many financial analysts are projecting that Apple will produce a TV set in Q4 of 2012, or 2013 at the latest. Gene Munster at Piper Jaffray has effectively bet his career on it, for which we offer our condolences. The Apple TV set they envision will compete in the high end of Internet-connected TV sets, selling in the $1500 – $2000 range with poor profit margins but insanely high volumes, or with subsidies from some un-named partner to jack the profits up.

What if Apple’s approach is exactly the opposite? Think about it:

  • Sales and usage stats for Internet-connected TVs show that customers won’t pay extra for them or invest much time in using the additional features. Sales volumes are anemic and usage is negligible.
  • The profits lie in the user experience, which needs to be frequently improved and the hardware needs to be replaceable.

TVs have become commoditized, and that can work to Apple’s advantage. Rather than try to de-commoditize the TV by building an Apple technology into a TV set, add the Apple experience to any HDMI-equipped TV set. Move the user interaction outside of the TV, where it can be replaced and upgraded easily. And extend it to seamlessly encompass the iPhone, iPad, and iPod Touch.

The trick is to make the Apple TV experience extend to watching live TV and cable channels, which is happening already as content providers build iOS apps to receive their content. Likely announcements of new integration options with TV peripherals will make it possible to completely define the TV experience outside the TV, then stream it into the TV via AirPlay.

The consumer gets to keep their current set, or buy the least-expensive, dumbest TV that they like, by just adding a $99 little box. Apple will have no constraints on how fast their TV experience business can grow due to display technologies, screen sizes, or price ranges. And they get to focus their inventive and manufacturing prowess in highly-profitable iDevices, most of which are subsidized by phone companies.

Sorry, Mr. Munster, it is unlikely Apple will build a TV set. On the plus side, they will sell many millions of “Apple TV” devices and millions more iPhones and iPads than they would have otherwise, so your $1000-per-share prediction for AAPL stock price may become real because of TVs after all. And in that case you’ve done your job.

And the name of this little blog comes true, too, as Apple’s maket capitalization will reach a trillion dollars.

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June 9, 2012

Does “control out” API mean apps are coming to Apple TV? Believe it.

If we can believe the story that Apple will announce a new “control out” API for other devices to be controlled by the Apple TV as reported in BGR.com (we believe here at TDTV), then we have to believe that those who provide the APIs will want to be able to create apps that at least demonstrate the capabilities of their compatible products. And, oh by the way, they’ll need to be able to test that the APIs work as expected. So there will have to be a developer toolkit for the Apple TV.And that means the whole ecosystem of branded compatible products and services comes to the ATV.

Minimally, Apple will need to add the following:

  • Apple TV app store* in the ATV user interface
  • Criteria and submission process for getting apps into the TV app store
  • APIs that are specific to the ATV, and APIs for other iOS devices that cannot be used on the ATV
  • Resolution-independent graphics, overlays for video, and other TV-related extension
  • Integrated touch-on-iDevice/see-on-ATV user interface extensions to AirPlay

* A variation on the approach would be that the app runs on an iDevice but the TV display is essential to the app. That eliminates the need for an Apple TV app store.

Either approach still means that there are apps that run uniquely with the ATV. It still helps drive the cross-selling between iDevices and the ATV. And the ecosystem will cause Apple TV sales to explode. Even one or two “killer apps” that exploit the TV display will do the trick. Look for Apple to also enhance iBooks to be able to use the TV display alongside the iPad or iPhone. Kindle can’t play there. Google TV can’t play there.

Once again, Apple laps the field.