Posts tagged ‘Piper Jaffray’

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.