Apple Triple Play: iTunes, App TV and Apple Television
by John Paczkowski
Posted on August 20, 2009 at 11:47 AM PT
“I think the whole category is still a hobby right now. I don’t think anybody has succeeded at it. And actually the experimentation has slowed down. A lot of the early companies that were trying things have faded away. So I would have to say that given the economic conditions, given the venture capital outlooks and stuff, I continue to believe it will be a hobby in 2009.”
– Apple CEO Steve Jobs, October 2008
“We still consider this a hobby. It is clear that the movie rental business has really helped Apple TV and there are more and more customers that want to try it. And we’re going to continue to invest in it, because we fundamentally believe there is something there for us in the future.”
There’s not much of a business yet in Apple TV, as Apple’s leadership often notes. But there may be soon, with the market for connected TVs evolving as it has been.
In a research note issued this morning, Piper Jaffray analyst Gene Munster says the time is right for Apple to release the next iteration of Apple TV–one that offers DVR capabilities and supports iTunes TV show subscriptions.
“Apple could leverage its deep library of content with many network and cable channel content owners to provide unlimited access to a sub-library of its TV shows for a standard monthly fee ($30 or $40 per month),” Munster writes. “Such a product would effectively replace a consumer’s monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels.”
Further, Munster notes, “The selection would dictate the value, and several tiers could be offered, but we see this as one way for Apple to leverage its large iTunes content library as well as its unique Apple TV hardware in order to get digital video to the TV for a price significantly less than the average cable or satellite TV bill.”
Makes great sense. And if Apple (AAPL) were to launch these services in concert with App Store support, as Munster has suggested in the past, it would be a pretty compelling proposition. And it would set the stage for the next evolution of the platform, the Apple Television, an Internet-connected TV with onboard DVR and media center functionality.
Says Munster:
“Beyond new hardware with DVR or iTunes video subscription features, we believe the 2-5 year roadmap for the Apple TV product lineup is robust. To begin with, Internet-connected TVs with interactive features will likely gain popularity in the next several years. Apple could differentiate itself in this market as a seasoned software developer competing largely with television hardware manufacturers that do not excel in the software arena. The device could also bring iPhone games, a relatively new segment for Apple, to the television.
“While this is unlikely in the near term,” Munster continues, “we believe the iPhone will succeed as a portable gaming platform and Apple may consider bringing higher quality games developed on a similar platform to the TV. The iPhone app developer community is already robust, and Apple could leverage those developers to enter the gaming arena on the TV. In fact, the iPhone or iPod touch could itself operate as a touchscreen gaming control for a game-centric Apple TV.”
Again, this makes great sense, though TV hardware is not an easy business–just ask Sony (SNE). But, as Munster aptly notes, it might be quite a bit less difficult if Apple were to “change the rules of the game,” something it’s done in a number of markets already.
That said, as Media Memo’s Peter Kafka just reminded me, the cable companies are working very closely with Hollywood to make sure it’s difficult for people to replace their cable service. They’d almost certainly attempt to sack an initiative like one Munster describes above.
Comments
Perhaps the alleged itablet will let us take tv with us, rather than us having to go to tv. While I like watching tv from my easy chair, I can see a device that would allow portable television. Perhaps this device could also let users read books and newspapers, listen to music, play games, create and edit documents, surf the web, take and store notes, store photographs, download applications, watch movies and video of course, do conference calls and have gps maps. the biggest hurdle is the tiny incremental bandwith steps taken by those robber barons, the phone companies. Where is bill gates with his satellite system when we need him?
Posted by David Owens at August 20th, 2009 at 12:12 pmThe market for these explodes when Apple cuts a deal with AT&T to provide Apple TV hardware/software for its U-Verse TV, replacing the POS Motorola/Microsoft units it now provides.
Posted by Chris Knape at August 20th, 2009 at 12:43 pmWhere was Apple in March when DirecTV was negotiating with the NFL to renew Sunday Ticket? All the billions in the Apple cash vault could have gotten a piece of the NFL pie. That alone would promote Apple TV from hobby status overnight.
What’s with the hobby thing anyway? Seemed like a senseless thing for Jobs to say and worse when repeated by Cook. For those who have bought the device hearing it referred to as a hobby is insulting. Not sure what they hope to accomplish with those statements.
Apple should take a hard look at the MLB deal Roku has. It’s what Apple should have done with the NFL.
Posted by Brendan Walsh at August 20th, 2009 at 1:27 pmI am not convinced that the opportunity for AppleTV is as great as implied above.
For example, everyone I know who has cancelled cable service has done so to save money and enjoy on-demand consumption by streaming to their TV through a $10 per month NetFlix account and/or free content from Hulu. Why would you pay $20-30 per month to Apple for free content?
The PS3 and Xbox already support this content delivery method natively or through 3rd party software, include DVD or BRDVD playback, and handle gaming just fine.
Apple could accomplish an elegant, and more popular solution through a revised MacMini that includes BR/DVD, integrated AppleTV software and easy access to NetFlix and Hulu. I haven’t met one person willing to spend $200 for AppleTV – because of the hardware or the content model, but know several willing to spend $600 for a device that combines all of the features above. In fact, most MacMini’s that I have encountered have been used as a hacked version of this solution.
Posted by Vince Ford at August 20th, 2009 at 3:24 pm@Brendan: “What’s with the hobby thing anyway? Seemed like a senseless thing for Jobs to say and worse when repeated by Cook. For those who have bought the device hearing it referred to as a hobby is insulting. Not sure what they hope to accomplish with those statements.”
More to salve their egos than to please customers. Like saying, “It was a flop, but we weren’t really trying very hard.”
You can bet if Apple achieves any success in the area it will be due to careful timing of the marketplace that only a genius could come up with, blah, blah, blah.
Apple has given up on computers as a driver of long term growth. Problem with that is they have to hit a home run every time at bat every two or three years now as they re-invent themselves again and again.
It will continue to look like genius until the first time they flop on something they can’t claim was a hobby.
Based on their big new data center, I think we are about to find out what that flop is.
Posted by Mac Beach at August 20th, 2009 at 4:11 pm