Apple TV 3.0 is largely as rumored: Adding support for Internet radio, Genius Mixes, iTunes LP and iTunes Extras (bonus clips, interviews, etc.). But it boasts another new feature as well: A redesigned user interface.

Whether the debut of Apple TV 3.0 heralds a hardware refresh of the device itself is anyone’s guess. It is worth noting, though, that there’s been quite a bit of speculation recently that Cupertino is working on an overhauled device that will offer DVR capabilities and support iTunes TV show subscriptions.

As Piper Jaffray analyst Gene Munster wrote back in August: “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).”

According to Munster, “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. 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.”

Sounds sweet, right? And it would be sweeter still if it were to offer App Store support and allow users to control games and other apps via iPhone or iPod touch …

Below, the official Apple (AAPL) release:

Apple Introduces Apple TV 3.0 Software With Redesigned User Interface

Enjoy iTunes Extras, iTunes LP & Genius Mixes on Your HD TV

CUPERTINO, Calif., Oct. 29 — Apple® today introduced new Apple TV® 3.0 software featuring a redesigned main menu that makes navigating your favorite content simpler and faster, and makes enjoying the largest selection of on-demand HD movie rentals and purchases, HD TV shows, music and podcasts from the iTunes® Store even better on your TV. You can now enjoy iTunes Extras and iTunes LP in stunning fullscreen with your Apple TV, as well as listen to Genius Mixes and Internet radio through your home theater system. The new Apple TV software is available immediately free of charge to existing Apple TV owners, and Apple TV with 160GB capacity is available for just $229.

“The new software for Apple TV features a simpler and faster interface that gives you instant access to your favorite content,” said Eddy Cue, Apple’s vice president of Internet Services. “HD movies and HD TV shows from iTunes have been a huge hit with Apple TV customers, and with Apple TV 3.0 they get great new features including iTunes Extras, Genius Mixes and Internet radio.”

The redesigned main menu on Apple TV gives you instant access to your favorite content. Recently rented or purchased movies, as well as other content including TV shows, music, podcasts, photos and YouTube, are accessible directly from the new main menu. The new software also allows Apple TV users to enjoy stunning fullscreen iTunes Extras and iTunes LP, including great new movie titles such as “Star Trek” or classics like “The Wizard of Oz” and albums such as Taylor Swift’s “Fearless (Platinum Edition)” and Jack Johnson’s “En Concert.” iTunes Extras gives movie fans great additional content such as deleted scenes, interviews and interactive galleries. iTunes LP is the next evolution of the music album, delivering a rich, immersive experience for select albums on the iTunes Store by combining beautiful design with expanded visual features like live performance videos, lyrics, artwork, liner notes, interviews, photos, album credits and more.

Now Apple TV users can enjoy Genius Mixes through their home theater system and listen to up to 12 endless mixes of songs that go great together, automatically generated from their iTunes library. Customers can also enjoy Internet radio, allowing them to browse and listen to thousands of Internet radio stations, as well as tag favorite stations to listen to later. Apple TV’s support of HD photos is enhanced with iPhoto Events, which simplifies finding your favorite photos on Apple TV, as well as iPhoto® Faces, which gives access to photos organized by people identified in iPhoto.

Apple TV users have direct access to a catalog of over 8,000 Hollywood films on iTunes including over 2,000 in stunning HD video available for rent or purchase. Users can also choose from a selection of 11 million songs, 10,000 music videos and over 50,000 TV episodes to purchase directly from their Apple TV or browse and enjoy the iTunes Store podcast directory of over 175,000 free video and audio podcasts. Purchases downloaded to Apple TV are automatically synced back to iTunes on the user’s computer for enjoyment on their Mac® or PC or all current generation iPods or iPhones.* iPod touch® or iPhone® users can download the free Remote app from the App Store to control their Apple TV with a simple tap or flick of the finger.

Not the most aggressive price considering that Amazon (AMZN) is currently offering the Pre, the Pixi’s elder, more robust sibling, for $99 (see image below; click to enlarge) with a two-year contract as well. Remember, the Pixi has a slower processor and a smaller screen than the Pre. And it doesn’t support Wi-Fi. Has some neat back covers though!

Worse, Pixi requires $200 to get out the door, and statistically speaking, there will be quite a few people who will fail to cash in that second $100 rebate. As I noted back when the Pre launched with a similar rebate program, redemption rates for offers like these typically run around 58 percent, thanks to customers who either find the process too cumbersome or forget about it entirely.

This can end up being quite lucrative for the issuing company. Consider this: In 2004, TiVo (TIVO) promised customers a $100 mail-in rebate within six to eight weeks of the purchase of a new DVR. About 50,000 of the 104,000 eligible for that offer failed to take advantage of it. That saved TiVo about $5 million.

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• Palm Pre: $199 After a $100 Rebate We Hope You Lose

You see, DISH, though it had been barred from shipping DVRs with the patent-infringing functionality, continued to do so, justifying its behavior by claiming it had implemented a noninfringing workaround. But in June of this year, a court found that not to be the case. The court again reprimanded EchoStar (SATS) and ordered the company to pay TiVo (TIVO) $103 million in additional fines for the violations that occurred during the time in which the “workaround” was implemented. And now, it has added another $200 million to that.

TiVo, as one might imagine, was overjoyed by the ruling, which leaves open the possibility of further sanctions if EchoStar does not abide by the injunction.

“We are pleased by the Court’s ruling to impose contempt sanctions of approximately $200 million against EchoStar for its continued violation of a Court-ordered permanent injunction, and to award TiVo its attorney fees and costs incurred during the contempt proceedings,” the company said in a statement. “This brings total damages and sanctions in this case to approximately $400 million through July 1, 2009, plus attorney fees, and is exclusive of potential further damages and sanctions. Additionally, we are pleased that the Court ‘will seriously entertain the award of enhanced sanctions’ if ‘EchoStar is unsuccessful on appeal and nevertheless continues to disregard this Court’s orders.’”

Who knows, if DISH keeps it up, TiVo may get that $974.5 million yet.

TiVo’s (TIVO) complaint seeks both damages for past infringement and a permanent injunction–similar to the one it won against satellite provider Dish Network (DISH)–that would force AT&T (T) and Verizon (VZ) to shut down their DVR services.

“Attempts were made to reach a commercial arrangement,” TiVo CEO Tom Rogers said during an earnings call today. “They were not reached. We believe we are being caused irreparable harm and that harm increases everyday this doesn’t cease. We have found ourselves in a similar situation with AT&T and Verizon. We need to stop their continued unauthorized use of our intellectual property.”

And, God willing, corral them into that commercial arrangement to which Rogers refers. After all, the company lost 146,000 subscribers in its second quarter. It desperately needs to do something to win new ones and lower its churn.

[Image credit: Flickr/montevino]

“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.”

– Apple COO Tim Cook, January 2009

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.

“[The Pre is ] extremely competitively priced.”

– Sprint exec. Kevin Packingham

The great truism about rebates is that anything less than 100 percent redemption is free money for the companies offering them. That’s something Palm and Sprint are clearly counting on as they bring Palm’s new Pre handset to market with a $100 rebate.

The companies tout the Pre’s selling price as $199, but really that’s a bit disingenuous. If you intend to buy one, you still have to walk into the store with $299. Sure, you’ll be given that rebate, but Palm (PALM) and Sprint (S) are both hoping you won’t use it. And statistically speaking, you may not. Sahir Anand, Research Director at Aberdeen Group, says rebate redemption rates among the 175 organizations he recently surveyed were just 58 percent. Customers who failed to submit their rebates either found them too cumbersome or simply forgot about them. And that can end up being quite profitable for the companies that issue them. Consider this: In 2004, TiVo (TIVO) promised customers a $100 mail-in rebate within six to eight weeks of the purchase of a new DVR. About 50,000 of the 104,000 eligible for that offer failed to take advantage of it. That saved TiVo about $5 million.

How much might Palm and Sprint save on the Pre rebate program? It’s impossible to say with any degree of specificity, but certainly enough to raise the average selling price of the device above $199. Perhaps even well above it, if Aberdeen’s metrics are borne out.

If inking a video-on-demand deal with a declining DVR pioneer is one of them… well, that’s not much of a plan, is it? But when your financial statements look like Blockbuster’s, I suppose you cling to life however you can (Blockbuster shares have fallen about 80 percent over the last 12 months). And so, beginning in the second half of 2009, the company will make its Blockbuster On Demand service available to TiVo subscribers. The agreement also calls for Blockbuster’s brick-and-mortar stores to sell TiVo DVRs. “We are excited to be teaming with TiVo, the company that created the DVR, to make Blockbuster’s entertainment content readily available to their millions of subscribers,” said Blockbuster CEO Jim Keyes. “Ultimately, our vision is to work with TiVo so that their subscribers can access movies not only through our On Demand service but also from our stores and through our by-mail service as well.”

For Blockbuster (BBI), the deal is a means of capitalizing on the rising popularity of on-demand video. But to really do that effectively, the company needs alliances with more electronics manufacturers than just TiVo (TIVO). After all, the DVR pioneer isn’t in the greatest of health these days. And Netflix (NLFX) already delivers online video to TiVo and PCs, Macs, Xbox 360s, and selected LG and Samsung Blu-ray players as well. Clearly, Blockbuster is as late to on-demand as it was to DVD-by-mail.

In Futurama, our characters are thoroughly inundated by advertising, especially subliminal advertising that comes out of your pillow into your dreams.

– Futurama creator Matt Groening, February 1999

How do you persuade TV viewers to watch advertisements when the DVR has accustomed them to skip through them? That’s the dilemma facing television and cable networks today, one that’s so far defied a solution. But perhaps not for much longer.

The Times Online reports that the evil geniuses at Keystream have developed a new overlay advertising system that scans video content for open spaces–an unadorned wall, for instance–and slaps an ad on it, embedding it directly into the programming.

“There’s a lot of potential,” said Simon Fell, head of future technology at ITV, a company that’s testing Keystream’s technology on its ITV Local site. “If there’s a scene in a program where there’s time, then it could give us a chance to get an ad away. But obviously on television you won’t be seeing one of these appearing at a crunch point in a drama.”

Really? In this age of product placement? Ever see the list of brands plugged in the “Sex and The City” movie?

If ITV’s tests prove successful it’s only a matter of time before we begin seeing Garmin GPS ads etched into the beaches of “Lost” or Levitra logos popping up willy-nilly on “Desperate Housewives.”

So it will be interesting to see what happens to AAPL when Jobs takes the stage to deliver the event keynote tomorrow. And he will be the one to deliver it. “We are confident that Steve Jobs will be presenting and we anticipate his appearance at the event to be viewed as a positive,” Piper Jaffray analyst Gene Munster said in a note to clients today. “While some investors are concerned that Jobs will not deliver the keynote, we have reason to believe he will. Therefore, we believe his health has improved since the June event, which would be a positive for the stock.”

[Image credit: iPhone Savior]

Lest there be any doubt that DVR functionality was purposefully left out of Apple TV, consider this patent recently unearthed by AppleInsider. Filed in October of 2006, the patent describes not just a version of Apple TV capable of browsing and recording live TV programming, but a touch-based remote that could be preloaded with upcoming TV listings to facilitate it. From the patent:

For example, program data for upcoming programs, e.g., for the next month, can be downloaded and stored on the remote control device. Thereafter, a user of the remote control device can search programs that are to be broadcast and determine which programs to record. The recording settings can be programmed onto the remote control device, and then be provided to the video device when a data communication is established between the remote control device and the video device.”

Pretty slick, eh? Lots of additional possibilities here as well. One could easily imagine the iPod Touch and iPhone serving as the remote the patent describes. And if this next-generation Apple TV is capable of recording TV programming, why not make it the gateway through which such programming is delivered? How nice would it be to subscribe to HBO–and HBO alone–via iTunes? How nice would it be to subscribe to a season of “Weeds”? Or to a commercial-free season of “The Office” and skip everything else NBC has to offer? How nice would it be if the latest unwatched episode of “Weeds” on your Apple TV was automatically synced to your iPhone for later viewing? How nice would it be if new films opened on iTunes the same day they opened in theaters?

Pipe dream? Perhaps. Certainly, these scenarios would require Apple (AAPL) to ink some fantastical new licensing deals with Hollywood. And the two aren’t exactly seeing eye-to-eye all the time these days. Still, you never know. Stranger things have happened.

I’m not so sure that the whole issue really is one of commercial avoidance. It really is a matter of convenience–so you don’t miss your favorite show. And quite frankly, we’re just training a new generation of viewers to skip commercials because they can. I’m not sure that the driving reason to get a DVR in the first place is just to skip commercials. I don’t fundamentally believe that. People can understand in order to have convenience and on-demand [options], that you can’t skip commercials.”

–ABC President of Advertising Sales Mike Shaw, July 2006

Leave it to ABC to devise a service that offers all the convenience of video-on-demand with all the annoyance and vapidity of broadcast TV in one joyless package. This morning the network and its affiliates announced fast-forward-disabled video on demand, which prevents viewers from bypassing commercials.

Designed to combat the now nearly ubiquitous DVR, the service offers viewers the chance to watch ABC shows like “Lost” and “Desperate Housewives” for free, at any time they choose, as long as they’re willing to suffer through the advertisements that accompany them. And just to make sure that they do, participating affiliates will disable their video-on-demand services’ fast-forwarding capability. “This does counter the DVR,” Anne Sweeney, the president of the Disney-ABC television group (DIS), told the New York Times. “You don’t need TiVo if you have fast-forward-disabled video on demand. It gives you the same opportunity to catch up to your favorite shows.”

And your not-so-favorite commercials. Which would seem to make it about as uncompelling a proposition as … well, as over-the-air broadcast TV. But ABC, which has been testing the service with Cox Communications in Orange County, Calif., insists it’s got an audience. The company says 93% of users it surveyed said they would be willing to give up the fast-forwarding option and watch the commercials if they were given VOD programming for free.

So perhaps the 30-second TV ad has a few more years left in it still. But only a few. According to a study by the Association of National Advertisers and Forrester Research, 62% of marketers believe TV advertising has become less effective in the past few years. And 87% said they plan to increase their online ad spending this year, while many said they will cut their TV ad buys substantially when DVR penetration tops 50%.