An Apple TV Could Be Interesting, Not A Game Changer

A report from Business Insider speculates (based on Jean-Louis Gassée’s guess) at what an Apple TV would be like. Apparently, the guess is that the TV would have 2 cables: 1 power and 1 coax for cable-in. It would supposedly simplify things and “change the game” for TVs. If the TV were to literally have only a single coax connection, then this device could be dead in the water. The article points out the issues Apple would have in terms of integration with various cable TV providers, but it overlooks several very important issues.

First is it ignores the issues with satellite TV providers, who use different standards than the cable guys. So, if it isn’t already difficult enough for cable, you have to add satellite into the mix. Second, it ignores the fact that this device has to co-exist with a large variety of ecosystems that are in place today. Without at least one HDMI port, it won’t work with any home theatre receivers, meaning people are stuck with whatever crappy speakers the TV comes with, and aren’t able to use the surround sound system that they may have set up. Without multiple ports, it means people can’t also connect their XBoxes, Playstation 3’s, Wii’s or various DVD and Blu-ray players.

It’s one thing to simplify the device. I’m all for that. But going “too simple” will make the thing a non-starter for a large number of people, myself included. While I do have a healthy iTunes TV and movie collection, I still have a far, far larger (and still growing) DVD and Blu-ray collection. I still want to play games on my PS3 or Wii. I still want the option of using the cable box (with DVR) that I have for my current cable provider. While I don’t want to minimize the issue, I don’t think the cable and satellite TV integration is going to be a huge hurdle. A lack of connectivity, basically excluding the hundreds or thousands of dollars worth of other devices that have to be able to connect, will be a significant and potentially fatal hurdle for the product.

If Apple really is building a TV, I would expect that they would have the smarts to know it should have several HDMI connections (probably at least 2, possibly more) at a minimum. Without at least that, the product will face a substantial barrier to entry. This isn’t replacing the phone in your pocket (which people do very 18 months or so) or replacing a computer/laptop (which happens every 3-5 years), both of which tend to be somewhat stand-alone. We are talking about a device that people will typically keep for a decade or more, and one that provides the primary interface to several other devices, or depends on other infrastructure like a receiver to provide the desired experience. That means connectivity.

It think that Gene Munster at Piper Jaffrey is overstating it a bit to say “Apple will do to TV manufacturers what it did to phone makers with the iPhone”. Unlike the smartphone and tablet markets, and even the MP3 player market before it, Apple isn’t entering the field when it is still in its nascent stages, where the rules are fluid and the margins high. Consumers had little to do with smartphones prior to the iPhone. The tablet market was moribund to say the least, with the only offerings being expensive, overweight and underpowered Windows machines aimed at the enterprise, prior to the iPad. There was substantial room for Apple to enter and determine the direction of the market.

That isn’t the same for televisions. TV’s are a commodity already (and have been for decades), and haven’t been high-margin products for a very long time. Being able to run iOS apps on a TV would be cool, but that by itself isn’t enough to make the device compelling. Besides, Apple could get a big chunk of that market by simply expanding the features on the existing AppleTV without the expense of designing, building and supporting a low-margin commodity product. My guess is it will be more like what the Mac is doing in the PC market: getting people’s attention, and building up its share of the market, but it has a long way to go.


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