An Apple television need not be expensive

29 Feb

With Apple officially confirming its next product unveiling will happen on Mar. 7, speculation about what’s to come can now kick into overdrive. Guessing what the notoriously secretive company is going to unveil next is easily the technology press’ favourite pastime.

It’s with good reason too. Over the past decade, Apple has revolutionized and/or created entirely new product categories, from MP3 players to phones to tablet computers. While the company may ultimately end up with only a slice of the markets it creates because of its insistence on tight control over all aspects of its products, there’s no doubt it’s a leader in consumer electronics.

That explains all the hype and interest in its events. While Apple often trots out incremental upgrades to existing product lines, everyone really tunes in to see whether the company has something potentially game-changing up its sleeve.

Looking at the the media invitation (pictured), it seems like no brainer that the next iPad will be introduced at the event. The device is expected to be faster with a better screen resolution and cameras, possibly with Siri voice control and/or 4G wireless connectivity. There are also a bunch of other potentials – I’d like to see stereo speakers, for example, while others are hoping for a smaller and cheaper version of the tablet.

The real question is whether there’ll be that “one more thing,” which in this case could be the television that departed founder Steve Jobs hinted at in his biography. As he told biographer Walter Isaacson:

I’d like to create an integrated television set that is completely easy to use. It would be seamlessly synced with all of your devices and with iCloud. No longer would users have to fiddle with complex remotes for DVD players and cable channels. It will have the simplest user interface you could imagine. I finally cracked it.

Speculation over a proper Apple TV – a full flat-panel screen, as opposed to the set-top box currently being sold – has been rampant since Isaacson’s book came out last fall. A few tidbits, such as Best Buy listing such a television in a consumer survey, have leaked out over the past few months, but there’s been nothing concrete. A Globe and Mail story a few weeks ago also served to confuse the issue by suggesting that big TV providers Bell and Rogers were looking to get a piece of Apple’s supposed product. Why the company would want or need to partner with a service provider for such a device – much less in Canada – is anyone’s guess.

Ultimately, it’s not hard to imagine what an Apple-produced television set might look like. It could be a giant iPad, where live TV is merely an app on the screen, and it’s controlled through an iPad, iPhone or iPod or via Siri.

Why would Apple want to get into such a fiercely competitive market, where profit margins are thin and shrinking? The answer is simple: apps.

As has been evident from the past few Consumer Electronics Shows, TV makers of all stripes have been busying themselves for years now building up app stores for their increasingly internet-connected flat-panel TVs. In essence, they’ve been trying to recreate Apple’s incredible success with apps in phones and tablets.

For Apple, making the jump from those smaller screens to the bigger one could be easy and highly profitable. As the biggest and most established provider of apps there is, developers would likely flock to create apps for its television, which could also interact with the company’s mobile devices. It’s reasonable to expect that such an app store would quickly dwarf rivals’.

What kind of apps could we expect to see on such a TV? A PVR app linked to cloud storage is the first one that comes to mind. The TV could record a show – no expensive box from the television provider required – and store it in the cloud, to be watched on the Apple television, iPad, iPhone or wherever. Having Siri integrated into the TV could also be cool (“Siri, find me something to watch that doesn’t suck”). There have been some efforts at this sort of thing with varying degrees of success, but Apple does have a knack for getting the fine polish right.

An Apple-produced television shouldn’t be worrying to just other manufacturers, it could also be a problem for the likes of Sony, Microsoft and Nintendo. Many of Apple’s most popular and highest-grossing mobile apps are video games, to the point where they’re already taking a chunk out of portable systems such as Nintendo’s 3DS. Apple having a video game distribution window into consumers’ living rooms could be a big threat to the established console makers.

An interesting side effect of all this might be a duplication of what has happened in phones and tablets, where the only way for rivals to compete with Apple’s app dominance was to adopt Android and its app market. Could a Samsung TV running Android be far behind? Needless to say, this would be even more bad news for BlackBerry.

For all these reasons, an Apple television need not be expensive, as some have speculated. The company could go with the razor-blade model, where the razor itself is cheap and the money is made on the blade refills. In Apple’s case, the refills are the apps and related downloadable content. Just as the iPad was released at a comparatively low price ($500), so too could a TV that makes its money through software.

Naturally, short of the company actually saying anything next week, any discussion of an Apple TV is just speculation. Some analysts say there is no evidence that the company is ordering the parts necessary to manufacture such a device, so it’s possible that expecting a reveal at the event is premature. I’ll be there regardless – be sure to follow me on Twitter – just in case it does happen.


Posted by on February 29, 2012 in apple


13 responses to “An Apple television need not be expensive

  1. Parallax Abstraction

    February 29, 2012 at 12:34 am

    I still don’t buy for a second that Apple would try to get into this market. You say that an Apple TV need not be expensive but frankly, that’s not the Apple way. They aren’t about the “race to the bottom”, they’re about premium products at premium (often artificially inflated) prices. The concept of frontloading the TV by taking a slimmer margin or even a loss on the unit itself to be made up for in app purchases is a common tactic used by game console makers but it’s not something Apple has ever done and I don’t see them reversing that trend now. Like Nintendo, they make money (substantial money) on every piece of product they move right out of the gate. It would be a paradigm shift for them to start frontloading products and given what whopping (and unsustainable) growth they’re experiencing by doing the opposite of that, I can’t see why they’d go in another direction, particularly when the company keeps insisting that Apple TV is “just a hobby”. And I think they’re going to have a really hard time convincing the average Joe with a perfectly good HDTV already to spend $1,000 or more on a 42″ TV that just has Apple stuff in it. And make no mistake, that’s the kind of prices we’d be seeing.

    • petenowak2000

      February 29, 2012 at 12:47 am

      There are a bunch of good commentaries out there on whether the “Apple premium” is a myth, such as this one: It certainly is a myth when it comes to the iPad and MacBook Air.

      • Parallax Abstraction

        February 29, 2012 at 11:46 am

        I can’t remember where I read it but I saw an analysis somewhere that claimed Apple is making close to or more than $200 on every iPad and let’s not even get started on their obscene iPhone margins. Given the margin most consumer electronics have, if that’s not an artificially premium price, I don’t know what is. I think the biggest mistake many of their Android tablet competitors are making is feeling that they have to charge the same amount as Apple or be seen as being inferior simply by being cheaper (the same problem modern console games have) and I think that’s boneheaded and wrong. I’m the first to admit that most Android tablets right now can’t hold a candle to the iPad and the way they grow the market is by being the cheaper underdog, not marketing in the premium price range with a product that can’t hold up to the current premium standard. There’s nothing wrong with making healthy profit and that they’ve managed to find a way to charge people so much above cost for a product and have them rush to get it is impressive and admirable. But I don’t think there’s any question that most Apple products are premium priced and in the case of their computers (perhaps MacBook Air excluded), priced far higher per their technical capabilities compared to their PC counterparts.

      • craigbamford

        February 29, 2012 at 4:13 pm

        That piece doesn’t actually prove anything, though. All it has is assertions about how the Air is just fine because of “similarly configured notebooks tend to cost just as much or more”—without any sourcing or examples—and snide comments about those notebooks that are cheaper than the Air. And while a given install of Windows 7 is more expensive than a given OSX update, Windows OSes tend to be a whole lot longer-lasting, too. Loads of people are still using XP.

        Besides, the piece is pretty much just straight-up advocacy, taking shots at everything from MS’s “wrong-headed approach” to Android’s marketshare “not counting” because it’s split across a variety of devices…without noting that low-cost devices that AREN’T aging models might be a valid space to occupy.

        While it’s certainly interesting reading, you can’t really count it as an authoritative refutation, especially when he’s just flat-out misrepresenting Windows 7’s featureset in comments. Trying to portray the consumer version of W7 as crippled is just straight-up wrong. This isn’t Vista we’re talking about, and he knows it.

        Sorry, but new Apple products ARE pricey, especially for people who want a consumer-grade system or a reasonably inexpensive smartphone. The refurbs are a better deal, but in an age where the middle class is either being hammered or just straight-up disappearing, we can’t ignore the price issue.

    • Simon

      February 29, 2012 at 11:47 am

      You say “The concept of frontloading the TV by taking a slimmer margin or even a loss on the unit itself to be made up for in app purchases is a common tactic used by game console makers but it’s not something Apple has ever done and I don’t see them reversing that trend now.” And yet, that’s exactly the model for the Apple TV 2. It’s a $119 device which makes it a no-brainer expense for most people – heck that’s cheaper than an iPod Nano – because Apple hopes to make money on iTunes TV/Movie rentals. The fact that it has no local storage underlines this strategy.

  2. Marc Venot

    February 29, 2012 at 12:39 am

    Maybe a challenger of the soon to be released Nintendo wii U?

  3. Jean-François Mezei

    February 29, 2012 at 2:04 am

    On the investor web site for apple, there is a presentation Tim Cook made at a Goldman Sachs conference on Feb 14th.

    In it, Tim Cook mentions that TV is still a hobby for Apple, and that while Apple no longer does hobbies and focuses on a narow set of products, they are keeping Apple TV alive because they see some potential in the future for something bigger.

    I didn’t get the feeling from his answer on that issue that an Apple TV is imminent. If it is, then Tim Cook is a good poker player.

    My gut tells me that they may have the general guts of a TV ready, but still have to work on getting the whole issue of access to content resolved.

    • Nick

      February 29, 2012 at 11:46 am

      @JFM – Jobs was notorious for saying ‘this is crap, you don’t need this, we won’t make this’ and then months or a year or so later, coming out with ‘this’.

      I wouldn’t put much stock in what Cook is saying in this case. He could just be managing expectations.

      I’m looking for a $1000ish mid-end TV and maybe a $1700ish high end one. Remember that just a couple years ago, a good TV with not-mind-blowing specs cost in that range.

  4. Simon

    February 29, 2012 at 11:52 am

    Hey Peter, when you say “Why the company would want or need to partner with a service provider for such a device – much less in Canada – is anyone’s guess.” I don’t think this is questionable at all. Any new entrant to the TV market in Canada is going to have to play ball with the incumbents unless they are prepared to seek their own CRTC license, which I suspect Apple has zero interest in. So an Apple TV would need to be interoperable with Cable, Satellite and Fibre services in order to pull together the vast array of video options consumers can access. This has also been the primary reason that skeptics have cited when they kibosh the whole Apple TV concept, pointing out that no one – not even Apple – wants to swim in that particular shark tank.

    • petenowak2000

      February 29, 2012 at 12:44 pm

      Hey Simon – what I meant there is that a TV (even a “smart” internet-connected one) is just a dumb appliance. As long as it is compliant with technical regulations and tested to make sure it can properly connect to cable and satellite providers’ various services, there shouldn’t be any need to work with those providers. Just as any you can plug any Sharp, Sony or Samsung TV into Bell, Rogers, Shaw et al, so too should an Apple television.

      Piping iTunes’ movie rentals and purchases, etc. straight onto the TV would also be simple, as would making live TV an on-screen app. That’s not very different from how many existing TVs work. The only potential roadblock is the TV having some sort of built-in cloud PVR. The service providers who sell such devices probably wouldn’t be too happy about Apple circumventing them on this, yet I’m still not sure how they could stop it. If TV providers are able to have some say over which company’s PVRs are able to record programs, then we’re onto some pretty controversial ground.

      • Simon

        February 29, 2012 at 1:54 pm

        So that’s really it isn’t it? What’s the benefit of an Apple TV if simply marries the content from your cable/sat box with iTunes content? Any set-top box could do that as you rightly point out. My hunch is that if indeed Apple is working with these providers (still not proven) it’s because they have a much more disruptive model in mind and will need to closely collaborate with the incumbents to make it happen.

  5. Jean-François Mezei

    March 1, 2012 at 2:17 am

    For the canadian market, there isn’t much Apple can do because the incumbents hold exclusive rights for internet distribution of US TV programmes. This is one reason Itunes sells those episodes are some ridiculous price.

    Unless Apple manages some content deals, its TV and iTunes will not have anything truly compelling enough for Apple to carve a large enough niche against Samsung, Sharp, LG and Sony..

    Apple is religiously opposed to blue ray. Yet, it it wants to have an integrated TV set with a single remote to control everything, that TV would have to have a blue ray player, at least until Itunes is able/allowed to distribute 1080p content with original soud. (Itunes doesn’t yet have all its movies with dolby 5.1)

    My guess is that Apple does have designs for the TV set done. But it is going to wait for some content deals to materialise before moving from mere “hobby” to “core product”.

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