Parsing Apple's TV ambitions
People don't replace their TVs every few years, which makes the idea of an Apple TV set less plausible compared to an Apple set-top box, says former Apple exec Jean-Louis Gassée.
Apple CEO Tim Cook thinks the TV viewing experience is lousy. "When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years," he told NBC's Brian Williams.
Read: Apple TV hinted at by CEO Tim Cook
Cook is consistently coy about how Apple will go about making TV a great user experience. "It's an area of intense interest. I can't say more than that," he said in the interview with Williams. Some, like Piper Jaffray senior research analyst Gene Munster, speculate that Apple will produce a TV in 2013 that will do what the iPad did for tablets.
An Apple TV, not a set-top box, should be ready for the holiday season, Munster predicted. It would likely cost $1,500 to $2,000, and be available in sizes from 42 inches to 55 inches.
"The average consumer just wants a better experience with their TV," Munster said. "People like all-in-one products, like a TV." The selling point will be the user interface, fixing the remote control problem, voice control, apps, games, and FaceTime.
In his Steve Jobs biography, Walter Isaacson quoted the Apple founder: "'I'd like to create an integrated television set that is completely easy to use,' he told me. '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.'"
But former Apple executive Jean-Louis Gassée doesn't believe that Cook and his team are considering a TV set to crack the code. He offered the following logic in his Monday Note post:
...I simply don't believe Apple will make, or even wants to make, a TV set. To realize the dream, as discussed previously, you need to put a computer -- something like an Apple TV module -- inside the set. Eighteen months later, as Moore's Law dictates, the computer is obsolete but the screen is just fine. No problem, you'll say, just make the computer module removable, easily replaced by a new one; more revenue for Apple...and you're right back to today's separate box arrangement. And you can spread said box to all HDTVs, not just the hypothetical Apple-brand set.
If carriers and content owners can be tricked, bribed, sued, or otherwise made to see the light and wisdom of higher revenue per subscriber, the TV Done Right will descend from Heaven in the form of a next generation Apple set-top box, not a TV set.
Google and Microsoft will try their hand at reinventing the TV experience. If history is an indicator, as evidenced by the iPod, iTunes, iPhone, and iPad, Apple has the better DNA to overcome the obstacles and provide a less backwards TV viewing and interaction experience. What's clear is that Jobs, Cook, and chief designer Jony Ive identified the TV as Apple's next major market to reinvent -- and its next pot of gold. And it has not been in Apple's DNA to produce a low-cost, low-margin product, such as a TV, to advance its ecosystem.
As Gassée wrote, "Apple's CEO is indicating that he'll continue to invest talent and money until the TV obstacles are finally surmounted. In other words: 'Join us and ride the wave that will sweep away the competition.'"
First, Apple must convince the content providers and cable owners that together they can create the code and all profit over the long term. In an August 2012 research note, Pacific Crest analyst Andy Hargreaves wrote about remarks from Eddy Cue, Apple's senior vice president for Internet services and software and chief negotiator with entertainment companies, regarding TV distribution:
Relative to the television market, Eddy Cue, Apple SVP of Internet Software and Services, reiterated the company's mantra that it will enter markets where it feels it can create great customer experiences and address key problems. The key problems in the television market are the poor quality of the user interface and the forced bundling of pay TV content, in our view. While Apple could almost certainly create a better user interface, Mr. Cue's commentary suggested that this would be an incomplete solution from Apple's perspective unless it could deliver content in a way that is different from the current multichannel pay TV model.
Unfortunately for Apple and for consumers, acquiring rights for traditional broadcast and cable network content outside of the current bundled model is virtually impossible because the content is owned by a relatively small group of companies that have little interest in alternative models for their most valuable content. The differences in regional broadcast content and the lack of scale internationally also create significant hurdles that do not seem possible to cross at this point.
Read: CNET's profile of Eddy Cue
The technology isn't the gating issue for Apple's TV efforts. Apple has patents for a set-top box, the fledgling $99 Apple TV box in the market, and plenty of talented engineers. In 2013 the company's brain trust will be quite busy trying to convince those in control of TV content and distribution that they can no longer avoid the inevitable deterioration of the current model and that Apple is their best bet for the future.
