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For Apple TV, subscription video service still missing

The rumors from last year about Apple preparing to launch a subscription video service were at best premature. One analyst says that without a new content offering, Apple TV isn't very special.

1080p Apple TV
Apple introduces a new Apple TV with support for 1080p HD photos and videos.
Donald Bell/CNET

Apple still has no subscription video service, and without it, Apple TV is nothing to get excited about, one industry analyst says.

As part of Apple's press event for the iPad today in San Francisco, the company announced that Apple TV would get an upgrade. The system will support 1080p movies and TV shows. Navigation was improved. Movies and TV shows will be supported in iCloud so they can be accessed from iPads and iPhones as well.

Dan Rayburn, principle analyst for research firm Frost & Sullivan, is unimpressed. He argues that Apple TV could be so much more, if it had a subscription service similar to Netflix's. Rayburn predicts that without such a service, Apple TV will remain a so-called hobby for Apple.

"While it's nice to see Apple offer 1080p support on their device," Rayburn wrote on his blog today, "to date, they have sold less than 5 million second-generation Apple TV units in the past 18 months. Without some kind of content subscription service, this updated Apple TV isn't going to disrupt the market at all."

It's not as if Apple hasn't tried to get a subscription service going. Rayburn says an executive with a major cable company told him that Apple has been in discussions about launching a subscription video service for at least two years. And remember all those rumors from last year, when analysts and bloggers sent the hearts of Apple fans aflutter by reporting that Apple was planning to launch a Netflix rival?

Apple has definitely talked to the studios and TV networks about such a service, but my film industry sources say the major Hollywood studios are less interested in renting movies than in selling them. They still want to rent, but with DVD sales in decline, the focus is on sales.

Rayburn believes that Apple won't build its own TV sets unless it can disrupt the market, and there just isn't a lot of room to do that. Creating TV sets with, say, higher resolutions or superior screens would force the price up too high, he said. With the market for TV sets hurting, he doesn't think that Apple will do anything until it can come at the sector in a sexy new way.

Now playing: Watch this: Apple announces next-gen Apple TV