Apple aiming for TV breakthrough

Tech companies haven't had much success in the living room. Can the iPod maker do any better with its Apple TV?

Apple may say it wants a revolution, but it might have to settle for something more modest in the digital living room.

Lost in all the hoopla over the iPhone at Macworld was Apple TV, sort of a cross between a Mac Mini, a wireless router, and a set-top box, which couch potatoes can use to connect a big-screen television with a Mac or PC. First introduced last September, Apple TV will hit stores later than CEO Steve Jobs said it would at the recent Macworld. But its imminent arrival, possibly as early as this week, has the usual cadre of analysts and Macheads debating its impact on the "vast wasteland" known as television.

Apple's intentions seem clear: It wants to be the company that finally figures out how to tie the television to the Internet and make video downloads as common as music downloads. "With Apple TV, we believe we are providing a new, better way for people to seamlessly and wirelessly enjoy their digital lifestyles," Peter Oppenheimer, Apple's chief financial officer, said during a presentation at the Morgan Stanley Technology Conference last week.

But don't expect Apple TV to be an overnight success. Loads of companies have been flailing at the same goal for several years because of technology and content problems. Many techies are excited about the exploding amount of free video content on the Internet, served up by companies like YouTube and Joost. Most people, however, are still used to watching shows like Lost and The Office or Major League Baseball on their televisions on the day the shows air. They don't think about how the shows arrived on their screens.

And so, set-top cable boxes dominate the living room, perhaps accompanied by TiVo or another digital video recorder. Quiet PCs repackaged for the living room have been slow to catch on as entertainment centers, and wireless adapters meant to connect older PCs can be hard to use and difficult to find.

Rather than trying to convince people to buy a whole new PC for the living room, Apple is pitching a $299 price tag and promoting the hundreds of TV shows and movies on the iTunes Store. But, at least in its first incarnation, it's unlikely that Apple TV will disrupt the entrenched players in the living room, according to analysts.

Cable and satellite companies, along with their set-top box partners, have invested heavily in providing their customers with on-demand shows and pay-per-view movies. You're still going to need one of those set-top boxes alongside Apple TV if you want to watch most shows or games when they air. And analysts say the combination of Apple TV and the Internet isn't the best method right now for delivering high-definition content, which the public has shown a clear interest in watching.

"One of the biggest issues as far as making the Internet your main source of entertainment is that it's something the consumer needs to hook up and network themselves."
--Michelle Abraham, analyst, In-Stat

"I don't see where people are going to be willing to give up their pay TV subscription and go to the Internet for programming" anytime soon, said Michelle Abraham, an analyst with In-Stat.

The premise behind Apple TV is that TV watchers will be able to purchase shows or movies from iTunes and either download them to the Apple TV box or stream them from their PC or Mac over the 802.11n connection to the large screen in the living room. Inside the Apple TV is an Intel processor (believed to be a Pentium M), a 40GB hard drive, an 802.11n wireless chip, and HDMI (high-definition multimedia interface) and component video ports.

Other attempts to bridge that gap between the computer and the television have not resonated with consumers. Start-ups such as Akimbo and MovieBeam have tried to get people used to the idea of acquiring content over the Internet, but have been daunted by a lack of compelling shows and complicated pricing plans. Established companies like Intel and Microsoft have sold plenty of PCs carrying the Viiv and Windows Media Center logos, but there's little evidence that people are actually using those PCs in concert with their televisions--and most of those PCs don't have TV tuners.

"To me, one of the biggest issues as far as making the Internet your main source of entertainment is that it's something the consumer needs to hook up and network themselves," Abraham said. More and more people are setting up wireless networks in their homes, but configuring those wireless networks to handle video has been a more difficult exercise, she said.

This is where analysts believe Apple might have an edge. "One of Apple's strengths is ease of use with elegant solutions," said Chris Crotty, an analyst with iSuppli. If Apple can eliminate the hassles encountered by early adopters of wireless home-media networks, consumers could be more willing to give it a try.

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