
Apple and the TV industry - jeffmiller
http://cdixon.org/2011/04/17/apple-and-the-tv-industry/
======
replicatorblog
There is one crucial aspect of the TV experience this argument leaves out.

Content - An Apple television would present some cool options for new apps and
games, but the lean back experience would be no different than with a current
TV. People want their Madmen, football, Nascar, Walking Dead, etc. and you
will need to buy that through cable companies (for now). If Apple makes a TV
it will look awesome and have some neat tricks, but it will be a "Dumb Screen"
for whatever comes through the set top box. That seems like a losing solution
for Apple.

I think a more likely scenario is that Apple buys a Cable provider like
Comcast and replaces the horrible set top box with an Apple version. Why?

Apple's huge cash position - Apple has more than $50B in free cash and are
adding ~$10B a quarter. They have made repeated statements about keeping that
money available for one or more major strategic investments. They could
conceivably have enough money to buy Comcast by the end of this year.

Why this works:

\- Fits their vertically integrated model perfectly. Now Apple will own the
customer experience from end to end.

\- Creates a wedge that will force other carriers to offer an Apple set top
box.

\- Forces all the content providers to play ball with Apple. If Apple owns the
pipes the content co's will lose a lot of negotiating power.

\- It is a great high margin business, well suited to the Tim Cook era where
device innovation might be slower.

\- It is a hedge against Net Neutrality. If the cable co's get their way it
could negatively impact the Apple UX, especially for iPad.

In this scenario Apple can take on a high margin business with a host of
barriers to entry and milk it while they reimagine what the TV experience
should be for the next 20 years. I have no doubt that we will see a beautiful
aluminum TV made by Apple at some point, but if they don't figure out the
infrastructure foundation first it will not work.

~~~
brudgers
Suppose Apple buys Comcast, then what? They would have no position right next
door in Mexico and Canada (not to mention Asia, Europe, South America, and the
Down Under).

If Apple seeks content, the target is Disney - hands down the only halo brand
in content, and it provides a sports network and deep market penetration
worldwide.

~~~
mdonahoe
Given Steve Jobs' seat on the Disney board, I might expect a partnership
before a buyout.

~~~
pdaviesa
Jobs is also the largest Disney shareholder. Not sure if he controls a
majority of voting rights though.

~~~
culturestate
IIRC he's the largest _individual_ shareholder, not the largest overall
shareholder.

------
nostromo
Apple today is one of the biggest gaming companies out there (because of the
iPhone and iPad)... But they don't really act like it. You see it all the time
-- they push enterprise work apps on their devices, even though the vast
majority of Apps purchased are games, games and more games.

Think about all of the Wiis and XBoxes out there -- those people would gladly
buy an iTV for their existing TV if Apple would embrace the gaming market.
Integration with your iPhone and iPad and computer would give amazing
opportunities -- much more than the Wiimote and maybe even Kinect.

This should be their entry into the TV space. I don't know why they don't see
this -- probably because their senior management is too old to take the gaming
space seriously.

And moving the gaming market away from PCs / XBox / Nintendo and to Mac and
iOS -- it could have great ramifications for several Apple lines of business.

~~~
2arrs2ells
Anyone remember the Pippin? Apple released a (terrible) gaming console back in
'95/'96.

I don't think prior mistakes (or general ignorance of the games market) are
the reason there aren't apps on the Apple TV now. Maybe it's a hardware thing
(A4 can't drive games at HD resolution)? Maybe it's a chicken/egg issue (not
enough Apple TVs to warrant developer attention)?

~~~
i386
Remember that Apple at this time was a company that made terrible computers
and handheld devices too (Remember the Performa and the Newton?)

Doing games on the AppleTV wouldn't be that unattractive for Apple, consumers
or developers: 1) The asking price of the Apple TV is very competitive
($129AUD last time I checked) compared to most consoles on the market. You can
buy three or four of them for the price of a XBox 360, Playstation 3 or a Wii.
2) Apple currently market the iPod Touch as a portable gaming system and there
are a lot of children/teenagers who have bought one because the games are
cheap and addictive - theres no need to go to the store or use their parents
credit card to purchase. 3) The amount of hit games first sold on the AppStore
is testament to the amount of work Apple have done to make their platform an
attractive target to game developers. 4) The current Apple TV uses the same
SoC that the iPad currently does. While I am no hardware expert, I'd imagine
that later revisions of this SoC would be at least as powerful as Nintendo's
Wii. While the Wii is "underpowered" compared to the PS3 or XBox 360 it has
been a roaring success because the content, not the technical capability, has
drawn in casual gamers.

------
stcredzero
_The mistake analysts made about the iPhone was to assume the current industry
structure would be sustained after Apple’s entry. I’d be wary of making the
same assumption about the TV industry._

The big idea in this post: Sometimes you can't judge the viability of a truly
_disruptive_ actor by taking into account a current industry's structure,
because a truly disruptive actor will change the structure!

~~~
kenjackson
Did the iPhone change the industry structure by much? We still have two year
contracts in the US. The price of plans seems to be increasing still. You
still can't take a phone from one carrier to the other (at least not easily).

What did Apple change? Updates directly from Apple? As others have noted other
phones did that before, including Nokia. Buying phones at the Apple Store?
Radio Shack and Best Buy have long had huge sales centers for phones. An app
store? Those long existed to, although generally carrier provided or via 3rd
parties (like Handango). So Apple provided their own app store. That might be
new, but it's hardly industry structure changing.

What Apple did show is that if you make a good enough product, people will
suffer through worse service.

With that said there is a HUGE opportunity here for Apple. Apple has shown it
knows how to work with Samsung and the likes to make great displays and
hardware. I wouldn't be at all surprised to see Apple ship the highest quality
display available. Plus with their volume on phones/tablets they can probably
use pressure to drive prices down on for a TV.

Next they integrate iOS into the TV. Then offer a subscription to iTunes
content and AirPlay support. The cable provider is now completely out of the
picture. They could charge $2500 for this TV and they'd sell 1M in the first
week. 1M in TV sales for a single model, I'd imagine, would be a blockbuster.

In many ways I think this industry would be easier to take than phones.

~~~
davidedicillo
Few things I can think on top of my mind:

\- You can have a complete new feature without changing your phone

\- You don't depend on your carrier in order to buy applications

\- No crapware (sorry this advantage is available only on non-open devices)

\- They opened the mobile development industry to indie and small developers

~~~
stcredzero
I'd say those are four big structural changes.

~~~
kenjackson
Except they almost all existed prior to the iPhone:

 _You can have a complete new feature without changing your phone_

I had this with Windows Mobile seven years ago. Not as frequently as today's
phones, but happened -- especially at transition points

 _You don't depend on your carrier in order to buy applications_

That's a feature phone issue. As I noted before 3rd party app stores have
existed for a long time. And for SmartPhones were the dominant way apps were
purchased.

 _No crapware (sorry this advantage is available only on non-open devices)_

If you go back far enough with smartphones they didn't have crapware either.
Largely because the carriers hadn't developed any yet. But Apple did get rid
of them for the newer generation of smartphones.

 _They opened the mobile development industry to indie and small developers_

That was also the case with smartphones prior to the iPhone. Look at the apps
on PalmOS and Windows Mobile. Most were written by small shops. And because of
their deployment models there were a large number of enterprise apps written
for them too. In fact in many ways the iPhone introduced Fortune 500 mobile
apps. On WinMo and Palm you were a lot less likely to find Disneyland and
Walmart apps as you are now with the iPhone.

~~~
bjelkeman-again
Yes but it was terribly executed before the iPhone and mostly not in one
package.

------
melvinram
OP's points are valid but it ignores the core of Apple's strategy whenever
they've had a home-run: getting partners to do things they would almost never
do.

They might be able to do the same with TV, but they might not choose to
partner with cable companies.

If they are indeed building an iTV, they might partner with the major
networks... or maybe just one to start... ABC. The networks might be motivated
by dropping revenues from their current channels. Apple might promise them an
AdSense style platform for selling TV ads. They would now be able to monetize
content that very niche audience would be interested in. If they promised them
the same 70/30 split or higher, it might be enough to get the networks to take
the risk of pissing off their local affiliates. I don't think they currently
get that high of a split from their affiliates.

There are a number of ways they could potentially get the networks on board
(though it'll be super difficult.) Regardless, I think the thing that they
have to crack is the demand side. How do they make a TV that is so much better
than current TVs that it redefines the category and get's people to give up
their current TVs. I have an awesome Pioneer plasma screen from 3 years ago.
It's going strong and I see no good reason to throw out the $$$$ that I put
out for it. However, if anyone can make me do, it's Apple but it would have to
be a fantastic product.

Part of the mix might be incorporating the gaming advantage that iPhone and
iPad has benefited from. If they just used their other iOS devices as
controllers & remotes, they would have a gaming platform that could rival XBOX
& Playstation. The only thing it would need to match it is a konnect style
device. Who knows if they'll go there with the first few versions.

They also would need to offer a new modality to TV that really changes the
game. I would hope that at the least, they would offer a hulu + netflix style
service.

~~~
jonhendry
They won't do a TV. Replacement cycles on TVs are long, especially now that
we're unlikely to see a persuasive tech shift that would drive upgrades.
Current 1920 HDTV screens are going to be 'good enough' for quite a while.

If Apple released a TV, they'd soon find themselves with a large installed
base of outdated hardware and customers in no hurry to upgrade because the
main functionality is still entirely adequate.

It's to Apple's advantage to sell easily-replaced $99 external boxes that
attach to whatever TV the consumer already owns. In one or two years, the
consumer can replace it with the latest Apple product, with its faster CPU and
GPU, additional storage, and new features, without too much pain.

People just aren't going to want to replace 60" TVs as often as they replace a
cell phone or a laptop or a game console.

------
atacrawl
I think Netflix and Hulu (along with the internet at large) have already
disrupted the TV industry.

Cable painted themselves into a corner -- they leveraged their monopoly of the
home entertainment dollar by adding more and more channels that people didn't
necessarily want under the guise of "choice," then subsidized those unwanted
channels by raising the monthly price. That worked until technology caught up
and the internet became a viable distributor of content. Consumers are wising
up to this, and cable is shedding half a million subscribers a quarter.

I think the best way for Apple (and others) to really put their boots on
cable's neck is either to poach content or compete on content. It'll be
interesting to see how House of Cards does on Netflix, for instance.

------
RomP
I always thought that what Apple does best is taking a cumbersome consumer
device and making it simple. E.g. iPhone replaced 4 or more devices with one
(phone, iPod, internet+mail client and GPS, at the very least, and that
happened before the AppStore opened). I really don't think that people at
Apple sit around the table and think in terms of vertically integrated models,
platforms, monetizing and all that other high-level stuff. I bet they think
about user experience and do what needs to be done to achieve it. Integration
models, platforms, partners, etc. come in next, they are secondary in the big
schema of things.

From the user perspective, people need simple access to the following types of
content: * real-time (think ESPN, Speed Channel and breaking news) * near
real-time content (talk shows, nightly news, first-run TV shows) * archived
content (moves on DVDs)

The archived content problem is solved by Netflix. The near-real-time problem
is solved by Hulu (some networks, like HBO and Showtime are not there yet but
will be once paid subscription becomes relevantly popular). The real-time
problem is not solved -- flash-based players on news sites do not count. Apple
might be able to to the third one, the way the newspapers are now published on
the iPod.

In my view the opportunity is to bring all 3 types of content into one box,
under one UI and wrap it into the nice user experience. Add IP-only delivery
and a-la-carte subscription (e.g. I want monthly pass to 3 shows from Showtime
and one show from HBO, but not the whole network), and users will ditch their
$150/month settop boxes in droves.

------
guygurari
I like Marco Arment's take on this [1]. He doesn't think Apple will release an
HDTV, citing the following problems.

1\. Consumers don't upgrade their TV as often as they do their laptops, cell
phones, and other gadgets.

2\. Apple can't make an all-in-one TV. HDTV's need to interact with receivers,
equipment supplied by the cable operators, blu-ray players, game consoles,
etc. Apple usually prefers to keep such interactions to a minimum.

3\. TV's require service at the customer's home, which Apple isn't currently
geared for.

He also offers some points I disagree with.

1\. Apple serves the high-end market in order to have high margins. How big is
the high-end TV market?

I think the same could've been said about the smartphone market prior to the
iPhone. As Apple showed, high-end does not equate high prices. Get the price
right on a quality product and you can capture a significant share of the
market. Better yet, disrupt the market by re-imagining the product (think
capacitive touch screens).

2\. Retail TV stores need a large display area, which isn't a good fit with
Apple's existing stores.

No need for a large display area if you're selling just one model.

[1] <http://www.marco.org/2011/04/16/rumored-apple-hdtv>

------
neworbit
There's a more important constraint here: people change out their small
consumer electronics MUCH faster. They buy new phones every year or two,
arguably as fast as Apple puts them out. Same was largely true for iPods. They
don't replace their TVs very often.

~~~
stcredzero
How often do people buy set-top boxes in the $99-$250 range?

~~~
benologist
As often as they break or want and can afford a bigger one.

I'd need a pretty compelling reason to buy a new TV even every _five_ years.

~~~
edash
How many Walkman's or Discman's did you buy before the iPod came out? The
market for portable music devices went up exponentially from the 90's to the
mid-2000's when the iPod achieved mainstream status. I bought two iPods in
three years before the iPhone made 'em useless.

Consumer behavior isn't set in stone.

Source: [http://www.in-
stat.com/press.asp?ID=1366&sku=IN0502148ID](http://www.in-
stat.com/press.asp?ID=1366&sku=IN0502148ID)

~~~
te_chris
Off topic, but the iPhone has done anything but make my iPod Classic useless.
It's shown me what a brilliant and useful device my Classic is, that I can
hold 120gigs of music in my pocket at all times. You have to be a music fan to
really appreciate this, but for me I like that I have a smart phone and an
iPod and, if my classic broke, I would certainly buy another one.

------
acangiano
There is no doubt in my mind that Apple will end up disrupting the TV industry
as well. Generally speaking I prefer the idea of an external box that can be
easily replaced and updated. However, I'm sure Apple will manage to provide
regular firmware and iOS updates to their all-in-one TVs, so the benefits of
the external box may become quite marginal for most people.

~~~
easyfrag
I think Apple TV is already in the process of disrupting TV, if I recall
disruption theory correctly the disruptor is not quite as good as the current
status quo.

Let's look at apple tv compared to a traditional cable box: Netflix is pretty
good but doesn't have the same level of "appointment" or "water cooler" shows
as cable. Cable is far superior with live sports, apple tv just has MLB
streaming with probably the NBA and NHL soon to follow.

Already for some audiences that might be enough to kill the cable bill
entirely or (more likely) to reduce the package they have. Throw in the fact
that it can also play the stuff that's on the your iPhone or iPod, has built
in pay per view mechanism, and a prettier interface and I think you might have
some freaked out cable/ satellite providers.

Apple TV is definitely not as good as cable but it's getting close to being
good enough.

~~~
r00fus
AppleTV hasn't replaced CableTV for me, but it sure has replaced on-demand-
movies. Netflix streaming is great, but it usually doesn't have the best and
latest movies.

We've used the AppleTV rentals several times in the past few months where we
might have instead watched Cable on-demand.

------
tuhin
Perhaps the Apple entertainment TV is already out there in the form of Macs,
iPads and iPhones. Maybe it is just me thinking stupidly but from the way I
see, the iTunes is the new Apple set top box. Certainly the Airplay and other
features they are adding seem to point that way.

What if they are able to have cheaper subscription rates for shows (entire
season, maybe?), entire NFL season etc. I chose what I watch and when I watch
and the experience can hardly get any better.

Of course I am not saying that iTunes is at its peak of innovation, but just
saying that perhaps Apple is not bringing innovation to TV but bringing TV to
a host of innovative devices.

For me every bit of TV watching happens online and I would like to believe
that that is the trend the industry is witnessing. What else defines YouTube
buying rights for streaming live IPL matches for India, a country where TV
sets definitely outshine the web streamers.

------
rm445
Interesting article. As I read it, I supposed that the conclusion would be
that the iOS ecosystem would be Apple's disruptive advantage in the set-top
box market.

Instead, he concludes that Apple might make a disruptive _television_. It's
interesting - displays are already vital to their other products so it's not a
big stretch.

------
dstein

      2) integrating into other TVs, or 3) Apple creating its own TV
    

I think he missed the in-between option here. Apple could partner up with a
single manufacturer (Samsung) to produce an Apple branded TV with their own
specs and the AppleTV STB built-in. I think this is the most likely
possibility.

~~~
ja2ke
Even if Apple did that, I imagine they wouldn't share co-branding prominently
on the packaging/marketing, which would make it #3.

How many devices have you seen in the last decade which include an Apple logo
AND another manufacturer's logo? I can think of one: the Apple/Nike+
<http://www.apple.com/ipod/nike/> . The Apple logo and the Nike swoosh are
cited as two of the most recognized logos in the world. I suspect that's about
the only caliber of partnered branding Jobs would allow on an Apple product at
this point.

~~~
slashclee
I love how everybody seems to have forgotten this one...

<http://direct.motorola.com/hellomoto/rokr/>

~~~
ja2ke
I remember that thing. I'd forgotten about the HP iPod though! The only cross-
branded product from that era still thats really left is the Nike+ though.

------
tienshiao
I think the iPad could be Apple's set top box.

You can see pieces of it in place already.

\- content: The recent apps from TimeWarner and Comcast. iTunes is obviously
another source. Games are another source of content.

\- AirPlay: Extending AirPlay to support video out doesn't seem to farfetched.
This would only really be needed for non-video applications (ie: games).

\- Integration with TVs: Presently, you need an adaptor (the AppleTV), but it
would not be farfetched to see the AirPlay functionality built into the TVs
(like the Samsung TVs with wifi and apps already). There is precedence for
this on the music streaming side with AirPlay.

~~~
wowamit
Re: "Integration with TVs" - I doubt Apple would depend on a 3rd party for a
core piece of the overall solution. So iPads as set top box is pretty much
farfetched.

------
elvirs
I think another major problem with tv is that it has too much content which is
hard to navigate in and it is not personalized. when I browse through channels
there are so many things that I would never watch but today I have to be
exposed to it and decide if its worth watching or should I move on. If my tv
or the remote knew my watching preferences it would walk me among the channels
showing things that I would prefer to watch at that moment. I am working on a
project that converts your phone (with internet) to a tv remote and enables a
personalized tv experience. I hope I can make it right.

------
pieter
He misss a fourth option: Apple replacing the existing top-box with their own,
using TV over IP. Might not be the time for that yet, especially with the
horrible broadband Market in the US, but once TV is a commodity you get over
the Internet just like music, Apple might want to give it a try.

~~~
masklinn
No, that is the very issue outlined in the AllThingsD Jobs quote (third quote
block):

> The problem with innovation in the TV industry is the go-to-market strategy.
> The TV industry has a subsidized model _that gives everyone a set top box
> for free_.

Competing with free is _hard_ , and replacing existing top-box means replacing
_free_ operator-provided set-top boxes.

Replacing top-box is what AppleTV does, and Jobs very much says it won't
achieve mass-acceptance ever, hence his conclusion that:

> I’m sure smarter people than us will figure this out, but that’s why we say
> Apple TV is a hobby.

~~~
pieter
I don't think the AppleTV replaces any top-box right now, nor is it meant to
do so. As long as you can't watch live tv with it, almost no-one will use it
instead of their cable subscription.

That said, I don't really see problems with giving away the AppleTV for free
with a one or two-year subscription; the iPhone is already available for free
on contract in a lot of countries, and the AppleTV is a lot cheaper to
produce.

~~~
rahoulb
If the AppleTV gets iPlayer and 4OD (I guess the equivalent would be Hulu for
the US) then I would cancel my cable box immediately.

I've got Freeview for live digital TV, the AppleTV could then take care of all
non-live watching.

------
panacea
"I am not citing these analysts to mock them. Hindsight is 20/20..."

John "Claim Chowder" Gruber, could learn a thing or two from Mr Dixon.

