I think they could build a next-generation-console-capable Apple-TV and sell it at or below $199 while keeping their 40% margin. They would sell you each additional wireless controller (and it would be sweetly designed, I suspect) for the standard $79 peripheral cost.
The primary contributor to their bill-of-material cost savings vs. competitors is that they already own and/or license at huge volume their CPU and GPU cores and know how to fabricate them in multi-core formats with high-speed cross-connectivity. They can also buy RAM and flash for SSD storage at better costs than anybody else. These are the primary cost drivers (basically money flowing to IBM, nVidia, etc for CPU/GPU and money flowing elsewhere for RAM/SSD/HDD) for xBox, PS, Wii.
Apple would have dramatically lower overall startup costs versus the original xBox/xBox360 and PS2/3 given they already have a toolchain and SMP operating system with sandboxing, an App Store and its back-end, user-accounts and payment infrastructure, and numerous other costs shared with the rest of the Mac and iOS ecosystems.
Apple wouldn't have a lot of work to do to train developers: tell us the screen resolution, how to interact with the controller and any other new hardware capabilities, tell us anything special about the GPU's and let us go to town with the existing toolchain we are using for iPhone and iPad.
So, again, I have no idea if they'll do it, I just think it would be a very profitable business for them.
When the iPod was introduced it didn't compete on tech specs with the other music players. "No wireless. Less space than a nomad. Lame." - the famous last words dismissing the iPod.
When the iPhone was introduced it did have innovative tech but it was secondary to the overall experience.
I'd say when, not if, Apple really wades into the TV market, they should be able to achieve the same kind of disruption. TV's are an obvious choice for Apple, because the TV is one of those consumer electronic devices that occupy a sweet spot between status symbol and the everyday always connected lifestyle.
Thanks for the article. Sony/Microsoft/Nintendo better watch out!
Now I am not too keen on the video games industry and an insider might have differ, but I've tried to do my fact checking. In a way the device you described for Apple's target specs is what Nintendo did the Wii - and were hugely successful for. They sold 100s of millions of units, and it wasn't sold at a loss so they minted money. However, despite their huge shipments, only Nintendo enjoyed success. The people who bought the Wii, only bought 1 or 2 games (like WiiFit and WiiSports) and it became incredibly hard for third parties to market big budget games to them. Effectively the 3rd party abandoned Nintendo.
Secondly, if the system is not powerful enough, I believe gamers will reject your platform. I believe this is more important than the "No wireless" issue because gamers are the only ones who will spend $59.99 on a big budget game, and as a result 3rd party companies will suffer. You can't sell Call of Duty at 99 cents, and gamers don't want to play a Call of Duty that looks like it was made in 2002.
So the market, I believe splits into 2 groups -
1.) Average folk, who want the box.
2.) "Gamers", who want the software.
We can already see this today. There are Netflix Machines like the Roku (1.) and consoles (PS3). However I believe that the the console guys (Nintendo/Sony) will eventually win out, because they provided the hardware (the hard part) first. Its relatively simple to get the indie devs on your side - open up the platform. But to get the big budget guys on your side you have to convince them that they won't waste 50 million producing the next CoD because it will be drowned out by the likes of Angry Birds and Temple Run.
Lastly, I am not sold on the fact that Apple will be able to push the same numbers as Sony on Apple TV without "big boy" support. If EA is not going to support your system I don't think the Apple Box will sell as much. (the Apple TV only sold 2.7 mill while PS3 sold 10 times as much). While Apple is known as the company that can sell a brick to the masses, I am not sure they can sell 25 million consoles without some big franchise names at launch.
Microsoft's huge win on both PC and Xbox has been their active and aggressive devrel for games, which was where Sony stumbled hard on the PS3 (Cell processor development difficulty abound).
But yeah, I could see your scenario happening. It would probably be amazing either way