Apple and the TV industry

There is one crucial aspect of the TV experience this argument leaves out.<p>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.<p>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?<p>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.<p>Why this works:<p>- Fits their vertically integrated model perfectly. Now Apple will own the customer experience from end to end.<p>- Creates a wedge that will force other carriers to offer an Apple set top box.<p>- 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.<p>- It is a great high margin business, well suited to the Tim Cook era where device innovation might be slower.<p>- 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.<p>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.

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.<p>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.<p>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.<p>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.

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

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.<p>They might be able to do the same with TV, but they might not choose to partner with cable companies.<p>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.<p>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.<p>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 &#38; remotes, they would have a gaming platform that could rival XBOX &#38; 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.<p>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.

I think Netflix and Hulu (along with the internet at large) have already disrupted the TV industry.<p>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.<p>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.

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.<p>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)<p>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.<p>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.

I like Marco Arment's take on this [1]. He doesn't think Apple will release an HDTV, citing the following problems.<p>1. Consumers don't upgrade their TV as often as they do their laptops, cell phones, and other gadgets.<p>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.<p>3. TV's require service at the customer's home, which Apple isn't currently geared for.<p>He also offers some points I disagree with.<p>1. Apple serves the high-end market in order to have high margins. How big is the high-end TV market?<p>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).<p>2. Retail TV stores need a large display area, which isn't a good fit with Apple's existing stores.<p>No need for a large display area if you're selling just one model.<p>[1] <a href="http://www.marco.org/2011/04/16/rumored-apple-hdtv" rel="nofollow">http://www.marco.org/2011/04/16/rumored-apple-hdtv</a>

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.

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.

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.<p>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.<p>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.<p>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.

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

<p><pre><code> 2) integrating into other TVs, or 3) Apple creating its own TV </code></pre> 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.

I think the iPad could be Apple's set top box.<p>You can see pieces of it in place already.<p>- content: The recent apps from TimeWarner and Comcast. iTunes is obviously another source. Games are another source of content.<p>- AirPlay: Extending AirPlay to support video out doesn't seem to farfetched. This would only really be needed for non-video applications (ie: games).<p>- 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.

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.

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.

"I am not citing these analysts to mock them. Hindsight is 20/20..."<p>John "Claim Chowder" Gruber, could learn a thing or two from Mr Dixon.