Apple’s Curious TV Plans

Tim Bajarin / August 6th, 2012

In Walter Issacson’s biography of Steve Jobs, he related a conversation with Jobs in which Steve says they [Apple] nailed what a true interactive TV experience should be in the way of UI, content and hardware. (My paraphrase) Although he did not announce any new products, he basically laid the groundwork for a lot of speculation about what he meant and what Apple might do with their future Apple TV plans.

Most speculation has been on the idea that Apple is going to do an actual television and could have it in the market sometime in the next two years. Others see the current Apple TV becoming a greater vehicle for content and UI innovation and that this is what Jobs meant.

Over the last two weeks, Apple has made a very important and, to us long time Apple watchers, curious move when they added Hulu to the Apple TV line up and then the following week, allowed Amazon’s Live TV and Movie streaming app to go on to the iPad. I say that this a curious move because these products compete directly with Apple’s own iTunes TV and movie store and at least in theory, would impact their services revenue coming from similar iTunes products.

While Apple could still make an actual TV, I think this move with Hulu and Amazon essentially signals a strategic move by Apple and is probably at the heart of their future TV plans. The key here is that for Apple’s current TV device to make money, it needs content. By biting the bullet and offering competing services to iTunes, the value proposition of an Apple TV device just went up. And it now lays the groundwork for Apple to accelerate their TV plans through an area they excel in. That area is software and human interfaces and I believe that they can do all that they want to do in this area through an external box that connects to a TV and delivers Apple’s iTunes and cloud services. The problem with TV’s is that people buy them and hold on to them for 5 to 7 years on average. And while Apple could design a TV that could be upgraded in software, it makes more sense to create a more sophisticated box that works with all televisions and allows them to innovate around this model.

More importantly, as technology advances, they could redesign the box every year or two and given its low cost, people could just upgrade to get these new features. That is what they do now with the iPod, iPhone and iPad and it makes sense to carry that business model to the Apple TV too. While Apple is clearly a hardware and software company, it is pretty clear to me that the software exists to help them sell hardware and ultimately deliver a whole eco system of products and services that allow them to make money through all of these offerings.

I am not sure how much margin they have in the Apple TV, but knowing Apple’s way of thinking about margins, I believe that they make enough profit to keep their “hobby” going. This buys them time to innovate around the software UI and services that make these boxes very valuable to Apple customers and draw new users into Apple’s overall eco system of products and services.

Also, Hulu debuted on the iPad and migrated over to Apple TV and it is only a matter of time before Amazon’s streaming service shows up on Apple TV as well. Apple knows content is king and that it helps them sell hardware.

As I stated earlier, Apple could create an Apple TV, but I really doubt that this is in the cards and I would be highly surprised if they did a stand-alone television. Instead I believe Jobs’ and team saw the long term evolution of what the external Apple TV could become and that it this box, tied to advanced UI’s and innovative services and content that is at the center of Apple’s vision of revolutionizing the interactive TV experience.

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
  • pete

    would impact “their” services revenue coming from similar iTunes products…

  • Good article! I agree this was a smart move for apple. I favored the roku simply because of the content options when I purchased a set top box.

  • FalKirk

    The author makes several excellent points in this article, but let me just focus on two.

    “(Apple) can do all that they want to do in this area through an external box that connects to a TV and delivers Apple’s iTunes and cloud services.”

    Exactly. Anything Apple wants done on TV can be done with an add on box. The actual television set adds little value to their proposition and would actually prove to be counterproductive.

    “That area (which Apple excels in) is software and human interfaces…”

    Agreed. Apple is hitting on all cylinders right now and they are so good at so many things that I think people forget that, at their core, Apple is a human interface company.

    – Apple makes their money by selling hardware; and
    – Apple sells their hardware by providing easy access to content; but
    – It is Apple’s ability to make technology invisible or, at least, less intrusive and more useful, that adds massive value to all of their products and turns a mere commodity into a premium proposition.

  • disqus_LuiRuyD7wV

    I am really surprised there isn’t more speculation on Apple’s love of curved glass. They are building a huge curved glass spaceship and will have the ability to drive down the cost in consumer devices. What could this achieve with tv? What about a spherical display to replace your tv? They already exist but are heavily expensive. Patent activity points to apple doing a lot of experimentation with 3d interfaces. Jobs clearly had a desire to pursue 3D when he bought Pixar. Disney has ingrained that pursuit of 3D. Apple signed Avatar on in iTunes. Everything points to 3D work. Yet modern 3D experience sucks. I bet a curved surface could deliver massively improved 3D effects without splitting the image in 2 the way commercial 3D works today

    • Rich

      “They are building a huge curved glass spaceship.”

      What in the world are you talking about?

      • disqus_LuiRuyD7wV

        Sorry, meant to say huge curved glass ‘spaceship like’ headquarters

  • The problem with the stand alone box as we currently have it is that you end up using the TV’s pathetic, Samsung-class, ‘interface’ too much of the time. if they do another set top box, then I hope it can control the cable, or eliminate altogether the DVR+cable combo box.

    • FalKirk

      “if they do another set top box, then I hope it can control the cable…”-Wolfgang Mozart

      Well, that’s the problem Wolfgang. Only the cable company can control their own, proprietary box. No one else need apply.

      The way around this is to divert the flow of content from the television cable to the internet cable. Your cable provider provides both cables, but they can only put a “box” on the television cable. Once the content is flowing from the internet to your computer to your Apple TV to your TV, then the television cable is cut out of the equation, the television box is cut out of the equation and the television cable revenue is cut out of the equation.

      Sort of makes you understand why the cable companies will fight this move to the death.

  • Rich

    “The problem with TV’s is that people buy them and hold on to them for 5 to 7 years.”

    That’s one of the problems with TVs. The other is that Apple doesn’t want to make a box with a 50-inch screen.

  • Walt French

    Maybe Hulu+ is the signal that Apple need not own the content store the way it dominates music with the iTunes store. Riffing on the idea, every producer would have an internet-based distribution system that it owned, independently of the brand of hardware.

    And independently of the cable nets, tho the ownership link between NBC and Comcast is just one of the obvious dual purposes.

    Customers could choose to sign up for a package of producers, and Apple would “win” to the extent that customers chose Apple devices as the easiest, or sexiest, or cheapest box for consuming content. Under this scenario, Apple might even provide iTunes’ brand umbrella over Hulu & its lookalikes, asking for a much more modest 10% to provide a link to the producers’ sites.

    I’d love to hear your, Tim, and others’ responses to this potential.

  • One thing that annoys me is the LEADEN pace at which Apple plays with the Apple TV box. “OOOOOoooooo — they added Hulu!” Big deal. It shipped day one on Roku. “OOoooooo – Amazon is on the iPad.” But can’t be streamed to Apple TV. Y.a.w.n.

    Yet another fall TV season approacheth. Does Apple FINALLY have some amazing new cool game changing TV access paradigm, or are they going to add Facebook to AppTV a year from now and expect everyone to swoon?

  • thorntondw

    I agree. Apple TV should remain as it is hardware-wise. As soon as I saw that Hulu was added I subscribed. It doesn’t really make sense for Apple to make a TV now … perhaps in a few years when it can become the central component of a fully integrated home buying and content consuming system as well as being integrated with household appliances.

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