What’s Next for Apple’s Living Room Strategy?
When Dictionary.com defines the living room as a room of leisure, its clear the online dictionary isn’t referring to the consumer electronics industry. Otherwise, the words “bloody battle to the death” would likely be included. With Circuit City going out of business, Toshiba retreating from a bruising loss to Blu-ray, and the Big Three of gaming throwing billion-dollar elbows, the room where consumers go for leisure is where upstarts and giants of technology go to die.
Even Apple knows this. After a decade in which nearly every move by the maker of the iPhone was golden, the company’s effort at a next-generation set-top in Apple TV stands as one of its few disappointments. The company set expectations going in, pitching the device as more “hobby” than “hit” from the get-go. But, two years after this “hobby” hit the market, it’s worth examining what Apple will do next in the living room.
Apple Television?
Some have speculated that Apple itself may be looking to make an actual television. The thinking goes, if it wants into the living room, why not control the main attraction?
Fat chance. While we’re clearly in the high-volume stage in HDTVs, the market has taken off precisely because consumers can get them so cheaply. A market where competition is fierce and prices are crashing hardly seems to be Apple’s ideal.
Blu-Ray?
Another option for Apple is to release its own Blu-ray player or at least incorporate one into the Apple TV. An Apple Blu-ray player could offer the best of both optical disk playback and online video. This doesn’t seem likely either. While Apple joined the Blu-ray industry group early on, they have yet to put a Blu-ray drive into a Mac, and with standalone Blu-ray players dropping below $200, its unlikely, even combined with Apple TV.
Apple TV: Game Box, Movie Box and More!
While the company may call Apple TV a hobby, it could ultimately be a paying gig for the company from Cupertino. With sales of Apple TV going up as of late, and the first model in its third year of life, Apple’s best living room bet may be a second generation Apple TV.
Why now? Since the launch of Apple TV, the company has launched its app store, pushed into gaming and started offering HD video content on iTunes. Add it all together on a refreshed box, and it could be a potent combination.
What would a new Apple TV have?
- First off, a heavy gaming and app focus. While Apple’s investment in App store and gaming has largely been on the iPhone, there’s no reason all that knowledge and the developer ecosystem can’t be transferred to the living room.
- Second, 1080p support. Today’s Apple TV supports HD, but neither it nor iTunes supports the highest resolution in 1080p. Its only a matter of time before iTunes goes 1080p, and such a move it could very well be in tandem with a new Apple TV.
- Lastly, tight integration with other Apple products – existing and possibly forthcoming – could be Apple’s knockout punch. Today, Apple TV integrates well with the iPhone and the remote app, but imagine a web pad as well as gaming peripherals connected to a new Apple TV.
Apple-predicting is a fool’s game, but given that the company clearly will look to further its living room strategy, its worth playing. What I predict is this: a new Apple TV at some point in 2010 that will be part gaming console, part online video and application powerhouse, all in wonderful 1080p.
Apple has a difficult set of constraints when it comes to television. The company makes money selling high-margin consumer electronics with a value prop built around strong integration between Apple-branded applications, computing and devices.
This has worked in the music market where paid media has been a high proportion of market revenues. Television is a different animal, and most of the revenues are buried in bundles or advertising…and not in paid media such as rentals and VoD. The ratings bear this out, with ad-supported Internet streams several orders of magnitude larger than paid distribution from the likes of Apple or Microsoft.
Which raises the question of Microsoft/360. Michael may be right about the near term outcome, but I don’t think either company has made much progress breaking into television.
@Neil – if Apple does do a TV, I owe you and Scott a beer
But, overall, it seems we’re all in agreement the need for Apple to continue to evolve their living room strategy. The surprise for me in the last day was they didn’t mention Apple TV once on their quarterly earnings call, so that tells me they are either building something they are very quiet on or are not sure what exactly they are going to do. It seems they are getting further behind while Microsoft is seeming like the innovator of the moment for the converged living room device with the 360, so Apple needs to do something here in the next six months.
It wouldn’t surprise me either in all honesty and I would tend to agree with Scott.
I would however agree the economics don’t necessarily make sense but Apple are going to continue to push their way into the living room. If they don’t opt for the TV route, I’m sure they’re going to be looking to make some fairly significant modifications to Apple TV. I’d hazard a guess they’d incorporate a range of updates to integrate additional functionality – look at Boxee – that will help drive sub volumes and ARPU, whilst combating the threat of the new up-and-coming bread of ‘intelligent’ TVs. ^^^There’s still lots of scope for them to push the VoD angle as this market is only going to grow – one key thing they are missing from Apple TV though is the content deals to air mainstream programming.^^^
Apple are becoming all about convergence and simplicity of access. I can’t see them not developing this aspect of their portfolio with the strength of the iPhone/iMac to provide a seamless, integrated service. Store once, access anywhere, anyhow.
I wouldn’t necessarily dismiss an Apple branded Television. They have shown again and again that people will pay a premium for the Apple aesthetics and feature set. Sure you can buy a cheaper TV, but you can also buy cheaper mobile phones, computers and music players. The crumbling prices in those areas hasn’t kept them away.
SB
@Scott – I think that quite a few people would buy an Apple television, but the TV market is changing very quickly, with OLED coming online, people talking about super HD and even 3DTV, that its a market you really need a full lineup with many sizes of screen, etc. Its one you need either a serious manufacturing capability or align with someone who has one. Apple likely wouldn’t own the manufacturing and would have to align with either a Chinese or Taiwanese manufacturer, and I doubt they’d do that. And I doubt any serious CE brand like Panasonic, Sony, Samsung, etc would work with Apple at this point. Some sources in Silicon Valley have told me Apple has talked with all of these guys – I haven’t confirmed this so take that for what it is – and all of them have turned Apple away.