3 Things Apple iTV Must Do to Succeed

A few weeks ago, when I wrote that over-the-top TV Apps would eventually overtake cable TV-centric apps, much of my thinking was influenced by the forthcoming iTV box from Apple. With press invitations now going out in the mail, I think it’s time to analyze what Apple needs to do to make its presence in TV more than a hobby. Below are three steps Apple must take in order to succeed in the living room:

Introduce Creative Video Bundle Packages

In the past few days, it’s become clear that Apple is unlikely to launch a highly desirable, all-you-can-eat subscription service, which as we all know would have been a true cable-killer. Instead, it will likely offer 99-cent rentals, which is, in truth, a disappointing consolation prize, since it’s not that differentiated from cable VOD offerings.

While some consumers will adopt OTT VOD to a limited degree, Netflix subscriptions for TV shows (both Watch Instantly and by DVD) will likely remain the preferred option.

So if Apple can’t offer an all-you-can-eat plan, what should it do for its OTT video offerings? Simple: offer season passes and other creative show bundles. Major League Baseball, for instance, has done well selling season passes to its video service to loyal sports fans. Given that TV show loyalty is similarly passionate  (just ask “Mad Men” fans), Apple would do itself a favor — and likely encourage cord-cutting — if users can access entire seasons of their favorite shows in a single pass.

Optimize Apps for TV

There’s some debate as to whether Apple should allow all the iPhone and iPad apps onto the new iTV, but unleashing the flood of thousands of iPhone apps onto iTV would be a terrible mistake. Remember that iPhone apps are touch-optimized, and built for a small-footprint screen. An iPhone (or even iPad) app blown up on a high-resolution, 42-inch HD screen would look awful and seem misplaced.

What Apple must do is simply push developers to create TV-specific apps on its iOS, and no doubt, there will be a flood of good apps optimized for the iTV and large-screens in a matter of months.

Put FaceTime Video Chat on TV

As we’ve talked about here quite a bit, Skype is heading into the TV market, and its biggest competitive weapon will be video chat. I have no doubt that Skype could be an app platform, so I think Apple’s should cut them off at the knees by offering a video chat capability in FaceTime, a move that could negate the dominant VoIP provider’s biggest asset.

How big would FaceTime be in the living room? I think it could potentially be very big. Living room broadband access doesn’t suffer from the same limitations as mobile broadband networks, which simply don’t have the capacity for an Apple invasion of video chat consumers (which is why FaceTime currently only works on Wi-Fi on the iPhone).

While Steve Jobs himself may not even be convinced an updated iTV would be a big hit, I think it could be, mostly because — as I’ve stated before — cable companies move at a glacier-like pace. By bundling online video rental packages and combining with  well-done TV apps and video communication in a revamped iTV, Big Cable would certainly be right to worry.

Related Research: Apple’s Path to the Living Room

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Michael Wolf

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