RIP Apple TV, Hello Apple TV

After finally admitting that the company did a poor job with the Apple TV, Steve Jobs in his Macworld keynote today unveiled a totally new interface with loads of functionality that should be enough for any Apple zealot to jump for joy. Of course, what Jobs didn’t mention during his “Delusions of Grandeur” speech was whether or not the Apple TV has some viability going forward. After all, how much faith do people really have in Apple to make its new offering a success when the product was relegated to the shadows and generally ignored over the past year?

If you ask me, they should have more faith than ever.

Let’s recap: The Apple TV was originally slated to sell 1 million units by the end of 2007, according to predictions made by analyst firm J&W Seligman and many others. But in reality, the device barely hit the 400,000 units sold-mark, staying on the shelves while more appealing Apple products continued to beat estimates. Why? Simple: Apple gave us no real reason to buy the Apple TV. If we couldn’t access iTunes from the device and YouTube integration was the only additional feature beyond what we could already do on a computer, why waste $299 just to have another set-top box laying around the house?

Obviously understanding this, Apple’s announcement today set the tone for the future of the Apple TV.

The newly updated Apple TV will allow you to download iTunes movie rentals, music, podcasts and video without the need for a computer. And with Flickr integration, you can even flip through your friends’ photo albums. As if that wasn’t enough, Apple upgraded the device’s UI to make it more user-friendly and dropped the price to $229. If you’re already an Apple TV owner, you’ll be happy to know that a free update will be released in two weeks that will give you the same functionality outlined above.

Why has Apple employed such a drastically different strategy? Well, the company has already invested millions in the device, so there’s little incentive to create an entirely different set-top box to accommodate iTunes movie rentals. Beyond that, the Apple TV is a convenient device that will allow Apple to create the end-to-end solution with rentals that it enjoy with music and iPods. After all, what other service has the number of users iTunes does and a full set-top box integration to boot? Netflix certainly doesn’t, and Movielink relies on Windows-based machines.

In the end, Apple may have talked a good game by claiming it wanted to create a more compelling Apple TV, but the truth behind its reinvention has everything to do with movie rentals. Apple smelled blood in the movie rental industry and realized that by offering movies in the same fashion it offers music and allowing people to enjoy the entertainment on an Apple product, it has successfully created an end-to-end solution that has yet to be mastered in this space.

Rest assured, the Apple TV was always an important piece in Apple’s puzzle and going forward, it could be the key to its future.