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Is Apple’s Television the Yeti of Consumer Electronics?

It’s now the second time we have had a refresh of the Apple TV box and both launches have been preceded by increasing chatter about Apple’s imminent entry into the television market. Yet again the faithful have been disappointed.

Apple almost certainly buys large displays in sample quantities to build concept TV products, and no doubt a call from Apple for samples is welcomed by a display vendor. Any sales manager would like to be famed as the one who won the Apple business. No doubt these tales then circulate through karaoke bars and leak into the media, gaining in credibility each step of the way.

However, the question of Apple’s living room strategy remains. Apple does not play in low-margin businesses and TV set making remains stubbornly challenging. Apple would need to find enough space to re-shape the experience, which in turn could revolutionize the market, as it did in audio. However, there are significant limiting factors:

  1. Most people watch broadcast TV most of the time – which limits what Apple can control.
  2. Most people watch fewer than 20 TV channels, so the navigation problem is an order smaller than a music collection.
  3. Premium content access is controlled by pay-TV providers. At the same time, just as Apple has not generally put FM radios into its products because it does not provide a revenue stream compared to iTunes, it is not clear that broadcast TV content would be of interest. Apple can’t escape the challenge of tackling the media companies head on – one of the failures of Google TV was that it was blocked by Hulu and Internet services from ABC, CBS and NBC.
  4. While iTunes is dominant in audio content, it is not in TV content, and Apple will need to trade off a desire to keep users in the iTunes environment (or approved streaming services like Netflix) against allowing access to the open Internet to download content and install apps. So far, Apple TV has been focused on iTunes and has not included Safari or other browsers.   

Apple could doubtless make a TV which would be slick and beautiful. At the kind of margins Apple is accustomed to, that means a niche high-end product, like those of B&O or Loewe. While Apple aims for the nexus of a highly profitable product with high volumes, most TV buyers are not early adopters. So it would be a challenge to match the success of the iPhone or iPad. The other aspect of Apple’s formula for success is to offer only one model (with a few variations for memory configuration or screen size) to the global market. The TV market on the other hand requires wide product ranges (the combination of four sizes and four digital broadcast standards alone requires at least 16 different models worldwide) even before you consider color or styling choices – compared to the sparse ranges of Apple’s other products.

For the time being, Apple can sell a $99 box which extends its iTunes universe into the living room, while the CE world continues to ship displays at low margin. Those same CE vendors are also compelled by their consumers to develop iOS apps for their Smart TVs. Apple probably does not consider that to be a bad outcome. As Daniel Danker of the BBC iPlayer noted, while the BBC has twice as many connected TVs as iPads accessing iPlayer, those iPads generate four times the traffic.

  • Anonymous

    Fully agree, but…

    Mobile phones was as challenging a business (6 years ago) as TV now is. Multiple standards (well, atleast 2), a plethora of handset diversities (clamshell, slider, qwerty, regionalization), no real differentiation and rapid margin erosion …until of course Apple found a magic cure called touch.

    What more – the TV and handset industries have many of the same (or similar) players – koreans, japanese, north europeans. All playing by the same rule book, all of them innovating in the same space, all of them wary about the emerging Chinese, all of them caught in the race to the bottom – and none of them making any descent profits. The TV industry is ripe for an overhaul, the question of course is will Apple find a magic cure this time as well. Fully agree that navigation is not the problem (so a solution like touch will not be earth shattering), also, I fear that if Apple tries to force-fit iTunes as the solution, then it might not work. So the billion dollar question stays open for now.

  • Paul Gray

    My point is that the TV business doesn’t need revolution -  it’s simply being overtaken by devices like tablets. It’s hard to differentiate a pure display device (especially if you insist on making the bezel 5mm thick). The future of Smart TVs will be ensuring that they play nicely in a 3-screen world, not in dragging consumers by their hair to interact solely with the TV.

  • http://www.amazeline.com/267 Dan

    It won’t be long before Android tablets will take over or surpass iPads.

  • Paul Gray

    That’s an interesting question. The Financial Times recently reported that Apple took 80% of the profits in Smartphones, even though they of course sell far fewer than half the units. So while many more Android tablets might ship (and I remain to be convinced from results to date) Apple still looks likely to keep the profits. Android tablets have to be priced at a very substantial discount to become a competitive alternative.

  • http://twitter.com/Sjgrist Stephen Grist

    There are ways to avoid the fragmentation of the TV market that you refer to above with regard to TV standards and distribution methods (cable / satellite / terrestrial). Increasing processing power is being seen in SmartTVs for the apps they are now expected to run. With a dual core A15, you can run software demodulation on the same processor as will be in the TV anyway. This means the holy grail of a single product you can ship anywhere that can receive any form of broadcast TV is nearly upon us. 

  • Paul Gray

    While a vector processing approach could solve some of the signal side, there remain regulatory / market standards hurdles – US models need an F-connector, all EU TVs have to have a CI slot by law, etc etc.

    Apple doesn’t have to make the display device itself to control what gets seen on the display. When your competitors are forced by consumer demand to write apps so their products can be controlled by iOS devices (and play nicely with them), why would you enter a business with 2% margins, logistics that requires shipping big boxes, huge product diversity and hyper-competition?

  • Zeke

    Okay Dan, If you say so.  

  • Zeke

    It would be helpful if content was upgraded first to warrant paying the premium price for a beautiful and slick TV designed in Cupertino. Until then my little 4″ x 4″ x 1″ Apple TV is my best third generation iPad accessory since with Apple’s Airplay feature I can view my iPad screen on my Samsung television. Of course I lose some resolution that way.

  • jane-tampa bay laptop repair

    I don’t think Apple can do good in TV design as much as through the mobile devide. Yes I admit apple’s good. Iphones are great and IPADS also but I do think they focus more on smartphones. There had been complains and concern on Iphone4s, they  should pay more attention to building and improving more of that.  http://www.cpr-tampabay.com

  • Anonymous

    I don’t think Apple can do good in TV design as much as through the mobile devide. Yes I admit apple’s good. Iphones are great and IPADS also but I do think they focus more on smartphones. There had been complains and concern on Iphone4s, they  should pay more attention to building and improving more of that. http://www.cpr-tampabay.com

  • http://www.displaysearchblog.com/2013/11/apples-long-rumored-tv-ambitions-on-hold-again/ Apple’s Long-Rumored TV Ambitions on Hold Again? | DisplaySearch Blog

    [...] However, the hangup has always been the content. [...]