I believe Apple is about to do for TV what they did for cellphones two years ago.

Most pundits have opined on AppleTV’s shortcomings, overwhelmingly declaring it a dud, even though it’s still sold more than Roku and about the same as Series 3 TIVO.  This is nonsense.

Clearly, after introducing iPhone and ATV together, Apple made a strategic decision to go all out on marketing and developing a best-in-class phone, rather than just a good phone and a good TV box.  They focused their resources rather than fighting a war on two fronts.

Fast forward to next week’s release of iPhone 3.0 which:

  • Puts the platform way ahead of the nearest competitor on a feature-by-feature basis.
  • Explodes the target market to include many new personal uses (e.g. ad hoc multi-player gaming with bonjour), industrial applications (as a sensor and device control interface), and commercial uses (e.g. handheld payment processor with attached ribbon printer).
  • Turns it into a video recording, editing and sharing tool (which BTW is sure to hasten the rise of citizen journalism).

Meanwhile in the last two years Apple has:

  • Drastically expanded the base of ObjectiveC / Cocoa developers.
  • Perfected a supporting ecosystem: App store, iTunes, push notifications.
  • Developed Open CL to squeeze more out of a low-power CPU/GPU combination.
  • Added enough movies to iTunes to make the rental service a viable alternative.

And consider how content has changed as well:

  • Low-def content has been embraced by a whole generation, not only for low-budget amateur productions but also for clips and highlights of commercial programs.
  • Podcasting of video has become viable at current hosting costs and broadband speeds.
  • Commercial podcasts are increasing as providers free themselves from licensing restrictions.
  • Hybrid models are developing.  For example Current TV delivers via cable, website and podcast.

This confluence of factors creates a perfect opportunity for Apple to kickstart the switch to real IP TV, by which I mean on-demand delivery of content produced by millions of sources (not the same 500 channel all-or-nothing model simply delivered over IP).

I believe this Summer, having placed the iPhone in an overwhelming competitive position, Apple will repurpose its iPhone engineering and marketing resources to the ATV, and shortly thereafter release a major overhaul of the software, including an API.  This will be followed by an App Store, and push notifications.

By the end of the year viewers will be watching Youtubes recommended by friends, the day’s extended family videos (recorded with their iPhones), the news (DailyKosTV, Democracy Now or Pajamas TV), the sports wrap-up podcast from a small state university in Oregon, a BBC drama, and CSI.  All from the couch/bed and without having to click around, hunched over a small computer monitor.

And because it costs Apple nothing to deliver it, each provider is free to use their preferred revenue model: free, ad supported, subscription or paid hosting.

I will be so happy to ditch cable and stop paying $60 to watch a couple of shows a week.

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AppleTV 3.0

February 8, 2009

Daniel makes his wishlist for AppleTV 3.0  As usual a great article, and I particularly agree including a DVR or DVD player is complete anathema to what they are trying to accomplish, but I do join a few commenters in saying an HDTV would be great:

  • It’s a great marketing tool:  An actual TV which plays all this additional content and rents movies is a much more immediate and familiar concept for (largely unsophisticated) consumers.  Apple should offer just one 24″ model which is perfect for the bedroom and easy to demo at their stores.  Once the customer is comfortable with the concept they are more likely to consider getting the freestanding box for their larger/existing TVs.
  • Apple’s enormous purchasing power in LCDs allows them to build with a lower bill-of-materials than competitors.  In turn, more LCDs for TVs lowers the cost of LCDs for iMacs.
  • Convenience: Switching source on the TV is simple enough, but having to reach for that third remote repeatedly to go from an iTunes TV show to live TV, back to an iTunes movie gets very annoying.
  • Stickiness: No chance of user disconnecting it.  Even if customer doesn’t use often, new features and content can be announced when TV switched on.

Also, just to expand on how they really need to add content, and recognizing how difficult it is to work with the studios and their contractual tangles, perhaps they should go for multiple niches.  For example festival-circuit films, film school projects, French cinema, Bollywood.  Most of these either have no existing distribution agreements in the U.S. or would be eager to gain the exposure.  Each niche would have a small but very enthusiastic audience that would also purchase mainstream content and could be very vocal evangelists.  Of course, this only works if Apple’s overhead to setup agreements and prepare content is very low, which I would expect.