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Is Apple’s Television the Yeti of Consumer Electronics?

apple_tv-q410-angled-lg-0312It’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.

The column was reprinted with permission of DisplaySearch and originally appeared here.

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