“Apple’s decade-long run of iPod-, iPhone-, and iPad-fueled prosperity has featured only one notable dud,” Peter Burrows reports for BusinessWeek. “Introduced in 2006, Apple TV is a set-top box used to play movies and other digital fare on a TV via iTunes on a Mac or PC. Apple has sold fewer than 3 million of them, estimates Kaufman Bros. analyst Shaw Wu. The company sold that many iPads in three months.”
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MacDailyNews Take: We’ll see your lone, rather hit-or-miss analyst and raise you an Apple COO and a much better Apple analyst: According to Apple COO Tim Cook during the company’s first-quarter fiscal year 2009 earnings call, Apple TV sales tripled compared to the company’s first fiscal quarter of 2008. Piper Jaffray analyst Gene Munster said after the earnings call that his company expects Apple to have sold 6.6 million Apple TV units by the end of 2009. The company did not sell that many iPads in three months. We don’t know where Shaw Wu gets some of his numbers, but if we had to guess, we’d go with “out of thin air.”
Burrows continues, “And yet, at a Sept. 1 event in San Francisco, Steve Jobs announced that Apple is bringing out a less-than-revolutionary upgrade. The new Apple TV looks different—it’s black, not white, and at 3.9 inches square, is 75 percent smaller than the old one—and you now rent rather than buy movies and TV shows. (The price has also fallen, from $229 to $99.) Otherwise, its function is mostly unchanged.”
MacDailyNews Take: Apple TV’s function has drastically changed. For one thing, Apple TV now sports an Apple A4 processor. Plus, as Ars Technica’s Clint Ecker explains, “The design changes are significant. The new Apple TV is a quarter of the size of its predecessor and is all black—which will help it blend in with HDTVs and various other entertainment center devices… Apple has instead opted for a 100 percent streaming model, backed by rentals and computers running iTunes or iOS devices running Apple’s newly announced “AirPlay” technology, which will come to iOS devices courtesy of November’s iOS 4.2 update. Users will be able to stream video from any iPhone, iPod Touch, or iPad on the same network, or Mac running iTunes 10. You’ll be able to start watching a movie on an iPad, pause, and pick up where you left off on your Apple TV… Before, you could buy television shows and movies from Apple, but now you can only rent them. Entire episodes are no longer downloaded to your device. Instead, they are actively streamed and buffered to the Apple TV as you watch them, and then removed. Built-in Netflix streaming is another nice addition to the Apple TV interface, complete with instant queue, browsing, and recommended movies and TV shows.”
Burrows continues, “‘You’re still looking at a product for the Apple fanatics,’ says technology marketing consultant David Clarke of BGT Partners.”
MacDailyNews Take: Nice sound bite; wrong, but at least it’s concise. From what we can see (and, by the way, we can see quite a bit more with much greater clarity than random “technology marketing consultants” who very likely do not run millions of ads while tracking clicks and sales), initial interest in Apple TV is very high. It’s a price thing: $99 is a nonexistent barrier to entry for many potential customers. For Netflix subscribers, the new Apple TV is a no brainer; even more so if they have iPhones, iPod touches, and/or iPads.
Burrows continues, “What Jobs didn’t say is that Apple wants to become king of the living room. He tells Bloomberg Businessweek that when the time is right, Apple could open an App Store for the TV that could do for television sets what all those apps have done for the iPhone. Asked if the iPad could evolve into the TV of tomorrow, Jobs shrugs and says, ‘That’s how I do most of my TV watching today.’”
“Still, the timing for such an evolution isn’t upon us, Jobs says. Apple’s biggest obstacle may be that it doesn’t have the rights to sell shows the way it wants,” Burrows reports. “Many studios, nervous about angering the cable companies that pay billions for their content, refused Apple’s efforts late last year to put together a subscription service, say three media executives involved in the talks, who requested anonymity because they did not have approval to discuss the negotiations. Consumers would have been able to purchase only those shows they want in an a la carte model, rather than pay for hundreds of channels they never watch.”
Apple “was selling many movies for $9.99 and TV shows for $1.99 ($2.99 for high-def) on iTunes. The new thinking: A flat 99¢ price per episode—$4.99 for movies—might spark a change in TV watchers’ behavior, just as it did in music a decade ago,” Burrows reports. “If Hollywood isn’t ready to distribute TV as Jobs would like it, Apple is still well positioned to pull off an a la carte model in the future. All of its devices function easily together, tied by software that no other consumer technology company has been able to match for utility and style… If Apple keeps growing the way it has, it may be too big for the media giants to ignore: Apple has 160 million credit-card numbers on file thanks to iTunes, while Comcast has 23 million.”
There’s much more in the full article – recommended – here.
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