Cringely: How Apple plans to own your living room

“As anticipated in last week’s column, Apple’s special event came and went this Tuesday and with the exception of the two HDTV models I predicted, it went the way I said it would. And those big screens are likely still coming before the Christmas season, just as Apple launched three new iMacs last week without putting Steve Jobs onstage,” Robert X. Cringely writes for PBS.

“But now let’s put this week’s Apple event in some context and understand what it is and isn’t, because there is a lot happening here. It generally comes down to a word we used to use all the time but haven’t much since the Internet crash of 2001 — disintermediation … [which means] cutting out the middlemen and splitting with the consumer what would otherwise have been the revenue of those disintermediated sales organizations,” Cringely writes.

“What I want to do here is to compare Apple’s position with Microsoft’s and Google’s or Yahoo’s. Microsoft, with its Media Center PC, isn’t ‘disintermediating’ anyone. Now in its third unsuccessful generation, the Media Center PC is a $1,000 TiVo box intended mainly to capture, store, and replay broadcast and cable TV. Microsoft has been unwilling to take the side of either the producer or distributor, and that very unwillingness has been its undoing,” Cringely writes.

Cringely writes, “Notice that the Apple announcement said nothing, really, about broadcast or cable TV. iTunes carries 220 TV series from 40 networks, Steve Jobs said repeatedly, but the actual television experience — commercials and all — isn’t replicated in any sense by the shows that are downloaded from Apple. It is a strictly retail experience: you pays your money and you takes your choice. We’re not bending the cable operators to our will, we are simply ignoring them. But what might have been the cable company’s piece of the action can now be shared between the producer and the viewer, with a cut for Apple of course. Apple has taken a side and that’s the side of the producers, not the historic distributors.”

“Contrast this with Google or Yahoo and even with Microsoft in recent years when everything seemed to be moving to being ad-supported. Where is advertising in Apple’s strategy? It is nowhere to be found,” Cringely writes. “By selling outright, Apple doesn’t need ad sales to succeed, reducing its risk. It also reduces downloads, I am sure, but that’s not all bad… Just as Apple isn’t Microsoft relying on working with the TV networks and cable channels, Apple isn’t dependent on advertising, either. PVR (personal video recorder) functionality and advertising can easily be added at a later date if that is justified by market conditions or revenue expectations. Yet for Microsoft or Google going the other way — from free with ads to paid — it is that much harder a task… When Apple needs more revenue from its hardware products, it can always sell a PVR upgrade for $99. The ongoing profit potential is immense”

Cringely writes, “Whatever happened to the Year of HD that Apple declared at MacWorld in January 2005? In reviewing this week’s webcast, I don’t recall once hearing the terms ‘HDTV’ or ‘High Definition.’ What changed? Apple deliberately repositioned its movie offerings to be better than broadcast quality but less than DVD quality and quite a bit less than HD-quality. Doing so saves on bandwidth (though less than you’d guess — moving NerdTV from 320-by-240 MPEG-4 to 720-by-480 H.264 increases the required bandwidth by only about a factor of two, the new codec is so much more efficient), but it is also politically expedient when thinking about Wal-Mart, Best Buy, and Target — the three largest sellers of DVDs and, not at all coincidentally, the three largest sellers of iPods, too.”

“It is a brilliant and finely honed strategy that first targets the cable companies everyone loves to hate, identifies with the studios and calms them, calms Wal-Mart and Target, too, then eventually offers in the iPod an ultimate video container that can be filled over the Net or at a store,” Cringely writes. And what about the iTV? “Apple will sell a ton of these and then will build this functionality into their HDTVs, which will be what differentiates them from the other guys.”

Full article with much more – highly recommended – here.

Related articles:
LA Times: With iTV+iTunes Movies, Steve Jobs stumbles over the last 100 feet – September 14, 2006
BusinessWeek: If anyone can make bridge the great divide, Apple can with ‘iTV’ – September 14, 2006
The Beeb asks: Would you buy the Apple iTV? – September 14, 2006
Three markets that are different today after Apple’s ‘It’s Showtime’ event – September 13, 2006
Cramer: Apple’s ‘iTV’ all about ease-of-use; Apple shares are going higher – September 13, 2006
Apple + Living Room = Logical Marriage + Boon for Stockholders – September 13, 2006
The Register: Apple event more like ‘No Show’ than ‘Showtime’ – September 13, 2006
The Telegraph: Steve Jobs’ genius making people desire gadgets for which they have absolutely no use – September 13, 2006
The Guardian: Steve Jobs needs ‘a charisma download, Apple risks being left behind’ – September 13, 2006
Mark Cuban: Things that are special about Apple’s announcements – September 13, 2006
Apple’s ‘iTV’ strategy – September 13, 2006
How will Apple’s ‘iTV’ work? – September 13, 2006
The Observer’s iPod FUD: Apple iPod is ‘wilting away before our eyes’ – September 10, 2006
Apple eyes living room market with device codenamed ‘iTV’ – September 12, 2006
Analyst: Apple ‘s iTunes+iPod+iTV model ‘the gold standard for the digital home of the future’ – September 12, 2006
Analyst: Apple ‘s iTunes+iPod+iTV ‘will be hard for other players to match’ – September 12, 2006
Apple gives sneak peek of ‘iTV’ set-top box to debut Q1 2007 (with images) – September 12, 2006
Apple’s QuickTime stream of Steve Jobs special event now live – September 12, 2006
NFL and Apple team up to offer 2006 NFL game highlights via iTunes Store – September 12, 2006

24 Comments

  1. “How Apple plans to own your living room”

    I’ll allow them to rent my living room under a few conditions. My house, my rules.

    1. Apple must pick up after themselves. No Performa pizza boxes lying around.
    2. Stay out of the bedroom. I have to draw a line there (no Bezier curves either).
    3. Keep your feet off the coffee table unless you’re wearing iPod socks.
    4. Snacks are fine but I’m not a piscetarian. No weird smelling stuff.
    5. No overclocking the appliances.
    6. Keep your pointer off of the thermostat. I have overheating issues.

    7. And most importantly, I want cash for payments. No flaky rebates.

  2. Maybe Apple is planning to release iTV for those who already have a large screen, and a couple of large HDTVs with iTV built in for those who do not already have a large screen.

    Why not? They built iMacs for those who didn’t have a computer already with a built in screen. But could Apple compete on price with Sony? Why not? They are competing with Dell on the desktop and beating them. And if you are planning on setting up a plasma on the wall with the wires hidden behind the drywall, why not hide the iTV inside the case?

  3. Are the HDTVs really that far out of the question? One of the things that has made apple so succesful recently has been its ease of use for consumer products. With the current itv model, this would require people to figure out how the connect this set top box to one of hundreds of different tv models, and with the exception of AV enthusiasts or tech savvy gurus, the common person doesn’t know the difference between an HDMI cable and a horse stable. Why not make an Apple branded HDTV imac style model that would make it easy for all to set up and use. The possibilities are endless with this as the main function for the living room with the itv acting as the bridge to other macs in the house. Imagine a computer with built in HDTV tuner with PIP from desktop to tv, a dumd down version of Remote Desktop for viewing other macs and content, web browsing, and even PPV video model, where people can download rented movies directly from the iTunes store. I’d rather do that then deal with going to blockbuster or mailing stuff back to Netflix. Sony already has 42″ and 46″ true 1080P HD LCD displays available right now, with a 52″ model on the way. I think its Toshiba that has already developed a HDDVD player that plays both Blu-Ray and HDTV discs. Take these features and put them together, and Apple could make an all in one that would blow the competion out of the water, and have mac enthusiasts drooling all over themselves. You may think I’m crazy and say its stupid, but if this exact product was released tomorrow….tell me you wouldn’t want it.

  4. I’m excited about iTV, but I absolutely need it to have some type of DVR. I don’t care if it’s nothing more advanced than the recording abilities of a basic VCR with no other Tivo-like capabilities, it it’s not there, it’s a deal breaker as far as I’m concerned.

    I’m afraid it’s not going to happen, though, as that doesn’t go with their strategy of selling content on iTMS, but I still have my fingers crossed.

    Ampar, you are seriously warped, but in a good way!

  5. Incorporate something new into the Apple Store:

    Movie Download Access Points

    A few central iMacs within the store that have all the movies, and customers with their iPod can upload movies onto their iPod directly.

    No Download Wait Time!

    This would require changes of course with how iPods can upload/download from computers and stuff…but still, it could work!

  6. even better, what rasterbator said….

    “Maybe Apple is planning to release iTV for those who already have a large screen, and a couple of large HDTVs with iTV built in for those who do not already have a large screen.”

    that would make ven more sense.

  7. As I see it Apple doesn’t plan to own and control everything, they know that people won’t download all the music/tv/movies from them. People will download some things, they’ll download the odd thing they suddenly decide they want, those songs they hear on the radio, the show they missed and really want to catch up on. In the future when everyone has superfast broadband with unlimited bandwidth then yes, everything may go online but that ain’t happening yet. Microsoft, google, napster, whoever, seem to want to control everything, an all or nothing strategy. Windows Media Center tries to do everything, tries to record, playback, get rid of all your other boxes. In doing so it does nothing. Jack of all trades, master of none. Apple is finding its niche and getting its place, it’s linking computer and tv but not trying to replace one with the other. Once it gets in the market and gets people on board it can grow and improve.

  8. How about music, TV, and movie download kiosks or vending machines for malls, airports, Wendy’s, Port-a-Johns, the Vatican, all stores that sell iPods, Times Square, toll booths, diaper changing stations, the ISS, Dollywood, and every college and university on this planet?

    Fill up before you go.

  9. Crungley points out some really interesting things in this article.

    Many of you are focusing on the last sentence about Apple making an HDTV. I think Cringely was speaking of potential future upgrade paths to iTV there, not as a product that he is predicting necessarily, and certainly not anytime soon. (But it would be a logical upgrade if there were an emerging market…)

    The point was that there are many upgrade paths. Both in hardware, and in this service / retail model which is so different from M$.

    This is the best analysis I’ve seen so far. And helps explain why Apple has positioned the current download quality just under DVD quality, among other things.

  10. So iTV is set to be released in spring ’07 the same time as OS X 10.5, remember the “top secret” stuff Steve couldn’t show us during the Leopard preview? Hmmmmmm……….. Any bets the iTV shown this week won’t be the final product? And how does all this tie into the rumor that the iPhone will be released about the same time? Hey every “expert” out there is making wild predictions. Now if you’ll excuse me I must put my tin foil hat on and go look for UFO’s.

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