Is Apple’s answer to TV’s big problem hiding in plain sight?

“Reading between the lines of the Wall Street Journal‘s story Monday about Apple’s ‘assault’ on the TV business, you can almost hear the desperation of the media executives who asked Apple (AAPL) to brief them on exactly what the wizards of Cupertino are up to,” Philip Elmer-DeWitt reports for Fortune.

“These media executive — which included, presumably, Rupert Murdoch, whose News Corp. (NWS) owns the Journal — are reported to be worried about what’s going to happen to the $150 billion a year that the existing TV business generates in the U.S. alone from advertising and monthly cable TV subscriptions,” P.E.D. reports. “They should be worried. That pipeline of cash — extracted from viewers through monopoly cable pricing and intrusive ads that nobody wants to watch — is ripe for disruption by the same technology that hollowed out the music business a decade earlier.”

P.E.D. reports, “Which brings us, as it often does, to Horace Dediu’s analysis of the situation. In a post published a week ago entitled ‘Hiding in plain sight,’ he pointed out that nearly all of Apple’s most disruptive products have been sustaining improvements on existing products, technologies or platforms… This, and the fact (as Steve Jobs himself reminded his 100 top staffers last year) that making TV sets is a low-margin, slow-turnover business, leads Dediu to conclude that the Apple TV that everybody is speculating about is the Apple TV the company is already selling.”

Read more in the full article here.

Related articles:
Apple meets with media executives to discuss TV plans, say sources – December 19, 2011
With Siri TV, Apple will dismantle the TV networks – December 16, 2011
Strategy Analytics: With 32% share, Apple leading ‘Connected TV’ market with ‘hobby’ Apple TV – December 12, 2011
Apple will reinvent television – December 2, 2011

25 Comments

  1. I’ve been saying this all along. If any difference, it will be that apple licenses the software/hardware to tv manufacturers and lets them build Apple TVs into existing TVs. But Apple is not going to build low-margin TVs themselves.

  2. “Dediu to conclude that the Apple TV that everybody is speculating about is the Apple TV the company is already selling.”
    Except that now it will be a thumb drive sized devise that plugs directly into the a TV’s HDMI connector.

    1. That one ooor… the current Apple TV ruberband attached to the HDTV….. Hahahaha. What else!??

      I very much stick to Dediu’s conclusion. It’s only how to best connect it to the TV (performance/speed wise) and how to best make it non-intrusive (hide it).

  3. The “TV problem” everyone keeps talking about is NOT how to make the remote with scads of buttons disappear. The fact is, most people rarely touch 95% of those buttons once the TV is set up.

    The problem is content and using it. You’re already seeing DirecTV making shows recorded on one DVR available to other TVs in the same house. Movie and TV downloads are available from Apple, Netflix, Blockbuster, DirecTV, and cable providers on demand.

    The problem isn’t the TV itself, it’s the content and the delivery in a manner that’s convenient and easy for consumers. Just like Apple did with iTunes, it’s looking to do with TV.

    That really means an Apple TV (as in big-screen with extras built-in) doesn’t make a lot of sense, at least not unless you have the stand-alone AppleTV (as in current little box) to be available alongside it for those who don’t want to re-invest in a large screen.

    A screen is a screen is a screen, so long as it is a high quality screen. The real difference is what drives the screen, and how do you interact with THAT. Very few people use over-the-air TV; most have satellite or cable or something else. Apple TV is going to be that something else, that thing which drives content to your TV.

    The other aspect Apple can offer content providers is removing their content from the control of the cable companies. Just look at the disputes which companies like ESPN and NFL Network and Fox have had recently, especially with Time Warner Cable. Apple can offer a bypass.

    1. The real problem is distribution. The cable/satellite systems are broken. They’re too expensive, make you buy channels you never watch, and deliver entertainment on their schedule—not the customer’s.

      Apple needs to use it’s billions of dollars of cash to guarantee that participation will be profitable for the content production companies. It could be the riskiest and most rewarding thing Apple ever does.

    2. One major issue everyone seems to overlook (but, I am sure, not Apple), is the need to control everything with a SINGLE REMOTE, using only a single paradigm. This means that the Apple TV remote should control all video sources, iTunes and others, whether or not those sources are run through the actual aTV box.
      I was just wondering whether the aTV could actually be made to tell the TV screen what to do with its various HDMI inputs, thereby obviating the need to act as a hardware video switch.

    3. “Very few people use over-the-air TV; most have satellite or cable or something else.”

      I have to disagree about over the air TV. Five to six years ago that might (and I really emphasize might) have been true, or close to it.

      I live in an area where cable and high speed internet aren’t available due to rural distances. It’s satellite only and local telco DSL speed for the internet is as good as it gets. Four neighbors that have dropped satellite service to return to free OTA TV.

      While the recession has been going on, cable/satellite rates have been rising. I subscribe to numerous media newsletters that have been reporting for years that cable and satellite subscriber renewals have been dropping at an increasing rate.

      As for that something else (online), many many shows still aren’t available (for free or paid) thru any legitimate source (the typical consumer doesn’t and isn’t going to torrent) and those that are, are usually only available for a limited (and often unknown) period of time. Throttling and caps also have an impact.

    4. The two biggest roadblocks to Apple revolutionizing television? Content rights and the data delivery mechanism…

      Apple will have great difficulty gaining cooperation from content providers and distributors that are already pulling in $150B per year in the U.S. via the status quo. Even if Apple gains rights to distribute quality content, how can they reliably deliver it to U.S. households that often have lower end broadband bandwidth – perhaps 3Mbps to 6Mpbs. That might be enough for one or, perhaps two, HD channels with serious compression lift Netflix or Roku, but it is not sufficient for a whole house system consuming multiple channels plus web surfing, VOIP, etc.

      Plus, the dumb data pipes have the ace in the hole – download data caps. There is relatively little competition in most areas of the U.S., even in metropolitan areas. And you can bet that the dumb pipes will arrange the caps and jack the rates as high as the market will bear. If only a visionary company had around $80B in reserve to bypass the incumbents and implement a next-generation, high speed, nationwide data delivery system… Such a system could also service iPads and iPhones and iPod touches and every other connected mobile device.

      Farfetched? Yeah, but it is my iDream.

  4. What everybody seems to overlook is that most of our Internet access comes from the cable companies. To be truly successful, Apple needs to find a way to become an ISP and provide the service at a value price.

  5. And that is exactly what I’ve been thinking regarding this whole Apple is going to make a TV rumor. I have yet to see a compelling argument of what Apple gains by putting the innards of an AppleTV into an actual TV.

  6. Ehh…

    I agree with the poster that it’s all about content and delivery.

    But, even if Apple were to wrangle all the content away from cable, how long do you think it would be before cable really, REALLY ups their fees for internet connection in order to make up for the lost revenue from the content side?

    Same thing with ATT and uVerse…

    Look for both versions of ISP’s to raise their rates significantly as dollars from content start to disappear.

    And I know I’m in the minority, but I cut the cord several years ago and couldn’t be happier without that monthly cable bill to pay for the gazillion channels I never watched.

    Forget about it all… what I want is HBO and Showtime by themselves. If Apple can make that happen, I’ll be a happy camper.

  7. They’re going to have to overcome a major obstacle:

    The cable companies saw this coming years ago. Their distribution model is threatened, so they started merging with the content creators. Cabletown is NBC/Universal.

    Will they make their content available to Apple’s distribution model if it undercuts Cabletown? Not likely. Will Disney make their kingdom available if it means unbundling their 20 separate advertising profit-making channels? Unlikely.

    Will Apple pay what the broadcasters want for the content? If they intend to make the service more convenient & more accessible & more affordable to viewers, probably not.

    Not saying it can’t be done, but it would be a huge attack on the cable/satellite distribution industry, which is so closely intertwined with the broadcasters and the content producers as to make them inseperable.

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