Apple Phone Key to Apple TV Success

Monday, January 9th, 2012 | Business | by

AppleThe Apple iPhone4 is the key to the success and imminence of the upcoming Apple TV (or iTV).

Everywhere you look online, it’s rumors about the upcoming Apple iTV.

Why is the Apple TV inevitable?

Other than it being mentioned by Steve Jobs in his biography as the next frontier for Apple, it’s just smart business.

There are 1.4 billion TV’s around the world.  On average a TV costs about $700.  That is an approximate market of about $1 trillion.

There are 5.3 billion mobile phones around the world.  The average mobile phone cost (to consumers) around $100.  That’s a market of $0.5 trillion.

With the average cable bill upwards of $75 a month, there is a huge gap for Apple to fill with it’s digital delivery.  Customers are abandoning cable more and more often because of the high cable bills, and the availability of alternatives.

In order to compete with Microsoft, who has sold 57.6 million XBox units, for the coveted “set top” position (center of the home theater) — Apple has to step up their game.  The AppleTV (in it’s current form, essentially an iTunes extender) has sold a paltry 2 million units (constantly referred to as a “hobby”).

Microsoft is competing via the XBox in bringing live programming, movie streaming, and even social media apps to the home theater.  Why hasn’t Apple struck yet?  They have the distribution network, they have the customer base, yet they have sold only 3.4% as many set top units as Microsoft.

They are waiting to get it right.

Training for the Apple TV

I’ve walked through Best Buy and all those other stores to see the TV’s nowadays with their “internet connectivity”.  Some of them even have “apps” installed like Netflix, and even games.

The state of today’s TVs compared to what they should be … is like comparing those Chinatown knockoff mobile phones whose screen is really a static image, to an iPhone.  Everyone has been trying, but they haven’t gotten it right.

Next generation TVs are going to be serious about:

  • Remote Control Interface (do we really need 100 buttons?)
  • Voice Control (it is just sexier to say “Record Jeopardy Tonight” than clicking around looking for it)
  • Apps – I hate the concept of Apps, but they’re here to stay.  Apps can’t be dumbed down Flash apps developed by the manufacturer, they have to be more, part of an ecosystem
  • Video Quality – A TV needs to look good
  • Content – Content is King, always
  • Networking – More and more we are buying content … we need to be able to access it on our TV without spending months troubleshooting
  • Gaming – yes, video games are here to stay
  • Social Networking
  • Video Chat
  • Wait … this is sounding like a computer …

Yes, the next generation TVs aren’t going to be 3D (it’s a fad, we all know it), they are going to be computers.  Microsoft called it when the bought out WebTV from Zenith, TVs need to be connected.  They just can’t be ugly beige boxes with wires hanging all over, we care about what our TVs look like.

.. enter Apple.

I can’t think of a company better positioned to put the television and cable industries in a spin, than Apple.

Apple customers have already bought into the ecosystem.  There are over 200 million people who have iTunes accounts.  That blows away Microsoft’s 60 million Xboxes, and that’s just the tip of the iceberg.  There are currently over 60 million cable customers paying that average of $75 per month for cable.  That makes a potential market of displacing cable of $4.5 billion.  That’s just existing cable customers in the United States, there are satellite customers, non cable customers, and those that have already cut off the connection.

All Apple needs to do is:

  • Build a nice looking device (they’re good at that)
  • Integrate everything, which is already almost done (the current AppleTV is close)
  • Give customers more access to their current libraries
  • Develop some sort of DVR functionality that work’s with Cable / Broadcast (not sure they’ll push this, as it may not be in their interest)
  • Develop programming partners for “free” television.

Think Of the Possibilities

Even if Apple didn’t have any unique “toys” that we don’t yet know about, they are set to make a huge impact.

With so many current iPhone / iPad customers out there, Apple already has a high end super-controller for their TVs.  They already have a customer base who owns media that Apple can provide access to for FREE (anything you’ve bought on the iTunes Store, will work on the Apple TV).  Voice control is almost solved (just need to add recording knowledge).  Hardware supply chains are in place for super high end displays / hardware.

Beyond that, what are some things within grasp for Apple, that could change television forever:

  • Access to our own media, when we travel (recorded Beavis and Butthead at home, watch it in the hotel’s Apple TV)
  • When visiting another AppleTV, it could know who’s watching (iPhones have GPS, and may be setup on the same network)
  • With voice command, you can remotely record anything you want (if it’s broadcast TV)
  • Built in gaming system with high end remotes — every iPhone can be a video game remote with GPS, positional information, camera, etc
  • Home TV can be a security system (your phone’s have camera / data, and the TV will likely have at least 1 camer … you could check in with the babysitter from the restaurant)

On the business side, the advantages are unbelievable:

  • Apple will be able to circumvent those annoying DVR rentals with their TVs (and offer MUCH better functionality)
  • Apple’s iTunes Store will have a much bigger market than “just” mobile phone’s (and Mac’s now)
  • Apple is already into their advertising network, they can target down to the exact location television commercials
  • Apple already has their FaceTime chat setup to work with all mobile phone users
  • Apple products typically receive a premium, I would expect an Apple TV to easily go for $1500-2000 (and you don’t have to spend so much money making all the pieces smaller)
  • Networks will be able to “fight” with cable providers much more effectively, by offering their content pay-per-use or even free w/ commercials on Apple’s network
  • Apple will have the most accurate advertising demographic information, knowing almost exactly who is watching the TV / seeing commercials.
  • Apple is already prepped for the newer 4x HD televisions … producing high enough DPI in the iPad / iPhone screens to move that to TV

I can go on an on.  The only question is when.

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