There’s a good amount of buzz about a Piper Jaffray report handicapping a possible move by Apple to reinvigorate its Apple TV lineup and even enter the living room with a television set. Should Apple make its own TV?
The possibilities, outlined here by Sam Diaz, boil down to the following:
- Piper Jaffray analyst Gene Munster argues that Apple will launch a new Apple TV product with support for subscription iTunes services and digital video recording (DVR).
- This digital living room takeover revolves around iTunes, which will connect your TV with the iPod and iPhone.
- In the long run, Apple will manufacture a TV set that’s connected.
Thus far, Apple TV hasn’t been a runaway hit, but a retooling could work. The bigger issue is that your living room already has too many set-top boxes. That’s not going to change. And for a subscription iTunes service to work, Apple would have to cut carriage deals with a bevy of media players who are a suspicious bunch. We’ll also table the fact that Apple chief Steve Jobs has talked down subscription services at every turn.
The most intriguing idea here is Apple making a connected TV. Would enough consumers pay a premium for an Apple television set?
Munster argues:
Yes, TV hardware is a challenging business if you don’t change the rules of the game, but we see potential for Apple to offer best-in-class software and hardware and charge a premium. As of November 2008, 40 million US homes (35% of households) owned an HDTV, and the Leichtman Research Group estimates the number will double in the next four years. This equates to a US addressable market of 10 million units a year. The argument that Apple will not enter the television market because prices have declined by ~70% in the past three years is a similar argument used to conclude Apple would not enter the cell phone market, given phones had seen similar price declines. The bottom line, 10 million HDTV’s sold in the US a year is a real market, and if history repeats itself, Apple will find a way to compete in a commoditized market with a premium priced product.
It’s a solid argument, but color me skeptical. Apply the science behind Apple’s innovation. Would you make a TV?
