The Apple TV - Apple's Secret Weapon

appletvHave you been wondering what are Apple's plans for the Apple TV?

Recently Apple dropped the price of the 160GB model by $100 and discontinued the 40GB model fueling the rumor mill that changes to what Steve Jobs has described as a pet project are forthcoming. Here is just some of the coverage and commentary:

  • Wired wrote a peice titled "Why Apple TV Must Evolve to Avoid Extinction" and referenced industry analysts James McQuivey of Forrester and John Barrett of Park Associates. Together they claimed that the Apple TV didn't have much life left in it, that Apple needed to dramatically improve the product to compete and suggested things like a Tivo-like DVR feature, Movie and TV show subscription options and a Blu-Ray player.
  • David Coursey blogging for PC World suggested that a "New Apple TV For Christmas Seems Likely" and suggested the new iTunes LP format would be a big boost to the platform. David also suggested that the price drop had one goal: clear the warehouses of existing Apple TVs to make room for a new model that he expects in time for Christmas.
  • AppleInsider also supported the idea that the new iTunes LP format seems aimed at the Apple TV with some detailed analysis on the new format and the underlying Apple technology called TuneKit.

I agree with David that a new Apple TV model is coming and I give it a 80% chance of landing this fall for the holiday shopping season. The canceling of the 40GB model and the price drop does scream inventory purge and check out this recent conversation at an apple store, something certainly seems up. As for what this new Apple TV will look like however all of the predictions on what will be coming in the next Apple TV seem to be missing the mark, some in the extreme.

Blu-ray is never coming to the Apple TV

Blu-ray may have  just won the format war but in my opinion it's already dead on arrival. Delivered right at the apex of physical media it is now set to be eclipsed by online access to video and I predict that the era of physical media is set to expire within 3-5 years. With HD content appearing online from Netflix, Apple, Microsoft and others there is increasingly less and less reason to buy a disc.

With most home movies rented, not purchased, the days of the disc are coming to an end and the reasons for this sneakernet holdout won't remain for much longer. The final nail in the coffin is the obvious one: Blu-ray does nothing to help the Apple online store giving Apple every reason to hasten Blu-rays demise, not support it.

An Apple TV DVR isn't coming...yet

Apple has eschewed broadcast media for two reasons. First, like Blu-ray, HD cable and satellite broadcasts have their own complicated and expensive licensing  costs and certification "bag of hurt" that Blu-Ray does. It's these licensing issues that has kept PC CableCard decoders off the market for example although there is supposedly a PCI-E tuner on the way in 2010.

The second reason is because Apple hates kludges and the DVR is the mother of all kludges (bear with me here). The TiVo may have changed how millions watch TV forever but DVR's exist to address a problem with the medium, namely you can't pause and remind broadcast media. The future however is content that is bought, sold and downloaded online with the days of advertising interruptions coming to and end and I think Apple is content to wait it out until this future arrives.

There is one snag however that Apple needs to figure out how to deal with: live broadcasts. Live news and sports are not going away and once live TV is easily delivered over the Internet then you can expect to see a DVR option but until then the Apple TV will likely continue to maintain "pet project" status at Apple. If Apple starts to make inroads to solving the live broadcast problem however, this will the key indicator that Apple is getting ready to take on TV.

Why the Apple TV is Apple's Secret Weapon

So if the Apple TV is only a pet project today and can't replace your cable or satellite box because of live broadcasts what good is the Apple TV? I believe the Apple TV is a Trojan horse designed to slowly find it's way into living rooms and eventually build critical mass. Supporting this theory is the fact that Apple is breaking even on the device which means that the goal here isn't to make money selling the Apple TV, but rather to make money off of the market the devices are meant to create. Expect the Apple TV to slowly build momentum in the coming months if not years but keep a watch out for the following triggers that will signal Apple is getting ready to launch this weapon:

  • Apple addresses or make hints of addressing live broadcasts - pause/play/record for Internet broadcasts will likely arrive at the same time
  • Resolves the issues between the Apple TV and the Mac mini - Why buy an Apple TV when you can build one with DVR capabilities?

What to expect in the meantime for Apple TV

In the meantime as we wait for the Apple TV master plan to be revealed you can expect a slow trickle of new features that will keep the media from forgetting about this little device. Here is the shortlist of features I'm expecting to emerge within a year or less:

  • Fully featured online application, music and video store with "in the cloud" storage of purchases. (You won't need to sync up with a PC or Mac to get the most of your purchase)
  • Online App Store for Apple TV and MacBook Touch applications
  • Gaming platform using WiFi based controllers as well as some very unique games and applications that make use of the iPhone/iPod Touch
  • Subscription based rentals for movies and TV shows
  • And the obligatory Increased capacity and processing power

So those are my predictions for Apple's pet project. No Blu-Ray, no DVR(yet) but still a lot of interesting things to come. My recommendation to anyone keeping watch over Apple is to keep an eye on the Apple TV. It's a precursor for things to come and a strategy that has yet been fully revealed.