Beneath contempt: The Apple TV business model | asymco:
“As Tim Cook repeated, they are very interested in this space. However, any discussion of the future must include an analysis of the business model and the sustainability in terms of profit that keeps long term development focused on getting the product to be good enough for the right jobs to be done. What we should think about however is this ‘polar opposite’ business model. Apple is running this as a ‘hobby’ or as an internal experiment. Sales are (relatively) tiny but it generates some profit. Volumes are small but they are growing. It’s taking a heck of a long time. It’s asymmetric to the prevailing model the company relies upon. It’s beneath contempt from all observers. Sounds familiar? “
Another intriguing post by Horace over at Asymco.
Caveats and context: I have not subscribed to cable or broadcast TV for over 10 years now so I clearly represent an edge case, or as I like to look at it: being ahead of the curve. I only recently purchased an AppleTV with the primary use case being iPad and iPhone mirroring on the big screen.
Subtle disruption
While the AppleTV in its current incarnation is not going to change many people’s TV viewing habits dramatically in the short term it offers another source of distraction from traditional TV watching. Every minute people spend looking at stuff via the AppleTV is a minute that they’re taking away value from the traditional cable/broadcast market. Even something as simple as browsing movie trailers which is fun and low effort on the AppleTV makes it a privileged destination instead of the potentially serendipitous 30 second trailer/commercial inserted into regular programming.
Then there’s the iOS synergy (sorry - I couldn’t think of better word) with AirPlay and mirroring. This is actually the closest realization yet of the dreams of web TV. Jobs to be done vary from family trip planning jumping from Kayak to the web from the couch, to sharing your iPad game on the big screen to full on console style gaming a la Real Racing 2.
The availability of TV Episodes for sale or rent has the possibility of transforming many AppleTVs into a more reliable DVR, but instead of paying the monthly cable tax to record content, you purchase only the bits that truly interest you. This goes against the current all-you-can-eat TV grazing habits instilled by the the cable and satellite offers, but may in fact become more common due to the difficult economy and changing generational habits. On the other hand, this is a DVR that works reliably without the hassle of cable cards that don’t work some of the time and the commercials are prefiltered from the content.
The only difference is that you pay by the transaction rather than a flat fee.
The mythical Apple TV
In this case, we’re talking about the idea of a physical screen with at least the same level of intelligence as the external AppleTV box. While a part of me has been dismissive of the concept, there are a few ways in which Apple could significantly differentiate itself in order to make the best possible big screen device for the living room. A key factor here is that Apple’s driving passion is the ability to label whatever they do as the best in the category, assuming that the category already exists.
Yet another HD TV with a 1080p screen is simply not enough, no matter how elegant the physical design of the box or the UI. One idea being floated around is a 4K (at least) screen. Currently there is simply no competition in this market because there is no commercially content available at this resolution so there’s no incentive for TV makers to experiment very much here because they’re waiting on the content providers to amass a significant library and distribution channels before pushing the envelope. Technically speaking, I think that every TV manufacturer out there is capable of producing these screens, but there’s absolutely no reason for the consumer to buy one. On the other hand, the content providers and distributors don’t have a lot of 4K content and the impact of moving to 4K is non-trivial. So we have a classic chicken and egg situation for these players.
The big difference for Apple is that broadcast TV is not the only source of content for an Apple TV. This would be an ideal tool for showcasing photography where we are currently taking pictures on 8+MP cameras. In the midrange market we have affordable high quality 16MP cameras like the Nikon P510, the Canon SX-40 and others from Sony, Fuji and Panasonic. High quality pictures on these cameras are ~4K right now.
Then we come back to to the AirPlay input. iPad mirroring on an HD TV is a less than ideal experience due to the resolution mismatch in portrait mode and the necessary downsampling when coming from an iPad (2012). Moving to a 4K display with a 16:9 ratio (4036x2270) would permit 1:1 display of the current iPad. This would be a logical next step to Apple’s current high DPI push across iOS devices.
That’s an awful lot of pixels to be moving via Wifi, but some of this could be optimized by simply sending the drawing primitives to the AppleTV rather than actually transferring a raw bitmap. Again, an advantage to owning the ecosystem rather than waiting on a standards body.
As for the 4K video content, topline films are already being encoded for 4K for digital screening in newer theaters so the content could be made available - we’re just waiting on the bandwidth. From a competitive angle, this is good for Apple since they already own a distribution network. For the incumbents this may pose problems since their networks designs are predicated on the current 1080p content streams. Apple’s distribution network is the public Internet where all of the players coinvest in the build-out whereas private players must upgrade their networks out of their own pockets.
The content providers are still the wildcard in this equation since they will be awfully reticent about making 4K cinema-quality content available as a digital download. But with just the photo sharing and Airplay features a 4K Apple TV does have some compelling appeal for the high end of the market.
Resolution isn’t everything
Integrated Facetime would be an additional compelling feature in this kind of scenario since the camera could be integrated in the TV and would go head to head with the Skype enabled TVs currently on the market, but with the simplicity of being already linked to your AppleID. A hiccup here is the currently mono-user aspect of iOS which, like the old fashioned home phone is shared potentially by several people.
Next obvious steps include Siri integration, but I suspect that Apple wouldn’t stop there and would also include some kind of motion sensing interface a la Kinect, but as it would be integrated in the TV they could get rid of the ugly mess of wires that currently plague these kinds of products. Viewing photos and manipulating them remotely by gesture is exactly the sort of differentiation Apple will need to bring to the table to set themselves dramatically apart from the current TV offerings.
Other key UI elements that will have to change due to the fact that the TV is a shared resource, not a personal device the way that iPhones and iPads are. Face and voice recognition and multi-user oriented apps will need to be developed designed for hosting the shared information of a family environment.
To DVR or not to DVR
Here I wonder seriously if Apple would even bother integrating any kind of legacy cable connection or DVR functionality. They’d rather you purchase or rent your content from iTunes and diving into the cable card world is enough like BluRay to justify the “bag of hurt” definition accorded by Steve Jobs.
I think they would simply cede this morass to the incumbents with their proprietary boxes and simply offer HDMI in as the method to linking to the legacy distribution channels. Of course the pundits will have a field day with this one since this is the baseline feature in the current TV economic model.
Upshot
Based on these points, it’s a huge undertaking that requires the introduction of a suite of new technologies that don’t currently exist in the Apple line-up. Do they exist behind closed doors? Almost certainly.
Will they actually bring the uberTV to market? If and when they’re satisfied with the quality of the product.