Daniel Eran Dilger
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Three Barriers Holding Up Apple TV

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Daniel Eran Dilger
Compared to the high profile sales of iPhones, iPods, and Mac computers, shipments of Apple TV are barely registering. Pundits present rival media boxes as potential “Apple TV killers,” but the entire market segment seems to have little life in it yet. Here’s what’s holding the market for downloadable videos back, leading up to what Apple can do to shake up the market and why it is unique in being able to disrupt how the world watches video.

Apple TV: The Hobby
Steve Jobs referred to Apple TV as being a hobby during the initial launch of the iPhone, pointing out that Apple’s efforts were instead focused behind establishing the iPhone, maintaining iPod market dominance, and growing Mac sales. Jobs said Apple TV might become a “fourth leg” once the company has the free time to begin investing in it, and suggested that this year would see some new developments.

Given the profit margin estimates given for Apple TV hardware compared to the company’s other products, that order of priorities made a lot of sense. Media sales can’t do much to enhance those slim hardware margins, as Apple’s iTunes cut largely only supports its site operations. In fact, it its latest earnings statements Apple pointed out that increasing sales in iTunes are actually causing a slight drag on the company’s overall profit margins because iTunes is not run primarily to create direct profits.

Apple TV Promises to Take 2008

A Supporting Role.
Apple TV is not the classic economic razor and media sales are not the disposable blades; both are only minor product offerings that help support Apple’s other businesses. Apple TV was created to allow Apple to get established in the emerging market for Internet movie rentals and purchases. Without it, the company would have had a tough time trying to sell the movie studios on its plans to market their movies exclusively on iPod and iPhone screens or for playback directly on PCs.

Apple TV plays a supporting role. Competing devices from Vudu to Microsoft’s Media Center have similarly had a hard time making much progress. Unlike the iPod, there’s no vast potential hardware profits to tap, and unlike the iPhone, there’s no significant service revenues to earn. Apple TV is a slow growth device that requires a supporting ecosystem of iTunes and iPods to maintain it.

Apple has that but nobody else does. That will make it very hard to compete against Apple TV, even harder than the competitive efforts mounted to displace the iTunes Store, where small profits require large volumes of sales to break even. Apple is building a juggernaut of slow growth sales that support new product categories that couldn’t exist on their own; Apple TV is a key example of that.

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Apple TV Digital Disruption at Work: iTunes Takes 91% of Video Downloads

Three Problems for All Players.
Despite its advantages of being linked to iTunes and the iPod, Apple TV faces three difficult barriers that also affect every other comparable device on the market, including several products that have already failed while trying to sell movie downloads through a set top box.

Lower quality downloads don’t look very good on HDTV sets. Apple did its best to work around this reality using H.264 to deliver the best standard definition video possible in small downloads. The company spent two years perfecting iTunes video, first with TV downloads, where quality is less critical, and then in presenting full length movies for sale and then rent. Apple also sells this video for use with mobile devices like the iPhone, where standard definition video looks fine.
Of all players, Apple was best suited to sell low def programming because of its iPod market power. It also integrated supporting features such as PC integration, music streaming, and photo sharing, which standalone devices like the Vudu lack.
However, Apple purposely resisted delivering Apple TV as a standard def device designed to work with today’s composite TVs. Clearly, that was because the company planned to target an emerging market a year or two out rather than optimizing it for the TVs consumers are rapidly moving away from. Apple TV was intentionally a slow growth plan; the hardware actually can support older composite TVs, but that capacity is turned off. If Apple had only been interested in market share and unit shipments, targeting older TVs would be the way to accomplish that, but the company would have been losing money supporting the nearly profitless boxes.

Apple TV’s accessory features, combined with the potential for HD downloads unlocked earlier this year, indicate that Apple’s plan for the box went beyond a simple iPod model of shipping lots of devices. Instead, it was a strategic product designed to serve a different goal.

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Why Low Def is the New HD

Studios want DVD-like profits from higher quality downloads. This year, Apple introduced HD rentals and then sales from Apple TV. These also benefit from H.264’s encoding efficiency, but are somewhat restricted because the studios want to see $5 rentals or DVD-priced purchases for HD content. That makes it harder for Apple to rapidly push download sales to consumers, as existing movie rentals and services like Netflix can be considerably cheaper. HD BluRay discs can also offer a significantly higher end picture and sound than HD downloads can.

That leaves Apple and the other online media sellers with a narrow band of potential for differentiation in selling HD downloads. Apple wasn’t first in offering HD content for download, but rapidly gained market share because of its strong existing position in selling low def video in iTunes.

It has also leveraged its market power in iTunes to negotiate media prices that are as low as possible; Apple even undercut Microsoft’s TV pricing in the Xbox Live service, forcing it to match Apple’s prices. Competitors hoping to sell hardware at a loss and make profits from reselling movies or subscription fees are feeling the heat of iTunes, which makes tiny profits on millions of sales.

Scott Woolley Attacks Apple TV in Forbes, Gets the Facts Wrong
Windows XP Media Center Edition vs Apple TV

Video downloads are big, and require fast network access to deliver. In order to use Apple TV to rent HD movies, buyers really need a better than 1.5 Mbit DSL Internet connection. In the US, that typically means cable Internet, but cable providers want to sell consumers on their own TV offerings.

The general lack of competition in US Internet access means than in order to use Apple TV optimally, users need to pay $40 to 50 monthly for fast Internet service. That sharply impacts the market for Apple TV and other similar devices, but Apple offers some additional attraction in its music, photos, podcasts, and other features outside of pay per view videos.

The Big Pipe Problem
Internet service cost is a problem Apple can’t solve without getting into the Internet delivery business itself. Thanks to the past decade of the US government’s support of big media consolidation, all of the big Internet providers are also big content sellers. AT&T, Comcast, and Verizon all want to sell their Internet subscribers a TV subscription, making it difficult to market systems that exist to sell content independently. Just ask Tivo, which is losing millions while finding it monumentally difficult to sell DVR features to cable subscribers that already have a DVR box from their cable company.

Tying Internet access to content subscriptions has stifled competition, resulting in the US trailing much of the developed world in broadband Internet penetration, speeds, and cost. Imagine how expensive it would be to drive around if the Interstate system had been built by a series of regional monopolies set up like the cable and telephone giants, each charging us monthly fees to access their roads.

America is now discussing Net Neutrality as if freedom of speech is a controversial idea. The real discussion should be much further ahead, instead discussing how we can induce companies to provide better, faster and cheaper Internet service as a matter of national security and competitiveness. Instead, the only political discussions are related to preserving copyright, because the media companies have the money to buy political capital.

This is unlikely to change until the government begins seeing the need to serve citizens rather than just making it easier for corporations to make money. This issue is key for consumers to contemplate, because the easiest way for corporations to profit is to move labor and assets out of the country while charging consumers more and giving them less. In a consolidation-friendly environment lacking any real competition, the market can’t solve that problem by itself and needs government regulation.

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Obama’s Apple, McCain’s Microsoft: the Politics of Tech

Working Outside the Pipe.
Since there’s little Apple and its competitors can do to solve the pipe problem, they’ve all taken steps to work around it. Apple designed its box to download movies in the background, making it possible to eventually get a desired title even with slower Internet service. Vudu developed a peer to peer sharing system for serving up movies between clients, but this primarily only helps lessen Vudu’s hosting costs; the size of the client’s pipe doesn’t get any bigger.

Netflix works around bandwidth limitations by only serving up low quality video. This works acceptably for some kinds of content when being watched directly from a PC, but will likely be hard to sell to consumers for use on a big screen TV from a dedicated box.

Challenged with dependance upon a fat pipe, Apple TV needs a compelling reason to push buyers into jumping on the $229 entry price of the box. The next article outlines Five Ways Steve Jobs Can Turn On Apple TV Sales.

I really like to hear from readers. Comment in the Forum or email me with your ideas.

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  • dicklacara

    First, I don’t think the $229 entry price is the obstacle.

    For $400 more, a Mac Mini can do what the AppleTV does, kinda’, but not as well or as easy (though you can add DVR capability with EyeTV and have a computer on your HDTV).

    With either of the above, you can probably justify the cost if you have a large AV library (probably on a separate computer with large external HDDs)

    I think what hinders AppleTV acceptance is the absence of something to exploit the convergence of TV/Internet/computer and people.

  • Pingback: RoughlyDrafted Magazine on what ails Apple TV « Island in the Net()

  • elppa

    The annoying thing is this seems obvious that in the future this is how content will be delivered to our homes — over the network.

    Apple has made as good a product as they can given the constraints, yet it seems those constraints currently limit TV to a niche product.

    I like the freedom TV and other such devices will offer. Having to not pay a annual or monthly subscription for content does not really appeal to me.

    This idea TV companies deciding what we like and charging us for it regardless of whether we watch it sits quite uncomfortably with me.

    I prefer the idea of deciding first whether I want to watch anything at all, then deciding what I would like to watch and finally when I would like to watch it.

    That way is fairer because the most popular programs will get rewarded and there will be no market for the rubbish.

    At the moment there is plenty rubbish, because the TV stations have to fill all the channels with content at all times of the day.

  • elppa

    Having to pay an annual or monthly subscription for content does not really appeal to me.

  • Berend Schotanus

    Perhaps it is time to face a hard truth: innovation takes time.

    Both suppliers and customers are not prepared to change their habits overnight. There is a well established business model that delivers video content by cable and by DVD. It’s obvious this business model will become obsolete – eventually. To me the advantages of video delivered by IP are clear but I know few people who share that vision. Most people appear to struggle information overload anyway and they become reluctant with the idea of yet another source of information.

    Most innovations take a lot of time to become popular, I think several decades might be normal. The iPod, first introduced in 2001 and mainstream in 2006, was extremely fast. Maybe this was because the iPod had the advantage of being smaller, lighter, more portable than it’s predecessor the Walkman. You buy an iPod because you want to use it in roughly the same way as you used to do with a Walkman and the improved portability is an immediate gain. Discovering new possibilities (playlists, podcasts) comes later. The Apple TV misses such an immediate gain. Any set-top box is a harassment that you don’t need for the old function, watching cable or DVD.

    It takes time for customers to discover the advantages of the new possibilities but that time will come.

  • Norm Potter

    I’d say drop the box and integrate all components into the Mac OS and hardware lineup.

  • MikieV

    “For $400 more, a Mac Mini can do what the AppleTV does, kinda’…”

    “kinda” = no provision for HDCP-via-HDMI

    If content-owners decide to implement the ICT flag – and its a big “if” – any DVI/HDMI hardware that doesn’t support HDCP will be useless for HD.


    “Content providers for HD DVD and Blu-ray media can set an Image Constraint Token (ICT) flag that will only output full-resolution digital signals using a digital HDCP connection.”

    I’m curious to see how Apple will handle the Blu-ray “conundrum”: if you put a Blu-ray burner in a Mac, people will expect the ability to playback movies – either on the Mac’s own screen, or by output to a HDTV.

    No AACS support in Mac OS = no playback of [un-cracked] Blu-ray on a Mac.

    No HDCP-support in hardware = no HD-quality playback from ICT-flagged Blu-ray.

  • dustbag

    Isn’t this really a strategic move by Apple to take advantage of the same type of evolution that has occured in music?

    As a consumer, my vision right now would be to have my video content as readily accessible to me as my music – when on the road, I have my iPod, when at home I have my content stored in high quality digital and access it through airTunes on my stereo equipment.

    With AppleTV wifi enabled, and presenting a user friendly interface similar to my iPod, as soon as storage capacities get economical I will convert my entire video collection to a hard drive on my network accessible via iTunes.

    Assuming some eventual sanity in the “fair use” doctrine legislation, how long can it be until you load up your DVD collection in iTunes just as you loaded your CD collection oh-so-many-years ago? (I know, big assumption, but a man can dream…). And then access it all on your Hi-Def TV via your Apple TV?

    As always, great analysis Daniel. I look forward to the next article. How long until we see you comment on the recent Windows 7 announcements at AllThingsD? Can’t wait.

  • RDMgreg

    Careful what you say about “the free market” Dan. Fox News may send its security guys out to set you straight.

    I do honestly believe “letting the market decide” is code wording for allowing the power of money to diminish and usurp the power of the government. It truely is the power of money vs the power of “We The People”. Currently, “We The People” are losing big.

  • geoffrobinson

    I’m not buying the Big Pipe problem. If you own an Internet connection and you want a movie, you can choose to go through your cable/TV provider or download at that point. Both at a cost.

  • http://www.lehigh.edu/sol0 pabugeater

    “how long can it be until you load up your DVD collection in iTunes just as you loaded your CD collection oh-so-many-years ago? (I know, big assumption, but a man can dream…). And then access it all on your Hi-Def TV via your Apple TV?”

    For all intents and purposes that’s exactly what I do now. Although my entire (small) DVD collection is not online, my plan is buy/rent content online rather than purchase physical media. And for content I already have on DVD, those few times I want to watch that old stuff I let HandBrake copy it to disk and import the movie into iTunes.

    I also rarely synchronize HD content with Apple TV because it generally streams w/o a hiccup, so its 40 GB disk is more than adequate.

  • http://johnsessays.blogspot.com John Muir

    I run my Mac mini with an Elgato tuner and EyeTV, with a MiniStack terrabyte hard drive slung underneath for good measure. Just my kind of setup. But obviously – as said above – not living room ready yet.

    Pipes are a problem. It’s been better in Britain for a while but in the last year or so … drumroll … a big buyout brought a NATIONAL MONOPOLY of cable service, when Virgin bought its last competitor: who about four purchases ago bought the company I signed up with in the first place!

    There’s some good DSL going on around here – a friend can hit 1.1 megabyte per second on the down pipe which I guess is 8+ “megabit” in network speak – but there’s signs of trigger happy buy outs on that side too. Hoo-bloody-ray. Looking over at nearby Sweden with its 100 megabit municipal broadband very jealously right now…

  • premda_nije

    Maybe is Apple missing the whole point!? With the name AppleTV they are misleading lot of people, who are about to buy a new TV set and probably don’t know anything about AppleTV. Apple should consider to address to them with the new approach. So what can be more logical for Apple than manufacturing real TV boxes with screens and put in every new TV set something they call now AppleTV! That would make lot of sense, because iPhone is a real Cellular phone with lot of extra stuff. iPod is a real mp3 player. Macintoshes are real computers, and what is in average TV buyers mind AppleTV? Some box that don’t even has a screen, and called themselves TV???

  • Michael

    hey i’ve got an idea. what if apple launched the iphone, and then decided to be a virtual mobile network operator? by 2012, which is when the iphone and at&t contract is up, i bet apple will switch to this type of service. and then t-mobile will have affordable 3G and *maybe* it will start competing with the cable and DSL providers with speed and mobility. They can’t always win! :) anyway, interesting ideas daniel, just i wonder about that road issue… if it’s such a big deal, maybe the government should take care of it and maybe they should sponsor a few public news stations… like Britain with the BBC. While they’re at that, maybe they should regulate… or better yet create a nationalized internet service.

    of course, none of these things are even possible today… but you can always hope :)

  • John E

    Good piece. some things to note:

    – the pie chart showing iTunes with 99% of internet TV Show downloads is based on year-old data and is definitely out of date. a lot of new VOD (video on demand) sites have started up this last year – both multi-provider portals like Hulu and dedicated network sites like Comedy Channel and all the majors. the chart must be updated to show this important trend.

    – some of the new VOD is for sale, but a very important new option is advertising-based free content – because that approach (really, just updating the original OTA TV business model) may win the market ultimately. the article totally omits this potential trend, which right now AppleTV does not support.

    – the chart leaves out CATV on-demand rentals/free viewing (with sales coming soon). but really, what is the difference for a consumer between internet VOD and CATV VOD? None. (and many in fact get their internet via their CATV wiring!) – both wind up being viewed on your TV and they compete directly in pricing.

    – physical DVD’s have even more advantages over downloads than the article mentions in passing. portability, sharing, extras, copying. for an excellent discussion from yesterday, look at:


    Look forward to the second part of the article.

  • Galley

    I’m one of those folks who no longer subscribes to satellite, but instead chooses to watch TV shows online. While hulu.com provides a decent experience, I’d much rather watch shows on my 32″ HDTV via my tv. The networks could insert ads in their shows, so the shows could be provided for free. Best of all, we already have a perfect delivery system; it’s called podcasting. We could subscribe to our favorite TV shows just like we do with video podcasts.

  • PaulMJohnson

    I have to admit I don’t see many of the problems listed. I love my Apple TV!

    The big pipe thing does not seem to be a problem. I’m on AT&T DSL and have no problems with download time – an HD movie is generally watchable after about 5-10 minutes. Personally I don’t have a problem with the quality of the video either, and suspect most consumers would not as it is generally only the techno-fanatics who get worked up about resolution differences. I can see that my Blu-Ray is better quality when I do a straight comparison, but if I just go to watch a downloaded movie, I can’t say I notice.

    I find it much better value than my old Netflix account. That was costing me $16.99 a month, and when I went on the road with work for a couple of months, I didn’t remember to suspend it (lets face it, who does) so I spent $34 on nothing. At least with Apple TV I pay at the point of use. I know I have to pay for an internet connection for Apple TV to work, but again, who doesn’t have one of those already in this day and age? The Apple TV isn’t costing me $35 a month in internet connection charges – my need for the internet is, Apple TV is merely piggybacking on it, in the same way my PS3 is.

    The only problem Apple TV has, in my opinion anyway, is lack of content. Whilst the number of movies to rent is improving, it still has a long way to go. I’m especially keen to see more classic movies added. Once they have content, the thing will start to sell.

  • dicklacara

    My AV library currently consists of:

    1) 11,000 Songs (LP & CD rips, downloads & Purchases)
    2) 600 Movies (HFS & DVD rips, downloads & Purchases)
    3) 300 TV Show Episodes (DVD rips, TiVo, EyeTV, downloads Purchased & Free)
    4) 200 Podcasts and Tutorials (DVD rips, download, Purchased & Free)
    5) Lots of “home movie” videos in various stages of production using FCS & iMovie (everything from HFS to AVCHD).
    6) Lots of home photos/scans

    I use an iMac PPC as the server with 2 2TB external FW drives (1 drive is a TimeMachine BU of the other)

    My AppleTV is connected to a 46″ HDTV (as is a Mini & EyeTV) and access the AV server via WiFi.

    Every time I buy a new CD, DVD (or find an old VHS tape) I rip it to the server.

    Today, the setup (excepting the HDTV) would cost $4,000-$5,000.

    Kaleidescape offers a comparable system in the $25,000 range.


    I am happy with the AppleTV/AV Server approach and will, likely, add additional AppleTVs as I replace SD TVs with HDTVs.

    When there are 3 active (School, Church, Soccer, etc.) pre-teens in the house it is worth almost any cost to be able to find and play AV, instantaneously (without having to deal with misplaced/scratched/cracked/peanut butter-coated DVDs & CDs). Now, where did they put that remote….

    A great feature of AppleTV is that it remembers where you were– so you can switch from a movie you are watching, let the kids jump around among videos, then pick up where you left off. I normally have 2-3 movies in AppleTV pause at any given time.

  • http://ephilei.blogspot.com Ephilei

    I’m rather missing the point – why does Apple even want this? It doesn’t make money on sales. Content is break even and the ATV has something like a $30 gross now. So what? I know, I know, it’s about “controlling the platform.” That may be true for OSes and devices tied to OSes, but it sure seems like the market (the entire market, not the techies reading this) wants a very simple experience: push a button a watch something immediately. Any company that wants a set top box to succeed will have to seduce the market into complicating from boob tube into a platform.

  • obiwan

    “Tying Internet access to content subscriptions has stifled competition, resulting in the US trailing much of the developed world in broadband Internet penetration, speeds, and cost”

    I wonder, why they are not going more aggressively after these other markets. For example in Germany it is quite common to get cheap DSL flats at 2-6 Mbit (or even 16 Mbit) from your fixed phone provider.
    But in iTunes we only have a handful of TV shows to buy (no movies at all). If they could offer more content I probably would get one.

    If they would even add a DVB-T receiver and a DVD player, it could replace all my other box-clutter. In that case I would get it immediately.
    Finally, one of the key factors for the iPods success is, that it supports “legacy” sources (CD import). The Apple-TV should do also.

  • lookmark

    The real problem Apple faces with the ATV are the cable companies. They can offer PVRs & VOD on the cheap, and just about everyone needs to deal with the cable companies to hook up a connection.

    Right now, ATV is a nice device, but $230 is still too much for the ability to rent movies and stream/play iTunes content.

    Either the ATV price needs to be cut dramatically to the impulse-purchase-level (e.g. $99), or the ATV needs to be more than nice – it needs to be really compelling. Adding PVR features (a serious disruption of Apple’s current content strategy!) or even casual gaming features *might* do that.

    I suspect Apple will continue to edge the price down while they continue to increase their content (and hopefully convince the studios to offer NetFlix-style subscription plans for a monthly fee as well)… and if all else fails, turn to PVR as the Big Plan B. Then you have a device that can really compete with the cable co’s PVR/VOD… with a better UI and iTunes/iPod/iPhone compatibility.

  • addicted44

    I think a combination of what you and some commentators have suggested is necessary.

    1) Keeping TV free. Hulu presents a fantastic model for moving television online. Its hard to see the mass public paying for what they now get for free. Those who currently buy TV shows off iTunes are those for whom time and convenience is actually worth the money. This is not true of the mass public. If Apple were to integrate Hulu into Apple TV (and Hulu was upgraded so all TV was available on it) then I bet it would only be a few years before TV not on the internet would be extinct.

    2) Continue selling Movies on the internet, as well as renting them. However, get rid of the inane 24 hour rental limit, and introduce a Netflix style system. I believe it was you who suggested the queue system, and I think its a fantastic idea. Best part about it is that movies later in your queue can already start being downloaded, so when you turn a movie back in, the next movie is available almost instantly…

  • nat

    I agree with Daniel that the “Big Pipe Problem” is the main thing holding Apple TV support back from what it could be.

    Here we have rather slow DSL that requires a 2yr contract, so most go with Mediacom, our broadband phone/TV/internet provider. Thanks to essentially no competition, we pay $145/month for basic cable (yeah, that’s w/ no digital box), broadband and unlimited landline calling (I just graduated high school, so it’s my mom who uses the landline; I’ve got a pre-paid ATT phone as I hardly talk on the phone). The most frustrating part about these bundles is that once you drop a service, the others increase in price. If we drop the $70/month basic cable (ridiculous, I know), they up the $30/month phone to $40 + the $45 we’re already paying for internet, that’s $85+tax. If we dropped the internet, the phone would go to $50/month. They don’t even list the cost of just having internet, but I’d guess it’d be around $60 or $70 per month!!

    On a recent interview with Larry King, Michael Moore brought up a good point about our taxes: we hate them because unlike other countries, our taxes hardly do anything for us. In Canada, for instance, some of their taxes pay for medical care. In other places they get free college. Meanwhile, our tax dollars are being funneled into a mismanaged war and useless programs like No Child Left Behind (an example of bad governmental intervention) as gas prices continue to rise and people lose their homes.

    Intelligent government intervention is needed to end a number of problems, like these cable company monopolies. We could have municipal WiFi that’s much cheaper, or free if a tiny group at the top of our government would stop following the will of the big oil and cable/telephone conglomerates and start following the will of those who put many of them into power – us! A lot of people praise our country and our rights, then in the same breath demonize our government, which is made up of…fellow Americans.

    Once the current administration disbands, I believe (and hope) those representatives we elected will be allowed to make real, positive changes and help America be a democracy again, rather than progress the dysfunctional bureaucracy it has become.

  • AppleScience

    @dicklacara: “I think what hinders AppleTV acceptance is the absence of something to exploit the convergence of TV/Internet/computer and people.”

    – My. Thoughts. Exactly.

    @Berend Schotanus: “Most innovations take a lot of time to become popular, I think several decades might be normal.”

    – Maybe not decades, but you have to remember, the people reading RD aren’t the norm for tech adoption.
    To try and get your head around just how huge the transition from solid media to download media will be to the non-tech oriented (the people that “Mac just works” for), just try explaining why AppleTV is better than DVD —- to your grandparents. Absent that Really Compelling Reason, AppleTV currently provides no reason for the average consumer to spend $229, much the same way Blu-Ray doesn’t offer enough of a benefit to non-AV junkies.

    As for the issues with download speeds, would it be possible in a future hardware revision to include hardware decompression/upconversion for a highly compressed file that would be more suitable for HDTV viewing?

  • nat

    Another reason Apple TV and similar set-top-boxes probably aren’t doing so well is the necessity of an HDTV. Yes, you can use Apple TV with an older flat screen tube TV that has component inputs, but then SD and even HD rentals are quite a bit lower than “DVD-quality.” I wonder if Apple will try to solve this by updating their Cinema Displays with HDMI, or if they’d actually couple one of those displays with an Apple TV. That’d be a real Apple TV, if you get what I’m saying. :D Maybe they already have that with the 24″ iMac.

  • Wizfinger

    Well, it’s really simple to me. I live in the Netherlands where Apple TV does offer ANY movies for rent or sale.

    I cannot put any downloaded DIVX/AVI content on it without re-encoding everything to a QuickTime format: too much hassle.

    So my Apple TV (bought on day one) is standing idle collecting dust, and I tell everyone not to buy one.

  • http://opinion-nation.blogspot.com/ philipmach

    What I want is a device that I can use a a digital VCR. The nearest I can get with Apple products is a Mac with EyeTV or similar. Until Apple TV has a way of adding a TV tuner it is bizarre that it has a name with “TV” included. EyeTV can dump recordings to Apple TV but if I have a big enough disk, I don’t really need that. All in all a poorly thought our product begging for a serious overhaul.

  • stefn

    Daniel, do me a favor: When your article announces a group of major points, please number them. That way we can skim the article to see what the major points are prior to wading in.

    It’s also encouraging to see the major points mentioned in the first or second paragraph, by way of an executive summary. It’s not giving anything away; I read your work for its depth of thinking and analysis.

  • labrats5

    I’d like to point out that your first and third issue essentially amounts to the same thing. The reason Apple sells low resolution, highly compressed video is because the U.S.’s pathetic internet speeds can’t deliver premium content fast enough. If 100mb connections were as commonplace in America as they are in Japan (hint: they don’t exist in America and are fairly common in Japan), then 720p and even 1080p would be no problem.

    The second issue, namely the pricing issue, is interesting because the studios actually have a lot to gain from digital downloads. The most obvious is that there is no used reselling of digital downloads. A great number of DVD’s are resold, with the studios netting exactly $0 from the transaction. Pushing a distributing path that has no possible resell market is of great benefit to them. Another obvious benefit is that you never manufacture too many or to few copies. You never pay for overstock. You never lose sales because you’re sold out.

    The real reason pricing is so high is because the studios are terrified that people will stop buying DVDs. But as I just pointed out, Digital download may be better for them than DVD, so why are they afraid? Because DVD is a known entity. They are frightened that they will be hit by piracy just like music was. But the reason music was hit so hard had nothing to do with digital distribution encouraging it, or even the CD’s lack of DRM. It was bandwidth.

    Here we see that actually all three of your points comes back to bandwidth. Movie piracy isn’t too bad right now, but it will skyrocket in the U.S. the moment bandwidth increases enough to make it practically instantaneous. People will burn movies to DVD, and watch it on their TV, much like they did with music and stereos in the late 90’s. Then the movie studios won’t have the Sword of Damocles hanging over their head anymore: it will have already dropped. Then they will be much more willing to talk to Apple.

  • PerGrenerfors

    @ John Muir

    “Looking over at nearby Sweden with its 100 megabit municipal broadband very jealously right now…”

    I get my broadband through OptoSunet, the Swedish university nationwide network. My apartment building (only student residents) has a gigabit connection and the individual apartment has 100/100 through CAT6 wires. The 10.5.3 update maxed out at 6 MiB/s. This is obligatory part of my rent and costs me about $22 a month. The service is for students only and is not commercial.

    My parents have that municipal broadband with 100/10 speed but it’s way more expensive (can’t remember the price). Difference is that it’s provided by one of the major broadband companies.

    With all this nice infrastructure Apple offers very little on iTunes for my country. With ubiquitous fast ADSL (24/1 Mbit/s is pretty much standard) and lots of people who own large flatsceen TVs TV could sell really well if it wasn’t for the lack of content suited to the market.

  • http://johnsessays.blogspot.com John Muir

    @ PerGrenerfors

    I wrote a comment on another story here recently which went: “It’s the studios and labels who carved up the IP world into regions long ago, and it is they who sustain it.”

    If there’s one thing worse than slow download speeds it is indeed the absence of content that you describe. The UK iTunes Store is a middle ground in that regard, thanks to the country’s traditional rank of a mid-sized market.

    I’ve long imported DVD’s from America for price and availability reasons (Japanese anime especially) but that’s something you can’t do with digital downloads. Amazon etc. don’t really care where you are, so long as you pay for delivery.

    If only I had a US billing address, I could probably access content quicker than most Americans!

    Presumably Apple are in talks for content in every market they have an iTunes store … and the ones they are planning next. But you have to expect them to concentrate on their home market first of course, and to then prioritise all of Europe’s (still annoyingly separate) stores mostly on a size basis.

    If it weren’t for the content holders (and their sword of Damocles paranoia as mentioned by labrats5) then we would obviously have one single worldwide iTunes store. I don’t care if 99 cents etc. works out as funky numbers in my currency, so long as I can get the content! Apple would be delighted to make all those sales too. And really, so should the content owners. Yet they are not, so there is the problem.

  • benlewis

    My question has always been: Why not integrate the features of the EyeTV with AppleTV, make the user experience seamless, and present the AppleTV as the best PVR on the market? If Comcast’s UI on its PVR didn’t really stink, wouldn’t they have already killed TiVo? Hasn’t Apple proven that people will pay for a quality user experience?

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  • AE

    Apple TV is a great concept but I think it’s the studios and networks that are holding it back. Apple can charge a good price for the hardware to make a profit and let services like hulu, which are already free, play on the device. A DVR isn’t necessary if episodes of TV shows can be seen after broadcast. I think that the public and the studios and networks just don’t get it and Apple has their hands tied. Who would pirate movies and shows if their was a fair way to get it at low cost and it just worked elegantly. Everyone is just too stuck on the old way of doing things. Also have to think about ISP’s and their bandwith caps holding all this back. Too much greed for those of us in the U.S. to really enjoy this good technology.