Daniel Eran Dilger
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How Apple TV can score at the big 3.0

Daniel Eran Dilger

Steve Jobs’ Apple TV hobby, the box that brings iTunes content into the living room, is getting ready for its third revision. What will the company do to leverage the recent spurt of interest in the device and boost sales even further? Here’s what the company will and won’t do to push Apple TV.
Apple moves iTunes into the living room.

Apple TV uncharacteristically debuted months before Apple was ready to ship it. That teaser introduction in the fall of 2006 served two goals. First, it indicated that Apple had a strategy for pushing iTunes’ digital media content into the living room, and wouldn’t simply be blind-sided by efforts announced by rivals, including Amazon’s UnBox (since renamed to Amazon Video on Demand) and Microsoft’s Xbox.

Secondly, the early introduction of Apple TV (at the time referred to under the code name iTV) allowed the company to distract the tech media into a frenzy of chat over the new device while it scrambled to introduce an even bigger story: the iPhone.

Apple TV ended up quietly floating out between the colossal legs of the iPhone at Macworld 2007, and then served as a product Apple could sell while the iPhone was readied for sale, keeping the company perpetually in the headlines as it expertly oscillated attention between the two.

The Apple iTMS vs Amazon Unbox Rivalry Myth

It’s a Mac, not an iPod.

In 2006, the iPod appeared to be eclipsing Apple’s Mac lineup as being the new focus for the company. That led analysts, including yours truly, to think that Apple TV would be a glorified iPod dedicated to playing content to a TV rather than to its own built-in screen, and that the rumored iPhone would be a fancy iPod with phone features.

Instead, Apple surprised everyone by revealing that the iPhone was actually running a mobile version of Mac OS X running on the ARM processor, news shocking enough for Slashdot to famously insist that Apple was lying and that it couldn’t possibly be true. It was then discovered that Apple TV was also a stripped down Mac running on a low power Intel CPU. Rather than building the simple iPod into a more sophisticated line of devices, Apple was adapting its desktop Mac platform to serve both the mobile and home video markets.

By the end of the year, Apple’s flagship iPod touch would make it clear that the company wasn’t abandoning the Mac, but rather embracing its core technology portfolio to deliver a new family of products that would each share lots of technology. Apple TV was effectively a Mac scaled down to do little more than play music, videos, and photos.

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Apple TV, Take Two.

From the start, Apple described the home video market as a challenge, and called its initial entry in the race a hobby. Analysts ignored this appeal to cut the device some slack, and instead set monumental sales targets for it in its first year. As a consumer device, Apple TV apparently just hit the million unit per year barrier of failure (based on pessimistic forecasts of analysts; Apple didn’t reveal actual sales figures).

Apart from a TV ad that implied that Apple TV was essential to anyone with a Mac and an iPod, Apple didn’t do much to promote the new device. That changed at its one year anniversary, where the company released Take Two, a new software release that gave the box the ability to access the iTunes Store directly to download or rent movies, buy music and music videos, and listen to or watch podcasts. The update also supplied built-in support for 5.1 Dolby Digital audio, delivered with HD video content from iTunes.

Jobs began calling Apple TV a “DVD player for the Internet,” and the company subsequently released an update that allowed the system to play YouTube videos just like the iPhone, and also access Flickr photos and .Mac (now MobileMe) photos and video galleries. Those updates juiced sales of Apple TV, with the company reporting a three fold increase in sales during the fourth quarter compared to the previous year.

Apple TV sales up threefold, will see continued investment

Third times the charm.

On the cusp of Apple TV’s third update, what will Apple do to cultivate that growth? Analysts have voiced a lot of terrible ideas that would actually dismantle or saddlebag Apple TV, converting it from a fun hobby into a burdensome money pit failure. Here’s some of their worse ideas:

– Add a DVR, perhaps by buying up TiVo. The only thing worse than jumping into a dead market long after the lights have been turned out is buying out the leading failure in the market in order to do so. Not only are there no real signs of life in the DVR market (it’s the PDA of the living room), but trying to convert Apple TV into a DVR would be like converting a motorcycle into a pickup: pointless, absurd, and an evidence of strategic failure.

Apple TV exists to sell iTunes content. Unlike the company’s other products, which use software to sell hardware, Apple TV is loss leader hardware that supports Apple’s iTunes software and services. The company isn’t trying to distribute boxes as a public service, it’s trying to draw attention to iTunes, Macs, iPods, iPhones, and other devices as an ecosystem.

Converting it into an entirely different product by adding TV tuners to make it capable of recording live TV would not only do the opposite by distracting attention away from iTunes as a content source, but would also make it twice as expensive (and therefore half as attractive) and make Apple dependent upon cable TV providers. DVRs pan for gold in the stream of broadcasted programming. If you want to return to the 90s, that’s a great product strategy because cable was the only option for programming back then. Apple wants to sell next generation digital download content in its store. No DVR required for that.

However, the biggest problem Apple would face in selling a DVR is that it would have to court the favor of cable and satellite providers to even get its hypothetical DVR-box installed, or directly compete against the cheap subscription boxes they already provide their users. That’s why TiVo is losing millions. It can’t sell its boxes in competition with provider’s own, and it struggles to remain relevant even as a parter with various providers. It’s a loser’s game, which Apple wisely chooses not to play.

Apple’s iTV & The Case of the Missing DVR
Should Apple TV Copy Tivo and Media Center?

– Add an optical disk, perhaps Blu-Ray. Talk about snatching defeat from the jaws of victory: Apple has been pushing digital downloads as an alternative to the DVD for years now, with pretty decent success. The entire industry’s push behind Blu-Ray had taken the format nearly nowhere, with consumers unimpressed by the slight bump in quality over DVD and irritated by the new format’s DRM restrictions and higher prices. Should Apple trade its early lead in order to bailout Sony, the company that managed to merge two wildly successful franchises, the DVD and the PlayStation 2, into a struggling successor?

Adding an optical drive would bump up the cost significantly, and adding a BR disc would elevate the device into an entirely new price category. In addition to the extra hardware costs (and remember that Apple is selling this thing as a loss leader to support iTunes, not as an exercise in distributing the company’s resources to support the strategies of its competitors), adding the ability to actually play DVDs or BR discs would incur additional licensing costs.

That’s why Nintendo’s Wii, which uses a DVD mechanism for its games, can’t actually play DVD movies. Adding that ability would have bumped up the company’s costs and raised the price of the Wii, when the device was designed to play games, not movies. While Nintendo makes money on the licensed Wii games, it wouldn’t make anything were users to play DVD movies on the Wii. Anyone with an Apple TV already has at least one DVD-playing computer. Why not allow that to stream DVDs to the Apple TV for TV playback? Because the DVD licensing terms don’t allow it. Sorry, blame the DVD cartel for that problem.

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Lessons from the Death of HD-DVD

– Add an HDTV screen. This one takes the cake for ridiculous. Recall when everyone and their dog demanded Apple take the display off of the iMac and sell it “headless?” Those same experts now think the way to expand the allure of Apple TV would be to bundle it into an HDTV so that rather than selling a cheap box that works with any HDTV a user has, it would require truck delivery and be tied to whatever screen sizes Apple decided it could stock in its small retail stores. Mind blowing.

The only way a partnership with HDTV makers might work is if Apple got them to bundle the Apple TV with sales, or license the components so they can integrate the box into their sets. The problem there is that many TV makers already face tough competition without adding a couple hundred dollars of extra parts to their displays.

RoughlyDrafted: Beyond Luxo Jr.

More sensible directions for Apple TV 3.0.

Apart from those top three ideas for wrapping an albatross and a millstone around the neck of Apple TV, there are a variety of smart things Apple could add to their box to make it far more valuable.

– Add iTunes radio features. Where are music visualization and Internet radio playback? Plug Apple TV into your speakers and have streaming radio with graphics. But wait, isn’t that just as bad as promoting cable with a DVR or adding Blu-Ray? Well, while Internet radio does potentially compete for attention with iTunes music sales, it doesn’t profit any of Apple’s competitors. Add a way to identify and purchase songs being played back, and you have a way to use radio to promote iTunes sales while also making Apple TV more desirable.

– More alternative content. While Internet radio is fairly popular (albeit under assault from Big Music with oppressive licensing deals), the other big free content source is podcasting. That market is well supported by Apple TV, although it could use some interface refinement. It’s fairly easy to find, subscribe, and play both audio and video podcasts on Apple TV.

So now add the ability to play iTunes U content and make it really easy, easy enough to promote the device as a virtual visit to a wide selection of universities. In addition to podcasting, make it easy for broadcasters to stream video feeds to Apple TV users as an alternative to watching podcasts, similar to Internet radio. Apple already sells QuickTime Broadcaster and Streaming Server, now it just needs to make it easy for users to pump their video out to an Apple TV audience.

– Add an iTunes Store, and an SDK for interactive content. The other obvious thing missing from Apple TV is a way for third parties to build modules that run on the device. The box is nothing close to being a conventional game console in terms of video or processing capacity, but there are lots of things it can do which third parties could provide for a nominal iPhone-like fee or for free. Apple could make it an ideal box for playing Keynote presentations, installed alongside a video projector in a conference room, for starters.

Third parties could write HDTV mini-games that let users interact using an iPhone or iPod touch, perhaps even multiplayer titles that borrow some of the casual family and party gaming allure of the Wii. Sure it’s not going to play Call of Duty, but how about multiplayer Scrabble, electronic versions of other board and card games, along with the other titles that developers can think up?

Make it easy to download little $5 games and app, and Apple TV will explode with the same software interest as the iPhone, perhaps with lots of crossover titles, such as iPhone games that interact in special ways when they discover an Apple TV. Enormous potential for fun and revenue.

With an SDK, third parties could offer their own DVR systems via USB. This would satisfy the niche market without requiring Apple’s resources to support things. Apple could also partner with third parties to offer their products in an online HDTV store, next to Apple TV apps and other iTunes content.

– Additional support for user created content. There’s already support for viewing MobileMe galleries, so how about a custom client for also accessing me.com email, contacts, and calendar on the big screen, navigated by the iPhone’s keyboard? And how about a tie-in to iWork.com, so users can pull up posted documents and comment on them? Or collaborative writing tools so that multiple people can write or draw on a shared HDTV blackboard, either using iPhones or a Bluetooth keyboard or trackpad (which would only require support for a USB Bluetooth dongle)?

Apple TV would make a great core system for digital signage and interactive kiosks, particularly when paired with a USB touch screen. Make it easy to create automated motion graphics and sell the device as a way to turn a standard HDTV into an animated window display, campus information system, or other navigation device. At home, turn the TV into a visualization center for calendar, to do events, posted reminders, streaming news headlines, and so on.

– Consider the controversial. While I’m quick to dismiss DRVs and DVDs as competing distractions, there are a variety of competitive services that Apple might benefit from partnering with, including ad-supported Hulu and subscriber-supported Netflix. Apple doesn’t favor either model, sticking to its guns as a pay-per-view digital media store. Making it possible to view third party content with ads or through a subscription would enable Apple to accommodate the fringes of demand in addition to pursuing an iTunes-centric model itself.

Adding provisional support for those services would make Apple TV more attractive, while also enabling Apple to recommend its own products. For example, it could offer to sell ad-free content at higher quality to Hulu watchers, or non-skipping, modern titles to users sifting through Netflix’s Instant Viewing catalog. Apple could also make a deal with Netflix to get subscription affiliate income from users who sign up with its service from Apple TV.

By making Apple TV the preferred way to stream any content to the living room TV, Apple would directly benefit from having a wider audience to offer its iTunes content and MobleMe services.

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Five Ways Steve Jobs Can Turn On Apple TV Sales

– Hardware advances? Does Apple TV need a hardware update? It’s survived two years on the market without one, apart from a simple hard drive capacity boost. The device’s hardware is fast enough to do what it it was intended to do, which is to play back iTunes content. It was designed with future capabilities in mind. HD playback, digital surround sound, and DRM support to pacify the studios was all included from the start, even though all three weren’t unlocked immediately as the software struggled to catch up to the hardware.

In many ways, Apple TV is more like a games console than a computer, and was similarly designed to last for a long time on the market rather then being immediately obsolesced by a faster unit. Rumors suggest Apple may be eyeing a move to NVIDIA’s Ion platform, which pairs a dual core Intel Atom (low power x86) processor with the company’s high performance integrated graphics chip and system controller that first debuted in the MacBooks last year.

Whether that would enable Apple to deliver a similarly equipped box at a lower price, or slightly more capable box at the same price, remains to be seen. It does not appear that Apple TV really needs a hardware boost. The addition of Bluetooth might be nice, if Apple decides to provide support for keyboards and other peripherals, but the USB port can do that on today’s model.

What Apple TV really needs is a sharper 3.0 software update that keeps the box on par with advancements in the iPhone and iTunes. And if it can deliver that in the first half of the year, Apple TV will definitely keep pace with the success of Apple’s other products rather than boiling dry on the back burner as a neglected hobby.

Apple rumored to adopt NVIDIA’s Ion platform

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  • http://Lyndell.NET/wordpress/ lyndell

    How many of the iTMS devices buy off iTMS? I have never
    purchased anything from iTMS, but enjoy podcasts and
    anything I can put on my iPod.

    Add MPEG-2: It’s like mp3 support on the iPod. Not
    profitable, but it does increase the utility of AppleTV. I
    have a DIY DVR that records into MPEG-2. I’d like to play
    that content on an iPod or AppleTV. iPod exploded with
    the wild days of mp3, a market studios couldn’t control.
    MPEG-2 is a niche market, but it can be sold like the
    MPEG-2 Playback component for QuickTime.

    Home server: Still an AppleTV at the core, but with a
    mammoth drive to hold the family’s iTunes content, backup
    like TimeCapsule, replicate home directories and manage
    users for all the household Macs and iPhones. This would be
    AppleTV, TimeCapsule, Airport and OS X Server all in one

  • jecrawford

    “..blind-sighted”. Daniel, this should be blind-sided shouldn’t it?


  • macpeter

    AppleTV is the only Apple device, where a Bluray drive make some sort of sense, and if you think they are too expensive, make it an 150 $ option and take a DVD drive for the standard modell. Because in every household there are some DVDs or your visitors bring a DVD and even if its possible – nobody want to go to another room, start a computer and stream the content back to apple TV in the living room – they want just insert the disk and play the content.
    There is a big trend to bring the Internet to DVD Players but it would be much easier for Apple to support a DVD drive in Apple TV because they have already the right software and the additional hardware is only a few bugs – and Apple can offer a complete substitution for a DVD/Bluray player.

  • http://www.roughlydrafted.com danieleran

    Apple TV plays back MPEG 4 H.264 in hardware. Playing back MPEG-2 would likely have to be done in software, and the CPU probably isn’t fast enough. MPEG-2 files are also twice as big at the same quality, and like BR, would also involve licensing costs.

    Playback of MP3 is easy to do without hardware acceleration on even today’s most minimal hardware. Whether MPEG-2, DIVX, or other codecs could play back in software acceptably isn’t something I’m sure of; it might depend on how complex the compression is. Of course, playback of MPEG-2 would be required to play DVDs.

  • brett

    actually, daniel, if you make a Playlist with your favorite radio stations, you can sync it over to AppleTV, and voila, instant radio on appletv now.

  • mailjohannes

    Apple already sells the perfect Apple TV with all of the capabilities you describe and a DVD player as a bonus.
    It is called the Mac mini.
    It is of course not as cheap but it isn’t a hobby either.
    (Its a bit strange to ask people to pay for a hobby I think.)
    Another perfect Apple TV is a MacBook. I use this myself and it has the advantage of no extra cost at all.

    I don’t think adding crippled computers to the Apple lineup is the way to go for Apple.


  • gothgod

    To make it a meaningful product they only need one big thing: Allow more codecs, or VLC, in a nice way that doesn’t sound too much “now you can watch your pirated movies”, even-though that’s just what it is. And make it easier to sync them with iTunes. Perhaps make it possible just to copy files to TV.

  • macpeter

    What´s about Intels new CE 3100 Chip. This SoC would perfectly fit for Apple TV- support all needed Codecs, draw less power, make the design easier, cheaper and much smaller so you have room for a optical drive in the same compact form factor.

  • greendave

    I use a MacMini with eyeTV – it does all the things that AppleTV doesn’t (except Bluray), streaming (BBC iPlayer is an essential capability in the UK), PVR, mail, photos, radio – and I don’t have to buy TV from iTunes as it is all automatically recorded and exported into my iTunes.

    Consequently, I agree, Apple really doesn’t want to make the AppleTV much more capable than it is or it will fail in its main purpose to drive download sales.

    I think you have something with the games link to iPhone/app store Dan.

  • rosko

    I really like my Apple TV, but here’s what I want in iTS / TV 3.0:

    – Better subtitle/closed captioning support. A very very small minority of movies/shows on iTS have closed captioning – this needs to be sorted. Also, Apple need to open up the closed captioning format so that we can create our own videos with toggle-able captions (currently we can use QT Text tracks – but they can’t be toggled off)

    – More remote functions. I love the custom Remote settings introduced with 2.2 (or was it 2.3?), but we need to be able to assign buttons to more functions like standby, toggle shuffle, toggle repeat, toggle subtitles, etc.

    – Third Party support for video on demand services. I’m the UK and if the BBC iPlayer was on the Apple TV (which BBC have already openly declared interest in) it would be SOOO handy. I really hope Apple aren’t disallowing this just because they have shows like Top Gear for sale in iTunes – that would be a bit evil given the service is available for free when using any other computer. Also other channels – I don’t care if Apple throw in DRM that makes you watch ads or whatever – just make it possible!

    – PRICES. I know this is partly to do with the studios. I would LOVE to buy my movies and TV shows from iTS. But I can’t bring myself to when on amazon I can get them for a quarter to half the price. Come on people, it’s ridiculous. Especially in the UK, where iTS prices are among the most expensive in the world.

    – Media views like in iTunes 8 i.e. grid of covers rather than list.

    – Music visualisers (they could even sell third party ones)

    – More screen saver options

    – Ability to turn off Ken Burns effect in photo slideshows if desired

    – Probably more, but I have to get back to work!

  • Galley

    1. The proper abbreviation for Blu-ray Disc is BD.
    2. It is not currently possible to subscribe to podcasts on Apple TV; it must be done through iTunes.

  • LuisDias

    I’m quite ignorant on the Apple TV, but if it doesn’t play divx, xvid, etc., I don’t even want to hear from it.

  • warlock7

    How about adding in 1080i/p output to the device? I wouldn’t consider buying any media playback device today without 1080p output support. 720p just isn’t good enough anymore. It wasn’t good enough at the last revision to the hardware and it’s not going to be good enough this time around for sure.

  • http://www.princessbridejewelry.com don731

    I disagree on the opinion that the lack of an optical drive is not important. Besides renting Netflix (and streaming via a Roku box) we use DVDs for family videos shot with DV cameras in various parts of the country. Many family members don’t have the internet bandwidth to email or upload these videos directly to the web. Using the MBA DVD drive as a extra paid add-on makes great sense. For now, we’ll continue to use our mac mini as a “full service” Appletv with boxee/hulu, and other legal streams easily available.

  • Zamfield

    Hello Daniel,
    Good article as usual, but I feel I have to disagree with your DVR perspective. As one of the minority that owned the Pioneer Tivo with DVD recorder, that one box was nothing short of life changing. Not only did Tivo’ing eliminate all the stress and arguments that come with sharing a tv with your spouse who has polar opposite tv tastes, but when we had kids it just kept becoming more and more useful. The dvd recording wasn’t ever that important, but not having to teach my kids or my wife how to pick the right input/source to go from tv to dvd was a godsend. And not only that, but the box was smart would resume a dvd just like any other recorded program or the live tv. That kind of convienence hard to let go of.
    We eventually returned the AppleTV as too incomplete to justify the cost. Not only do most people use cable internet to access iTunes, but they get basic cable programming bundled in because you have to pay for that either way. So while iTunes has a huge and growing library, it doesn’t show Lifetime movie network world premieres and can’t record them from a tv broadcast. The don’t get put out as DVDs to purchase so I’m back to having to own several boxes to satisfy the family’s entertainment needs.
    So here’s my take on AppleTV’s next big move. Integrated Peripherals. The form factor for the AppleTV is very appealing. I didn’t mind it sitting out in plain view at all. Why not offer a unit that provides the dvd player in a stack-on package with full integrating into the AppleTV interface? Let it bookmark and resume DVDs like the Pioneer Tivo did. Let it share it’s drive with any Macbook Airs that need it, or serve as a feeder for adding CD content into a home iTunes library. And then why not add another stack-on unit that provides DVR tuners and additional storage with eSATA / USB3 / Firewire 1600 for additional external storage? Integrate that function into the AppleTV interface with all the DVR goodness, along with multiple tuner support and storage to really do a media center right. And of course what does all this really do for the intended audience? It eliminates the need for my parents and grandparents to have to learn the right remote button or navigate the TV’s built-in menu and switch the tv source. I know most TV’s come with a zillion inputs these days, but none of them have interfaces designed by Apple, and to me that makes all the difference.
    Your other suggestions for easier navigation on podcasts and inclusion of Hulu or Netflix enablers is spot on, and a big part of the reason we went back to the Tivo, it just does it already. And iPhone / AppleTV gaming goodness is what I’m really waiting for! So bravo on that one!


  • Zamfield

    Sorry to double post, but I forgot to mention that the AppleTV 40gig model I owned could cook eggs! So internally a SoC or anything that lowers the heat factor would probably be appropriate in the next hardware refresh. It go so hot I was scared to put it into a shelf on the entertainment center incase it started a fire or melted!

  • paradoc

    I agree with many things that you’ve said, but not all of them. I owned an AppleTV but ended up selling it. Here’s why: Content is king. Apple is going with the “pay to play” philosophy. The catalog of movies and TV shows on iTunes is limited, and more importantly I don’t want to pay $1.99 to watch an episode of a TV show that is available for free on Hulu or another streaming site. I installed Boxee on my aTV and had that working relatively well (considering it is still alpha software, it was running VERY well!)… I think THAT is the future of the AppleTV. If the aTV 3.0 offered 1) Netflix streaming, 2) access to other free video providers like Hulu and 3) access to free content on iTunes I would buy another one. The other issue is they need to improve the processor so it can handle video playback better. I’ve got a good broadband connection, but couldn’t get content from iTunes or Boxee to reliable stream without repeatedly buffering. That has GOT to be fixed.

    I think you are wrong about the Tivo also. I’ve got a Tivo HD. It streams Netflix and Amazon movies on demand, and has full DVR functionality for my cable provider. But if I could reliably stream shows like Daily Show, Discovery Channel, and few network shows on my TV for free or reasonably affordable monthly fee (ie $10/month), I would gladly drop my cable.

  • Galley

    What Apple TV really needs is a TV subscription service. The best thing is they already have the delivery system in place; podcasts.

  • MacenScott

    The one area that I disagree with Daniel on is that adding DVR functionality would not be in Apple’s best interest for tv 3.0.

    It’s obvious that Apple wants to preserve and promote the iTMS as much as possible, but due to greed on the part of the movie studio heads, it isn’t cost effective for video rentals or purchases. I say this despite being a huge Apple supporter and iTMS customer for my music since day one. With music it’s an inexpensive purchase to by a song or two that you will listen to over and over (I won’t buy albums because I never like more than 4 or 5 songs on an album, so why would I pay double the cost for singles?). Video purchases are only slightly cheaper than DVD, and sometimes more expensive than popular DVDs on sale.

    I may be in a unique position, but I can rent movies for 99 cents at a vending machine in my local grocery store. I could even rip the movie with Handbrake if I wanted a future copy. I think the studios need to lower the cost in order to increase the adoption of digital distribution.

    Also, iTMS TV Show subscriptions are too high. One might save money over cable for a single individual, but for a family of 4 (like mine), the cost would be prohibitive. Plus, sometimes TV is a passive experience — you want to flip through and watch whatever is on or discover something new. I shelled out big bucks for a Tivo HD unit so I can have 160 hours of HD available whenever I want.
    And, I would still consider buying an tv. For me, sharing family photos on the big screen is the main draw. Why Apple doesn’t promote and add more slideshow controls is puzzling. I always wanted a WiFI picture frame from Apple that ran iPhoto slideshows, so maybe tv fits the bill.

  • Bob

    Apple TV should re-emerge as a gaming/media platform, capable of playing high-end graphical games while retaining its current capabilities. No need for optical media. Stick with downloads for games, movies, TV, etc. With Apple’s famous ability to make the user experience simple and pleasant such a gaming platform would blow away PS3, XBox and the Wii.

  • stormj

    I agree with most of your points, but I would strongly emphasize the need to support something like iPhone apps. The iPhone was pretty cool without third party apps—it is revolutionary with it.

    AppleTV may be about delivering iTMS content to the living room, but it sure would be something if you had the functionality of an iPhone overlaying your cable and disc viewing. I agree with your rationales for why that shouldn’t and won’t be so, but I think that general direction is where to take the thing

  • http://www.henrygeorgi.com hgeorgi

    I think the biggest thing apple could to with appletv is to make the audio system wireless using some sort of “bonjour”-like technology. Simply place you wireless speakers around the room and voila, instant surround sound, no comlicated wiring necessary (wiring the audio is easily the biggest pain with the new hdtv systems – kinda like setting up the old vcr).

  • stefn

    Apple HDTV: I back the idea that Daniel deems the worst of the lot. Here’s why.

    * I simply won’t buy another TV that isn’t a computer at heart. It makes no sense. I want all the services and navigational tools that a computer offers, not the mindless, useless, one dimensional services on TVs currently.

    * I simply won’t buy a PC/TV that doesn’t have OS X at its heart. My Mac is so much a better TV than my TV that I won’t purchase something less. The only thing that keeps me attached to my TV is the addition of 3 boxes that handle, respectively, cable modem, digital conversion, and replaytv navigation. That’s 4 (FOUR) boxes total, where there should be 1 (ONE).

    * I would be delighted to pay the premium for an Apple HDTV or purchase a slightly smaller screen to offset the costs.

    This is why Apple WILL do an HDTV. It loves to break up industries. It loves to create new mind blowing CE gizmos. It loves to charge a premium for gizmos.

    In fact, I’m sure Daniel is absolutely right in his analysis. I just wish it were so.

  • stefn

    And by the way, buying a AppleTV unit, as a FIFTH box attached to my TV? Not likely.

  • Janus

    Has anybody considered that the real reason AppleTV started taking off was because of Boxee? The magical software that, strangely enough, lets you do what you want with your device?

  • GUS

    Great article. One point I think should be reconsidered. I believe adding a DVD player would make sense as a way to get a foot-in-the-door (or in this case, the living room). The cost of adding a DVD drive is inconsequesial to the total price ($20 retail?). Home DVD payers need to be replaced occasionally and most of us have an investment in DVDs (similar to the iPod/CD issue). The last time I was in this situation, I looked long and hard at the Mini, but the cost differential vs a decent DVD player was just too great. DVD playing AppleTV (w Dolby out) would have been easy choice.

    Add web surfing and email (no cost here, make it only work with MobileMe) and it becomes your living room portal to the family HDTV. Without a WP and other apps it should not cannibalize Mini/iMac sales. But get people hooked on it as their media interface and it’s the iPod market all over again.

  • http://Lyndell.NET/wordpress/ lyndell

    I like the stackable modularity idea. I’ve thought that’d be a great way to expand/upgrade a computer.

    MPEG-2 has it’s drawbacks, but I’m accumulating content in that format. I figure a graphics card could accelerate it and other codecs as they all use similar math. MPEG-2 isn’t going away, because DVD isn’t going away and ATSC gives it new life. However, Apple is avoiding legacy-tech like a floppy drive.

    An SDK and a more functional USB port would allow all these ideas to flourish without Apple messing with them. Again, using the iTMS App Store for AppleTV, Apple can cover their expenses and keep the ecosystem tidy. Computer based DVR is an established market, not big, but it’s there. It’d be interesting to compare the TV tuner (EyeTV), media player (Mvix) markets to AppleTV.

    @ stefn,
    Almost fits me. I have no interest in a large screen TV. I’d rather have a large monitor, and watch TV, DVDs and video on the computer. However, I rather have the physical media if I’m buying content.

  • MacenScott

    Daniel, great article as usual.

    As for my tv wish list, here it goes/

    1. Keep entry-level tv priced around $199
    2. Open up tv to the internet for sites like Hulu.com
    3. Sell a bluetooth keyboard with touch pad for navigating in addition to support iPhone/iPod Touch control
    4. Sell add-on units that can be stacked for additional storage, DVR and DVD playback (easy way to upsell at minimal cost)
    5. Open up the App Store to the tv (imagine games being played using your iPhone or Touch as a controller)
    6. More of what you already have (slideshow transitions, visualizations, etc.)
    7. Encorporate DVD ripping technology (like Handbrake) into iTunes software if the studios don’t loosen their grip. A disclaimer each time you rip reminding you it is for backup purposes only should protect them against lawsuits)

  • Steve Sabol

    Am I the only one who consistently experiences lag issues on the AppleTV, especially when going from one category to the next (TV to Movies, for example)? We have LOTS of purchased and ripped media (a few hundred movies, lots of TV shows, lots of music) and I suspect we’re overwhelming the box.

    I agree that selling an 52″ HDappleTV makes little sense for the same reason I never bought a TV with a VHS player in it… Our long-in-the-tooth TV was bought back in 2001 and it’s had a billion different components over the years. When we moved into our new house last year I didn’t hook the DVD player back up… it just sat there on the shelf between the Wii and the AppleTV (I think I still had my PS1 back in 2001… then the GameCube… and now our Wii) . This past weekend it found its way into the time capsule I call our basement.

    The only reason Apple should take on the TV space is if it can fundamentally change it… make the TV into a two-way audio/video/text communication device.

  • hmciv

    The big think I’d like to see is the ability to rent a television season.

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  • SteveS

    “- Hardware advances? Does Apple TV need a hardware update? It’s survived two years on the market without one, apart from a simple hard drive capacity boost.”

    Survive? The Zune is technically surviving to. Is that the goal here?

    “The device’s hardware is fast enough to do what it it was intended to do, which is to play back iTunes content. It was designed with future capabilities in mind. HD playback, ”

    No, the device does not do what it was intended to do. It requires a HD tv, yet it doesn’t support 1080p. Unacceptable. I’ve played with the current AppleTV. It’s a nice toy, but I can’t justify buying it as it. Once it gets true 1080p support, I’m in. I’m not sure how you can cover the nVidia ION story and not agree that it needs a hardware update. The ION platform handles 1080p with ease. That’s what the AppleTV needs.

    Additionally, I’d like to see an SDK opened up so that people can add new capabilities and possibly even casual games, etc. Game controllers, etc. could all be optional purchases to keep the cost down.

    However, I do agree with you in that Blu-ray, DVR, etc. are not the answer for what the AppleTV should be.

  • John E

    oh! another “what do we do with AppleTV?” post/comments. well it’s kinda all been said, but it still is fun ;)

    pretty much agree with what Dan says it should NOT do (although the offhand dissing of TiVo was really wrong – i guess Dan doesn’t watch much TV). but the stuff Dan recommends is just too weak to make any real difference for AppleTV’s future.

    the article did not take note of what some AppleTV owner’s are already doing to enhance its capabilities, and it should have (that’s always good evidence of what users really want!).

    easy-to-install Boxee of course greatly improves AppleTV with support for all media files types and, especially, direct access to the rapidly growing selection of free web media portals. Apple is just plain crazy stubborn if they do not replicate that with AppleTV 3.0. A little more complicated, but not really hard, is adding a Safari HD or CouchSurfer full-feature web browser and keyboard/mouse support.

    with just those two more things, you would suddenly have a pretty darn good product.

    my favorite idea is somehow – there are various possibilities – tying in your iPhone/Touch with AppleTV. i don’t mean like the current Remote app, i mean using the virtual keyboard and touchscreen like a mouse, or even running iPhone apps via the AppleTV that you then watch on your HDTV. but i think this is just too radical a notion for Apple and don’t expect to see it, darn.

  • TexasAg03

    There is just no way I would consider Apple TV unless it had DVR functionality. There is no way I’m going to pay $1.99 for every episode of every show I want to watch. That would be too costly.

    How long are shows available through Hulu and other similar sources? Sometimes, with our schedule, my wife and I may go a month or more before catching up on TV episodes. With two kids, things are too unpredictable. DVR is the only way to guarantee that I’ll be able to record an episode tonight and watch it in April.

    I can guarantee that I am one of many people who are in the same situation and Apple TV is simply not a reasonable option at this point.

  • TexasAg03

    By the way, I think you meant “Third time’s the charm” instead of “Third times the charm”.

  • GwMac

    I have DirecTV with their DVR and I also have my retired G4 (Dual 1.4 with 1.5GB Ram) connected to that same 65″ HDTV via DVI to HDMI cable and an optical audio cable going to my AVR. I also have an EyeTV like device from Pixela connected by firewire that allows me to save any show permanently on my computer or burn to DVD if I choose. It only uses S-Video but offers very good quality on high settings. I mostly use VLC to watch videos I download, but can certainly use it for DVDs, or even any website like Hulu for example as well. Not to mention iTunes, iMovie, and even games like Halo or Unreal Tournament 2004. I think there are a lot of people with aging computers that could easily do the same thing I have done with little to no cost that also allows far more functionality and features over an Apple TV. I wonder if “retired” computers aren’t the biggest competition to Apple TV and similar type devices.

  • Brau

    I agree with Daniel here and feel the AppleTV will not change much. There is also one more problem Daniel did not mention, which I learned recently while talking with EyeTV support. Any ApleTV with a tuner would require an EPG (program guide), and the way the laws are now a site can provide the information for free but if they want to tie it to a recording device then they have to pay royalties. That means adding a tuner to an AppleTV would automatically require a monthly subscription payment, for a feature that is already on most cable boxes.

    The limitations placed on devices by the cartels are what limits the AppleTV the most, and sadly why I’ll likely never buy one. It’s why I doubt Apple will ever offer an integrated TV either.

    It’s really too bad. Everyone knows how the system should work but as usual the greedy media cartels are more interested in protectionist schemes than providing what the customer really wants.

  • qka

    Did you see that this article was picked up by Fortune?


  • Per

    I think it would really make sense for Apple to use the Ion platform. They already use the chipset for laptops and I wouldn’t be surprised if they show up in the next revision of the iMac. Using even larger quantities of the chip should also keep the cost per unit down.

    According to AnandTech, the Ion platform is even capable of playing back Blu-ray content (not that Apple needs it) which means that AppleTV really could develop into a great platform for casual gaming paird with the iPod touch and the iPhone as Wii-style remotes.

    As a bonus, the low-power Atom also runs very cool so that Paul Thurrot won’t burn his fingers anymore without resorting to noisy fans :D

  • seanw

    i don’t have a cable subscription, so i can’t comment on the usefulness of a DVR.

    what would make the 3.0 upgrade beneficial is this: cheaper, longer rentals, timelier release dates closer to the DVD release, better international licences for allowing international programming to be available.

    there’s money to be made here on the international stage. i’d rather subscribe to something (like BSG) than have to resort to manual bitorrent downloads, conversion and adding to itunes.

    cable is too expensive proportionately to what our family actually watches. television is as useless as it is dead.

  • zpikzpan

    All this makes sense in the US, and for people who spend lots of money on rentals anyway. Outside the US, iTunes movie rental just doesn’t come close to replacing a DVD player. You can only watch the most stupid and generic blockbusters under slightly worse terms than the rental around the corner – which has all the block busters and a huge load of stuff that’s really hard to find in the US anyway. And the other functions don’t make sense, unless you have money enough to watch pictures on TV and want to visualize your iTunes music library. Daniel’s analysis may very well be spot on, but that doesn’t change the fact that without DVD or an industry-wide miracle that brings iTunes tv and movies to the rest of the world – with content that has broader appeal than US mass market – I will never buy a TV show or rent a movie from iTunes. With a DVD, I would have an excuse to buy the thing and have a DVD player that my daughter could use and cool extra’s that actually work.

  • scubadane

    I agree with many of your insightful perspectives, but you’re wrong on Apple TV and DVR. Here is why:

    Seeing your set-top box as a mere tool to peddle your own content and failing to see it from the consumer side is exactly how every attempt to “own” the living-room has failed so far. What TV consumer are fed up with is the fact that everyone is trying to sell them one more box to put under their TV with one more remote and one more user experience.

    If you want to “own the living-room”, as I believe Apple will and could, you have to be at the center, not another side-show of down-loaded content.

    The time is so ripe for a re-integration of Audio/Video – much as the likes of Bang & Olufsen did in the 80’s/90’s – since then it has exploded in devices and remotes and a dysfuncitonal user-experience.

    That re-integration requires strong software (interfacing, both human/machine and machine/machine), and that’s where every other major player falls flat. Apple has that.

    And leveraging the iPhone/iPod as a remote and iTMS as an Electronic Programming Guide (+ obviously the content), as they demonstrated in one of their 2007 patents would make Apple TV a killer app for the living-room. Now that’s strategy.

    Muscling content providers was ultimately what made Apple successful with iTunes Music – through a couple of steps – so why not? But even if all Apple does with Apple TV 3.0 is re-integrate digital free-view and DVR, then they are at least still in the game.

    Your suggestion seems akin to making the iPhone texting/SMS only, just to peddle their Music and App Store content…

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  • John E

    right on, scubadane.

    agree except with regard to DVR function, because i can understand why Apple does not want to get involved in business deals with the cable companies and the telcos, who really are seeking exclusive services control of the consumer.

    it is the remote control – the user interface – that will be the true decider of who “owns the living room,” not a set top box or some list of features it has. what all us couch potatoes want most of all is a single remote that magically makes everything happen on our living room TV and stereo and connected media computer that we want while we sit comfortably on the sofa. conventional universal infrared remotes (Logitech’s even control AppleTV) are good for standard stuff, but to browse the web or control an application, no.

    simply put, a remote control moving a cursor horizontally or vertically around a screen grid to select items with a click – as they all do now, including AppleTV – is just like using DOS used to be.

    what is needed now instead, just like for computers 20 years ago, is a much more flexible and varied GUI, using a touchscreen and wifi given the sofa circumstance instead of a mouse/keyboard.

    whatever company solves THAT challenge is the one that will “own the living room.”

  • http://home.comcast.net/~daguy daGUY

    Great article. I agree 100% with your suggestions, but I disagree with your comment on an Apple HDTV – I think this is a great idea.

    Look at it this way: you NEED two devices for Apple TV to work – the TV itself, and the Apple TV unit. Apple’s selling the smaller, cheaper add-on unit, leaving people to buy the expensive big-ticket item from another retailer. It would be like if they sold their high-quality wireless keyboard and mouse without an accompanying computer to pair them with.

    Why not approach it like the iMac? Create an integrated product that has everything you need – an HDTV with Apple TV functionality built in. Set up consists of taking the unit out of the box and plugging in one cable. One fewer box to add to the stack of devices in your living room.

    Of course, they can continue selling the standalone unit for people that do already have an HDTV.

    Apart from that, I can suggest two features for an Apple TV 3.0:

    – The ability to rent/stream TV shows, just like movies. Maybe I’m in the minority, but generally I watch TV episodes once, so I don’t see the need to have to own them. I’d be happy paying, say, $1.49 to stream one particular episode on a whim every 6 months, rather than buying an entire season of DVDs for $30 – $40.

    – A plugin system. Let third-party developers write plugins that can display different video formats not supported out of the box.

  • Rob

    This year I decided to cancel cable in favor of Apple TV for all of my content. I don’t watch much TV and figured that I was paying about $840/year for cable. TV Season Passes on AppleTV run anywhere between $20 and $50, so let’s say an average of $35. That’s a lot of shows…a full season of 20, give or take!

    So far I’m pretty happy with the whole Apple TV experience. Sometimes I miss channel surfing, but I certainly don’t miss flipping endlessly and finding nothing. Nor do I miss stumbling upon the gruesome visage and shrill cries of Nancy Grace or the nonsensical rantings of loudmouth Chris Matthews and Bill O’Reilly.

    Apple TV has made me enjoy TV *content* again. I genuinely look forward to watching a show knowing that I won’t be plagued by advertising or fleeced out of a monthly DVR fee.

    What the media companies need to understand is that there are more and more people like myself, people who wish to consume *some* media but refuse to subject ourselves to the onslaught of marketing and channel glut. Apple TV is an easy revenue stream for these media companies. Which leads me to my first complaint: so-so selection.

    Apple TV desperately needs MORE CONTENT. Why can’t I buy Real Time with Bill Maher? Or any HBO original series? Why can’t I get PBS’s Nova or Independent Lens? Of course this isn’t really a problem with Apple. It’s the dinosaur content providers. I don’t get it. Shouldn’t they WANT to sell as much of their product as possible? We need more content!!!

    The hardware *definitely* needs a refresh too. Lag, lag, lag. I’m constantly waiting for menus to appear. Sometimes the remote simply stops working for 20-30 seconds. Then, all of a sudden, a flurry of activity.

    Syncing with iTunes doesn’t always work well either. There should be an easy, main menu way to trigger a sync. I shouldn’t have to reboot it to get it to sync.

    I like the SDK and store idea. I’d love to be able to download little widgets that let me check weather or watch webcams, etc. But such features are all secondary in importance to me.

    Apple TV’s number one drawback is the content licensing. It’s too expensive. There aren’t enough movies and shows to make it worthwhile. And there should be a cheaper way for people to view TV Shows without having to buy them (ie: $0.99/episode to watch once, no expiration date).

    All of that said, I can’t really imagine myself reconnecting cable again. I realize now how often I had the TV on, not necessarily paying attention, but in the background. I enjoy not having that background noise any longer, nor the energy it brings into one’s life. I have high hopes for Apple TV.

  • planetwc

    Apple needs to provide an SDK for the AppleTV. Just as they did for the iPhone, furthermore apps should be available from the app store to run on the apple tv like boxee. Additionally, the usb ports should be lit up to allow one to extend disk space on the device. If Apple doesn’t want to do it, let someone else do so via the SDK.

    let the iPhone and Touch work as remotes and game controllers for the ATV. Slap some of the new hardware Apple now has access to, like nVidea chips, PowerVR etc. to beef up the box to do full 1080P.

    As a side note, Apple needs to provide a home media server solution that I can scale up as far as I want to. Do the usual cocoa interface on top of ZFS so that my media collection is protected. Let me scale to my hearts desire, with either external drive arrays or additional media servers for different content. Allow me to control who has access to what, like adult content, either porn or rated MA/R. Let the apple TV multiplex among those home media servers as needed, without the all or nothing choice they offer today. via the SDK allow developers to support the other codecs out there like wmv10, rm, mkv, etc. etc.

  • bregalad

    I would like a single box to be the center of my living room. Like the AppleTV it would need to connect to my HDTV and home theater receiver. Also like the AppleTV it would need to play my iTunes library, but quite unlike the AppleTV it would need enough storage to hold that library. I set aside a 250GB hard drive for my iTunes library, but it’s almost full and there’s not much video content in there yet. I know streaming is a solution but that means I have to leave a computer running iTunes 24/7/365 so the AppleTV can access it. Not a very practical solution and definitely not Energy-Star compliant.

    I also have a collection of DVDs that I’m not going to replace with digital copies so I have to keep my DVD player and its separate, incompatible remote control.

    Some people may be moving away from cable TV, but it only costs me $1.50 per day on top of my internet service. That’s less than a single show from iTunes.

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  • nextcube

    Actually, the feature I would like to see is compatibility with MLB.tv. The iPhone already has an MLB app that lets you watch video highlights and use the “gameday” feature to follow a game. MLB.com the website carries the radio broadcasts for home and away teams, and also lets you watch the entire game (tape delayed if it’s being broadcast locally) on your web browser – for $80 a season, ALL TEAMS, ALL GAMES. (I’m paying $65/month for cable so my wife can watch the YES Network – $80 for a SEASON sounds like a GREAT deal!)