A Rational Take On Apple’s Ambitions In The Television Space

Of late, all we’ve heard about the Apple Television are either Tim Cook’s comments on how awful the current TV setup is or Gene Munster’s yearly hyperbole filled research notes (incorrectly) predicting that Apple will finally launch a TV this year.

Jean-Louis Gassée, former Apple executive and a competitor to Steve Jobs during Apple’s acquisition of NeXT, has a much more reasonable take on Apple’s ambitions in the Television industry.

He outlines the basic issues with the current TV setup:

– We still can’t order channels à la carte or search the program grid. For the latter you have to go to your tablet. And forget about the former.

– You can’t buy your own set-top box; you have to rent it from your carrier. For STB makers, there’s no incentive to build a better product.

– Add in the contorted rights and packages games played by the content providers and you end up with today’s mess.

(via Monday Note)

The technology needed to make Television more “on-demand” is already developed, and is being used as we stream large libraries of audio and video content from iTunes, YouTube and other such services on our iPads, “Smart” TVs and smartphones. Video related apps that take advantage of AirPlay to display content on the large screen are a good indicator of how a cable service set in the future might look like. The only issue is the content itself, which content owners do not license easily fearing loss of revenue and control to Apple. This is a problem that will not solve within a span of a few months, but will take years of convincing.

Gassée adds that since the theoretical Apple Television would essentially be a computer paired with a display, Moore’s law would make the computer inside outdated every other year, while the screen would remain just fine even years later. Since no one really wants to replace a (possibly) $1000 TV set every couple of years, the computer would have to be replaceable, bringing us back to the current Apple TV-type device.

So why is Tim Cook making comments that fuel speculation on Apple’s probable entry into the Television industry? Gassée says:

Apple’s CEO is indicating that he’ll continue to invest talent and money until the TV obstacles are finally surmounted. In other words: “Join us and ride the wave that will sweep away the competition”.


[L]et’s consider Apple TV’s place in the company’s business. In the 2012 fiscal year ending last september, Apple’s total revenue was $156B. 5 million Apple TVs translates into $500M; that’s 0.3% of the company’s total.

Why bother? In 2014, Apple’s revenue could exceed $250B. Even if Apple TV sales were to grow by ten times, they would still represent no more than a 2% fragment of the total.

The answer is that Apple TV isn’t meant to generate revenue but to enhance the value of the more muscular, profit-making members of the ecosystem: iPhones, iPads and, to a lesser extent, Macs. In a similar, grander, and now well-understood way, iTunes isn’t in the business of making money by itself. iTunes made the iPod larger than the Mac in 2006, and it made the App Store possible — and the iPhone and the iPad as profit engines.

Gassée goes on to say that Apple will continue pursuing its Apple TV “hobby,” possibly opening up the platform to developers, and iterating on the product until it manages to get a major cable network like Comcast onboard, at which point it will come out with its final product, and hope to reform the entire industry, as it did with the iPhone.

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