Above the Crowd

Will Apple Make an Actual Television? Makes Sense to Me

May 29, 2009:
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There is a lot of buzz in Silicon Valley circles that Apple may be working on a actual physical television (as opposed to the set-top box product known as AppleTV). There have also been assertions by business analysts that such a product is coming. I have no confirmation of this from inside of Apple, but I must say that this makes huge sense to me.  

Here is my logic:

  1. For Apple, the fact that the TV business has become a commodity business will not be a road block. In PCs and MP3 players, they have proven they can charge a huge premium and extract enviable gross margins even where others have starved.
  2. The large iMac has the aesthetics of an item for your living room. Apple could easily deliver a beautiful device that high-end users would be proud to hang on their wall. I would go even further – it could become the type of product that many people aspire to have on their wall, especially the Mac enthusiasts.
  3. Their current TV product, Apple TV, is a stand-alone set-top like product. This will likely change. First, it generates the frequent question of “who needs another set-top in their living room?” Second, over the next two years, every TV manufacturer is adding an Internet menu stack similar to that of a cell-phone. Some vendors already have products on the market.  By the end of 2010 every TV will have an Internet menu which means the stand-alone product will be increasingly difficult. Therefore, Apple may be forced to build an actual TV if they want to play in this market.
  4. This is a huge market. Q1 2009 flat-panel TV sales were roughly 7mm units. Let’s assume Apple can get roughly 10% of this market. That would be 2.8MM units a year. Assume an average price point of say $1250, and that’s a $3.5B opportunity for Apple.
  5. Here is the punch line: it will all be built around the iPhone ecosystem. What this means is that the entire application ecosystem from the iPhone is now available on your TV. You can now get your entire music library. Stocks, weather, photos – done.  Pandora – done. YouTube – done. And thousands of other apps are ready and available (including several Benchmark companies :) — Zillow, Yelp, Mint, OpenTable). Importantly, think about what this means for gaming. All the casual games for the iPhone are now on your TV. And of course, the iPhone itself (or an iPod Touch) becomes the remote, complete with accelerometer. Now you have a Wii competitor.
  6. (From Bill T. in comments)  Don’t forget, Apple has retail stores to sell them.

I should note that I own Apple shares in my personal account (I have for about 15 months).  Of course, as a shareholder this idea makes me very happy.

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23 Comments

  1. David G May 29, 2009

    Surely the switching cost is far greater for consumers as a totally bundled device? 5 years ago maybe this opportunity existed for Apple but at this stage, everyone has a flat panel and most of them are still making those credit card payments. I try to look for analogs for this kind of stuff and I’m reminded of the video + tv devices that failed horribly. I’m also into AAPL but I think they could grow a bigger market in the DVR/on-demand space than in the big-screen space. In home networking there’s far more value in Apple figuring out next-gen air-tunes and then air-video than in competing in the TV market. And I think that consumers demand too many configurations of TV’s to fit Apple’s ideal of a narrow product range. I love my apple TV and I’m glad I can easily hook it up to any monitor/projector/TV.

    We shall see …

    Reply
  2. Luis May 29, 2009

    I agree with you 100% especially when the iPhone echo system.
    David’s comment below does not take in consideration the fact that companies like Sony, LG, Samsung, Toshiba, Panasonic etc. are majorly invested and manufacturing flatscreen TVs. So why not Apple?
    They are much better positioned than these other guys are to deliver a product that is compelling. Just take note at what happened to the cell phone business, real deep entrenched competitors with big bucks and still they got their butts handed to them by Apple.

    Reply
  3. Adam Nash May 30, 2009

    The key here would be for Apple to build towards offering other TV manufacturers ability to make iPhoneTV OS part of their sets as well. Apple can still make signature devices, but still open the market broadly enough for developers.

    The iPhone dev environment would work brilliantly for this, since it accommodates horizontal view natively (vs. the tall & thin web). TVs really don’t accomodate scrolling. Resolution would be an issue for games, etc, as most aren’t built to be resolution independent yet (1080P set is 8.1x as large in pixels).

    Totally agree that Apple could make LED-backed LCD TVs at variety of sizes at a premium and sell them. Have you seen the giant iPhone displays at the Apple Stores, which are actually wrapped 42″ plasmas? Amazing how good it looks up on the wall.

    Adam

    Reply
    • bgurley May 30, 2009

      I don’t think they will do the OS thing. They tried this once in the PC market, and could have tried this in phones. The risk is that you lose control of the total experience, including HW quality and design. I say they sell the entire thing.

  4. David Sturtz May 30, 2009

    Agreed 100%. I’ve been waiting for the integrated entertainment system, based on itunes, itv and those beautiful monitors, for several years now. The home stereo market is ripe for the picking, with the adjunct TV market an easy pick too.

    Reply
  5. John Lazzaro May 30, 2009

    The bill-of-materials on a flat-panel TV is dominated
    by the display … and the purchasing decision is driven
    by the image quality of the display. And so, it is hard to
    get decent margins and a good market share if you aren’t
    doing your own display R&D … yet alone the margins
    Apple usually requires to green-light a new product.

    Reply
    • bgurley May 31, 2009

      As i said, this could have been argued for PCs and MP3 players as well.

  6. Ravi May 30, 2009

    I can’t possibly see this happening for 2 reasons:

    1) Apple isn’t exactly the type of company that likes to make lots of different models for various groups of consumers — unless they standardize on a single 50″ TV or whatever, do you really think they’ll make different sizes that fit in everyone’s places?

    2) If the (current) Apple TV breaks, you can buy a replacement and hook it up to your existing TV. If your suggested Apple television’s internal computer breaks, consumers are in the market for a whole new TV — not very Apple-esque, is it?

    Reply
    • Phil Leigh July 7, 2010

      Ravi hits the nail head.

  7. Jay May 31, 2009

    The iPhone ecosystem is not sufficient at this time to be the sole source of television programming. Here’s where your speculation runs into some problems.

    What would an Apple television do for programming? OTA? Cable? Satellite? Any or all of those programming sources are somewhat problematic. Over-the-air is increasingly marginalized by cable/satellite due to limited programming. Cable & satellite both have DRM issues. Cable has balked at every attempt at an open solution for DRM. CableCard is effectively dead, and the cable companies are dragging their feet with it’s replacement.

    Would an Apple television require a cable/satellite set-top-box? Not likely. Requiring a STB causes its own set of integration problems. Now you have the STB controlling the programming UI, or worse, the user has to choose between two separate UIs (TV vs. STB) for different tasks.

    Will Apple’s iTunes Store video content partners make content available at a cost competitive with cable or satellite? I would be very surprised. The content companies have shown very little willingness to do anything that would in any way compete with their current business models. Witness the roadblocks that Hulu’s content providers have placed in the way of using Hulu content on TVs.

    Due to different sources of TV programming, and DRM issues, I don’t think Apple will come out with a television. At least not until programming is available via the iTunes ecosystem at a much lower cost than Apple (and their content partners) currently provide.

    Reply
    • bgurley May 31, 2009

      i would say that you assume the customer has cable or Sat (as something like 90% of Americans do). This is separate from that. Let linear TV be linear TV.

  8. Bill T. June 1, 2009

    Don’t forget, Apple has retail stores to sell them.

    Reply
    • bgurley June 1, 2009

      Great Point! I should add this to the numerical list…

  9. Q dub June 2, 2009

    To put it simply, Apple should make a TV because TVs are making the transition into computing devices, identical to the trend with cellphones.

    Reply
  10. Dom Mason June 5, 2009

    We are making concepts for games that are scalable between small screen on iPhone apps and big screen on Apple TV, as I believe that either this or an IPTV mechanism for getting iPhone games onto a TV, will happen.

    Dom
    twitter: dom_mason
    dominicdotmasonatatomfireproductionsdotcom

    Reply
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  12. Jim Edington December 3, 2009

    Unnecessary.

    Imacs just need true HDMI output. All the laptops in the windows world have it, how come mac doesn’t?

    Although you can buy an overpriced tv/computer combo, I’d say it’s too much to swallow right now for the consumer given that they can buy a $2000 tv and hook it up to their $500 laptop with hdmi output and watch hd content.

    Apple’s already missed the boat, but a $4000 apple itv would not sell especially since several tv manufacturers are already creating this stuff.

    Okay, enough of being the devil’s advocate. I lied, and I want you all to know I’d be first in line for even a $6000 apple itv. But it better be 72″.

    Bluray will go away in a few years because it’s completely unnecessary.

    Reply
  13. Ho Nam March 25, 2010

    I would love to buy an Apple TV. But doubt Apple will come out with one as long as Steve Jobs is running the show. Even though he’s on the board of Disney, he doesn’t like TV. He doesn’t watch TV. Could care less about TV. Will never get the focus and attention needed from the big guy to really make it happen (according to someone who should know better than I).

    Reply
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  15. Jacob Kingo October 19, 2010

    I think Apple might become a big player in the “Home Automated System Technology”. Which I see as a future must have for home owners. Connecting and controlling every electric device in your home, through an Apple software on an Apple touchscreen, with its aesthetic look and user friendly interface, hanging on the livingroom wall. If not Apple then someone else.

    Reply
  16. Dentya February 25, 2011

    Very huge market that APPLE has been make, and for every good reason everything will make :)

    Reply
  17. City of Houston March 1, 2011

    Makes sense to me. Why not tie in and link all their products with a television. Think about it; your ipod, computer, iPad, iTunes and more can all be accessed from one location.

    Reply
  18. アナルセックス April 6, 2011

    It comes absolutely satisfactorily by enhanced contents.

    Reply

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