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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