Apple TV: What was Apple Thinking?

| Editorial

As the dust settles from the new Apple TV announcement, some observers are getting all wound up about the limitations of the new device. Are these concerns valid?

There is more going on here than speeds and feeds. There is more going on here than the extent of the content available on the Apple TV.

Apple TV

New Apple TV

It’s likely true that Apple is being throttled by the networks and studios regarding the control Apple has over content. As the esteemed Sascha Segan said today:

 

“In terms of TV content, it’s looking like Apple’s hands are tied. It’s obvious that movie studios and TV producers alike are holding the line on price and selection. Their businesses are a very complex mix of revenue streams—broadcast, advertisements, DVD sales, DVD rental, theaters, Netflix—and they’re very uncomfortable about upsetting those apple carts.”

 

Given that constraint, Apple knows that it can’t compete on the depth and breadth of content. In addition, Apple is historically reluctant to dazzle the living room user with geeky technical overload. That’s not what Apple is known for.

The Problem

As I have mentioned before, the home TV watcher, the so-called living room TV customer is a different animal than the hyper-informed Mac and PC geek. These are dentists, airline flight attendants, interior designers, high school teachers, accountants and so on who don’t spend all day learning about HDMI throughput in Gbps, progressive scan video and TCP/IP addresses. About all they can handle, as you know from Quick Start sheets with other consumer electronics products, is to connect, turn it on, and hope is all works.

This is why so many home users connect the HDMI output of their DVR right into the HDTV and listen via the tiny speakers on the side. The prospect of an A/V receiver, multiple HDMI inputs and Dolby 5.1 sound with multiple surround sound speakers is just too expensive and daunting. We do it, but many of these living room TV customers are very uptight about buying and managing lots of devices. It’s called “set top box fatigue.”

Given the constraints Apple is under and the well understood psychology of the Living Room TV customer, Apple has to take a different approach. One that the uber-geeks refuse to appreciate.

The Solution

Apple knows that the only way they can be successful is to create a simple infrastructure that’s a no-brainer to set up. Even the task of “marrying” an Apple TV to the host PC or Mac with the four digit code frightens and upsets many customers. The device has to be simple, a joy, and easily approached. For most home users, that’s an acceptable trade against some arbitrary rigid standard of available content.

After all, if people are willing to watch the crap that’s on current network television, with 18 minutes of commercials per hour, can you really argue that they’re all that picky about whether they can watch season 2 of ABC’s Legend of the Seeker or not?

The Apple TV has been gaining momentum. Sales are in the millions. While some products can boast superior content or tech specs, Apple is a large, well known company that treats its customers well. The buying experience in an Apple retail store is superior. The quality and reliability of the product is great. The instructions for use are plain and simple. Despite the naysayers, Apple will continue to sell the Apple TV in satisfactory quantities while people come to realize that this is a rather nice device.

As that appreciation kicks in, customers will send Apple lots of money, voting with their wallets. Apple tends to gain momentum with that kind of approach while some competing products with better specs never seem to gain a lot of traction.

As the Apple TV, old and new, pick up steam, the networks and studios will come to realize that this is the way to earn some additional revenue. They’ll squirm and bitch, but finally decide that Apple knows how to make oodles of money. And money drives every decision with the content creators.

We can’t take a shallow approach to evaluating the Apple TV family. The big picture and Apple’s historically successful consumer approach trump speeds and feeds and quibbles over content. Get the product right, then content will come along later. But that won’t keep the geeks from bitching.

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Comments

FlipFriddle

As soon as Steve said $99 I knew I was going to be getting one as soon as I get a digital TV (the CRT is still alive), just for the mere fact that the AirPlay thing will make it easy for me to see all of my iPhoto and iTunes stuff on my TV and stereo in the living room.

Nemo

With its new Apple TV, Apple has built a product that meets the needs of the majority of users for a great user’s experience.  Apple has some of the best hardware and software engineers in the world.  They, subject to IP constraints, which don’t seem to be an issue here, can do anything.  So where Apple TV doesn’t have match some other device in features, it is because Steve Jobs personally tested the experience wrought by the set of features in Apple TV and decided that the Apple TV that we see today provides the best experience for the broadest number of users.  At Apple, it is not about and has never been about cramming more and more features into a box in an effort to achieve dumb product differentiation.  It is about designing a product or service so that users will have the best experience, so the features of an Apple product or service is guided by what Apple thinks user will find to be delightful or at least useful and intuitive.

Apple TV may indeed have accomplished that goal of achieving a great user experience.  I am sure that John will let us know, once he has had the opportunity to try it.

But Apple TV of today seems to follow another of Apple’s principles, that of evolving from a solid base product.  Apple TV, based on feedback from the market and Apple’s on genius for discovering the features that create the best user’s experience, will evolve on several vectors.  One of those is working with the content providers to get licenses for content.  That is a business and legal issue, not a technical one, and will simply take time, as results from the marketplace guide decision making at the media companies.

Another vector is the feature set and UI.  I, for one, would like a more powerful search engine, where I can simply type in “Cries and Whispers” and find it, rather than flicking through screen after screen in hopes of finding a specific movie or TV show.  Now, I will have to use my Mac to find what I want and then stream it to Apple TV.  And while it is clear that you can’t use Multitouch for a 46” screen that you are sitting 25 feet from, Apple’s new Magic Trackpad may be the means of bringing Multitouch to Appple TV’s UI.

The point is that Apple TV is a good product now and forms the basis for evolving into a product that has an outstanding user’s experience and that leads the way into the world of digital TV over the Net and the death, I hope, of the Cable TV middle man with his exorbitant monthly subscription for TV channels that most never watch. 

After all, if you ditch the middleman, there will be more revenue for the content providers to divide amongst themselves and maybe even a little rebate to the consumer, unless Google and Verizon and their ilk prevail in their proposal to close the wired and wireless Internet and transform it into the new Cable TV-like middleman.

Dylan

I’m hoping for a software update that will add AirPlay to my old AppleTV, but I’m not holding my breath. That is the only feature I’ve seen that makes me want to give up internal storage.

The problem I have is that I have the main media library in my house, but I’m also out and about all day. What I like about having internal storage in my current AppleTV is the fact that it untethers my media library from my computer so others can enjoy it. The only way I could duplicate this functionality with the new one is to keep redundant copies of all my movies on every laptop in the house.

The loss of the ability to buy is not a big deal to me, because I use the AppleTV as a dumb storage box. I don’t buy anything from iTunes on it. Maybe this is because I never bought into the Netflix model, but everything goes through my computer first.

I don’t know. I suppose that if the new one still supports iTunes Extras then I’ll get one.

Lee Dronick

I thing I dislike about some of these small devices is that the connected cables can “lift” them from the desktop or shelf. This is often a problem with USB and FireWire hubs. The new Apple TV only weighs a little over a half a pound. What I have done with to help with this problem is to fix the device down with a strip of velcro that itself is screwed onto the horizontal surface.

Jonesy

I’m going to buy one of these as soon as I can.  The only thing I will miss is being able to buy a movie right from the AppleTV.  I don’t want to leave the couch after I’ve found a movie I want and download it on to my Mac.  Wait for the download to complete and go back to the couch to watch it.  I do love the price point.  Now I can connect some other TV’s up with my Mac.

wilf53

I held off with the purchase of the iPhone until it supported tethering - which works extremely smoothly btw - and I haven’t seen anything in the Apple TV so far which could have compelled me to buy the product, since I live in Norway and there are not one single movie nor TV-show to be bought on iTunes here so far. But this little thingie might change my ideas:) First of all because of the price and then also because of the size. Next, because of the ability to stream video along with audio and photos from our computers. Then because one can watch stuff on YouTube. With that price, I can survive without being able to rent shows and movies. Hopefully, Apple will be able to make a deal with something alike Netflix over here. What about Lovefilm?

All in all, I think the hobby is beginning to get serious now:)

sunnyday

Will Apple enable game play through EYETV? It seems like it might be easy to add game play using your Ipod tough, Iphone or Ipad as the input device. Now you have a game console for $99. Watch out, there goes 50% of the home console gaming market! This device is truly subversive!

spudgeek

Like
- TV Rentals
- Netflix
- Airplay
- Size & weight

Dislike
- Can’t buy music & movies
    I do this often; have 3 kids and kids like to repeat-watch movies; with aTV v.1 purchased movies & TV Shows are watchable within seconds; with v.2, purchases will have to be made on iTunes and content fully downloaded before watchable.
    I play music on aTV combined with AirTunes and occasionally buy direct from aTV which copies to iTunes on the next sync; v.2 will force me to buy from iTunes.

- Can’t store content
    I like taking the aTV on vacation for playback of owned content (movies, music, photos); beats carrying a selection of DVDs, CDs and players; iOS 4.2 devices will enable streaming with AirPlay but the available content will be limited.
    My iTunes library is large and is stored on a NAS; occasionally I get a problem with the NAS and with the new aTV that will disable playback of owned content;
    Can’t let iTunes host sleep if you want to play owned content

Compromise
The new aTV is a compromise between features and price. An internal HDD would double the price of the new device and increase the physical size. I understand the compromises and I’m not bitter (much), it’s a great new product and I think (and hope) it will do well.

v1 & v2 compatibility
I hope (I really really hope) that v.1 is compatible with the new software version to get the best of both worlds and I can’t see a technical reason why not; the demo of v.2 interface looked very similar to v.1 except v.2 had NetFlix and lacked “My ...” (Movies/TV Shows/Photos) but there was no major interface changes. If v.1 is compatible with v.2 software then I hope that Apple will continue to offer v.1 alongside v.2. You might question why Apple would plan to do that and not announce it; the only reason I can think of is that the $99 price point makes this little black box of magic a no-brainer purchase decision; SJ was marketing the new product to a broader audience than the current aTV owners and introducing an aTV product “range” would complicate the purchase decision for newbies and for a very complex/delicate [home-media] market space.

daemon

John, what is your source for apple tv sales?

davebarnes
Ethan

Apple missed on this one. The didn’t solve the issue of getting everything people want now through one device. Without that this will stay in the Apple niche and not break out into the larger mass market. The content providers have no interest in giving Apple the control that the music industry regrets now. As elegant an iterface as it is-if you can’t get the NBC or CBS show you love you’ll not bother with it.

Apple needed to give the content guys whatever they wanted to get everyone on the device. Then after getting the user base they could push for unified pricing etc. Pushing for unified pricing now simply keeps the status quo of a fractured living room where the apple TV is just another box. As my ver.1 AppleTV can attest to. It’s right next to the dvd, tivo, and settop box.

They needed to do a embrace and extend vs. a raze and rebuild the living room setup to generate swift purchases.

Ars nailed the weakness today:
http://arstechnica.com/staff/fatbits/2010/09/apples-trouble-with-tv.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss

Huck

These things will sell like hot-cakes. It is worth it just for netflix, seeing as it’s the same price as the Roku, the other cheapest way to connect Netflix to the TV.

Then it streams from your iTunes, allows you to rent from the (albeit limited) itunes store, etc.

Add to that Photo streaming/slideshows

and coming with 4.2 you can stream from your iOS device! That is amazing. Now if your friend comes over with the latest whatever video on his iPhone he can just bam, send it to the big-screen. That’s RAD!

$99 is the sweet spot and they hit it right on the head. Make no mistake, although it’s still being called a ‘hobby’ that is only because the networks aren’t on board and apple likes to under-promise and over-deliver sometimes (like with quarterlies). They are going to be able to brag about some serious Apple TV sales after the holiday season.

Huck

Apple missed on this one. The didn?t solve the issue of getting everything people want now through one device. Without that this will stay in the Apple niche and not break out into the larger mass market. The content providers have no interest in giving Apple the control that the music industry regrets now. As elegant an iterface as it is-if you can?t get the NBC or CBS show you love you?ll not bother with it.

Apple needed to give the content guys whatever they wanted to get everyone on the device. Then after getting the user base they could push for unified pricing etc. Pushing for unified pricing now simply keeps the status quo of a fractured living room where the apple TV is just another box. As my ver.1 AppleTV can attest to. It?s right next to the dvd, tivo, and settop box.

I think you’re missing the point. The studios aren’t letting anyone make that box that replaces everything. What the AppleTV has needed for so long—and hasn’t had—were features that made it clearly worth its price, and features that were unique—something you couldn’t get elsewhere.

Netflix by itself is enough to make this thing worth the price. The rentals and playback of owned content is frosting.

It also lets you pump your iTunes out of your stereo, so there’s another feature. Unique? No, but elegant.

Then look at the integration with iOS devices (AirPlay) and you have unique features. I can’t do that with anything else.

Boom. Success.

The studios will come around, eventually. That is inevitable. No-one has a great deal from them yet, no-one can beat the AppleTV. No it won’t replace a DVR or cable subscription, but it doesn’t need to—yet. It can’t—yet. That box can’t be made—yet.

The AppleTV, however, does enough to sell and well. It will put an Apple device in many, many homes. It won’t be a runaway success like the iPhone or iPad, I think it is more like the iPod. Originally it was a Mac-only device, but it was popular. Then when apple finally made it cross-platform it began selling well, although it took awhile still before it was the monster of a success it eventually turned into.

Expect the AppleTV to get its name out there, to sell, well, now. It will be a super-handy tv add-on. An affordable, neat Christmas gift. A great way to hook up an HDTV in the office for slideshows and music (my office will—guaranteed).

The rest will follow. Up until now the Apple TV was a fringe box that couldn’t really justify the price for most people. Netflix is the thin end of the wedge…

John Martellaro

My source for Apple TV sales is Gene Munster with Piper Jaffray and his analyst notes to investors.

daemon

Gene Munster, the guy who picks a number from his nether regions and then multiplies by 4?

http://macdailynews.com/index.php/weblog/comments/24674/

You wana try finding an actual source instead of a guy whose just trying to manipulate Apple stock prices?

John Martellaro

Awhile back, I provided two different methods for calculating Apple TV sales.  Still trying to find the article!  Maybe someone can help.

daemon

John,

During the press event yesterday Steve Jobs said:
“We introduced it four years ago, but it’s never been a huge hit ? nor has any competitive product,”

The question then becomes what does Steve Jobs think constitutes a big hit? Cause that number is what the Apple TV has not sold yet.

John Martellaro

A big hit would be total iPods:  275 million.  A big hit would be iOS devices: 120 million.  The Apple TV has sold, by various estimates, 4 to 6 million units.  Small potatoes.

Still looking for that article of mine.

John Martellaro

Here’s the article.  Over time, I learned that my estimates were conservative, but I think the methodology is fine.  Just need to revise some of the input values.

http://www.macobserver.com/tmo/article/How_Netflix_is_Slowly_Killing_Apples_TV_Hobby/

Warren

I was watching for the release of the new Apple TV; as soon as I read up on the new product, I bought the old one that had just gone on clearance at $149.

I have Verizon FIOS, and its Video On Demand feature is excellent; my own need was not NetFlix, but ease of storage and accessibility of my iTunes library and some of my own movies.  I definitely wanted the onscreen menu to be able to easily access what is on the Apple TV (something lacking if I connect an iPod to the TV and audio system).

The old Apple TV does that without my computer having to be left on, so it does what I want while the new one does not.

Easy call.

Neil Anderson

The hobby is turning serious!

Bosco (Brad Hutchings)

There is little margin on these devices in and of themselves. What counts for whoever is shipping them is that they are hooked up to TVs and regularly purchasing content. The sweet spot is probably licensing to TV manufacturers so that they are always hooked up for the life of the TV and present a potential “good enough” barrier to bypassing them for another content pushing device.

Ultimately, though, the big content providers just want a whole bunch of players who never gain more than a small island’s share of the market. They’re busy routing around cable companies now, but not too busy to make sure no company dominates distribution over the Internet. And they can play paid w/o commercials versus free w/ over and over to balance things the way they want. No way they let any particular closed, proprietary technology gain a stranglehold on distribution. And not terribly likely that they embrace more open approaches either.

Ethan

Huck, gotta disagree.  “It won?t be a runaway success like the iPhone or iPad” It HAS to be a runaway success to get any leverage with content providers. They get so much cash on the barrel from last mile providers that an alternative has to be a guaranteed success.

As Bosco said the media companies already saw how Apple took over the music industry and have no interest in trying to make up the price difference with volume. They will do everything to keep all the solutions fighting it out in the muck and no one getting big enough to be a threat. They have no interest in Apple telling them what to charge for their stuff.

I think tivo has come the closest to build the complete device:
http://www.tivo.com/products/tivo-premiere/index.html
they have a LOT of contentyou have access to on that machine and it actually does replace the set top box via cable card.

I guess we can all come back here in 2-3 years and take stock of what ended up happening.

daemon

A big hit would be total iPods:  275 million.  A big hit would be iOS devices: 120 million.  The Apple TV has sold, by various estimates, 4 to 6 million units.  Small potatoes.
Still looking for that article of mine.

John, the Tivo has a subscriber base of 2.6 million. Steve Jobs wouldn’t be calling the Apple TV a “hobby” if they were dominating the set-top box market that thourghly.

Here?s the article.  Over time, I learned that my estimates were conservative, but I think the methodology is fine.  Just need to revise some of the input values.
http://www.macobserver.com/tmo/article/How_Netflix_is_Slowly_Killing_Apples_TV_Hobby/

John, I’m positive that the comments that we left back in 2008 pointed this out, too bad they weren’t archived with the article, but your methodolgy is so wrong it’s laughable.

You completely ignore the single most likely device to be used to play bought or rented movies from iTunes. Personal Computers. You also ignore people playing them on their iPhones!

I don’t know how you can possibly come up with a methodolgy to estimate Apple TVs in the wild based upon movie purchases and rentals without taking in to account those two huge device segements!

Alphaman

Yes, consumers may look at the Apple TV, and some will buy it for its ease of use. But the first time they try to play back the home video they just shot with their shiny 1080p camcorder and can’t will herald the last time they recommend an Apple TV to their friends. They’ll soon be off looking at any of the numerous other boxes that handle 1080p out of the box. And if you think the sales people at Best Buy won’t know this up front when they’re selling these, you’re kidding yourself.

720p is “a bag of hurt”. This is their Achille’s Heel. This will keep the Apple TV a hobby and only in the homes of a few Apple fanboys. But not this one.

What was Apple thinking when they stuck with last century’s technology for a box that is targeted to the second decade of the 21st century? I am soooo disappointed.

John Martellaro

There is a rumor floating around that the A4 chip cannot handle 1080p video.

Alphaman

There is a rumor floating around that the A4 chip cannot handle 1080p video.

Yeah, I’ve heard that also.  I’ve also heard that the other media players (Roku, WDTV, Popcorn, etc) are all using the MIPS32 at speeds ranging from 330MHz to 665MHz.  And they all do 1080p.  I know, A4 MHz <> MIPS MHz, but the 1st gen ATV couldn’t do 1080; now the 2nd gen can’t do 1080, while everyone else is laughing and leaving them in the dust.

But even then, that’s only half of the 720p question: what about outputs?  The 2nd gen Apple TV won’t even scale the output (like the 1st gen did), meaning that in order to get it to work with my TV that only does 1080i HD, I’ve got to not just get an HDMI-to-component converter ($50+), but also a scaler!  Or I have to plunk down for a new TV.  So I can pay $300 or more to scale it, or I can plunk down a few grand more for a new TV.  For a $99 STB?  Like that’s going to happen.

I know I’m in the minority with my 1080i output restrictions, but I also know that a growing number of people are going to want to play their home videos shot on their shiny new camcorders, and that’s not going to happen on this box (without consumers learning about transcoding—exactly the kind of thing SJ said he didn’t want consumers having to worry about).

I get the feeling that Apple rushed this product to market because of Google’s announcement, with no apps, only 2 networks, and no full HD support (in or out).  It shows.

Mark my words, when you walk into Best Buy or Frys or any other electronics store in a few months and say you want a video streamer, you won’t be directed to the Apple table.

Apple TV remains a hobby.

wab95

Thanks Dave Barnes for the Wired piece. I think Wired nailed it.

Linking the Apple TV to the iOS device universe was a subtle and apparently innocuous move, but was nothing of the sort. In chess, you have to sacrifice pieces in order to check-mate. The old Apple TV was not even a big piece to sacrifice, more like a pawn doing nothing in particular.

It was not clear to me what, if anything, was Apple’s strategy for the Apple TV until now. I have little doubt that they are now leveraging their sizeable and growing market share in the iOS space to move that pawn up the board to make it a queen, and then wreak havoc upon the old cable model. And it may work. They are, once again, changing the terms of the game; this time, expanding how people consume the media they used to get only on cable beyond the TV to the ultra-portable space, only they’ll get more. If Apple add additional features to this set (aTV and the iOS devices), such as gaming, Facetime, etc, its appeal will widen to those less interested in TV content alone. Sort of like what you could do with the Xbox, except that Apple are starting with the ultra-portables, which already include games and Facetime, and saying, now all you need is the box in order to close the loop. They are starting from a potentially larger base. 

True, the new Apple TV is no geek-feast of technical prowess. Nor does it need to be. Its appeal and power is its simplicity of setup and function. And cost. Apple does not need to sell one Apple TV for every iOS device in order to make its point to the industry, just enough as proof of concept for the industry to realise the potential earnings of a new paradigm. This is truly a forked approach: for the consumer, an easy to use, cheap device that broadens their options; for the TV industry, money, and potentially lots of it.

Then again, I could be wrong.

jeey

Well, what I’d like to see is a new Apple TV that’s more like the Airport Express. Just a little module that plugs into the wall. Throw in a video processor chip and a bit of Flash memory and make it cheap enough I can connect one to every TV in the house. Then everything streams wirelessly from my Mac with a nice interface, remote controlled by the iPhone/iPod/iPad. That’s all I want.
Though enjoy videos or movies on iPhone or iPad, yet very cool, handy and free on the go, but image that remote with iPhone/iPod/iPad, enjoy the stream TV on MAC with a nice interface really a match made in heaven!

Ross Edwards

daemon,

The reason you don’t see huge numbers for TiVo itself is because most people have their cable company’s house DVR.  Whether it’s Cox, Comcast, DirecTV, Dish, etc…  it’s a huge, huge number compared to TiVo DVRs.

SomeGuy

Just give me a $99 product that allows me to surf the web on my tv without a computer. How friggin hard is that Apple? Ok so maybe non-geeks don’t want to surf the web on their 32” tube. I can understand that. That’s not me though.

Mike from Vashon

I think this will force Cable internet to actually work. The AppleTV device may smooth things over well with some judicious buffering, but if internet service providers don’t provide the good feed all the time, they’re gonna get an earful from AppleTV customers. Where have I heard that before?

John Martellaro

SomeGuy.  Remember, only a tiny fraction of ordinary living room TV viewers have (or even want) a keyboard and mouse in their laps when they watch.  So the Apple TV has to be usable for them with the std Apple remote supplied.

limesat ultra

Wow! I love to read this article, this is very awesome, thanks for posting.

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