Recant: How Apple Could Enter the HDTV Business

| Editorial

There are some interesting questions to ask about Apple’s possible foray into the HDTV business. After Apple deals with some minor technical and social issues, the door may in fact be open, providing the company has great patience and focus.

Selling HDTVs is a fairly easy process when you have as many retail outlets as Apple. But the question is, where does that TV fit into the customer’s life? For the past several years now, home TV viewers have been steadily replacing their old standard definition (SD) TVs with HDTVs and upgrading their cable or satellite service. I have watched certain sections of my neighborhood for years now that are not served by cable and counted SD vs HD dishes. This year, for the first time, HD dishes dominate dramatically.

Minor Technical Issues

Part of that migration is the price of entry. In 2007, a good quality 50-inch Plasma HDTV, 1080p, would cost $2,500 or more. Nowadays, they’re well under $1,000. Because the Plasma picture is so good and prices have dropped so far, Plasma sales are up 5.5 percent in the fist quarter of 2011 while LCD TV sales were down 3.5 percent according to the Consumer Electronics Association.

The problem is that Apple is not fond of Plasma TVs while customers are. They use a bit more electricity than LCD TVs, so they aren’t as green. They generate a bit more heat. Apple is into LCD/IPS and isn’t likely to change. So that means that Apple would have to target people who are looking for a second TV in a den, starter families on a budget or perhaps college students and catch their business while they’re young.

Apple HDTV

Another nagging problem is the 3D issue. The general feeling by customers is that 3D TV is a gimmick. Active mode glasses are expensive. Current technology is known to cause serious headaches in some people. The technology is seen as an attempt to panic people into wanting the latest and greatest technology and dump their “old” HDTVs. Customers generally aren’t jumping on the 3D bandwagon, and even theater goers have found that while an occasional Big Event like Avatar is fun, routine 3D viewing in theaters isn’t a preference.

Apple is caught in the middle here. Hollywood continues to push the technology, but consumers are wary of it and don’t want to pay higher prices all the time. Would Apple kowtow to Hollywood? Or work on developing a new technology that doesn’t require glasses? Or simply stay with the 2D status quo? Again, the idea of a second or third HDTV that’s smaller, less expensive and only 2D makes sense.

Apple’s Ace

The final question relates to Apple’s overall strategic goal. Apple sells premium hardware and uses software as the soul of the system to make the hardware even more compelling. This worked beautifully in the Macintosh and iOS markets where people have hungered for a better computing life. Apple’s angle in the TV business may be similar. Shoddy software on cheap DVRs and ever rising cable bills mean that families are not exactly in love with their cable and satellite companies. Customer service is often unsatisfactory and business practices and charges can be annoying.

So Apple has a great opportunity to disrupt another entire industry — before they get their act together. These Apple branded TVs with iTunes built-in will be fabulous money making machines for Apple, not to mention the profit on the hardware.

Even so, the cable companies see this coming and have countered with hit and miss tactics: closer relationships with TiVo, video on demand, iPad apps, and data caps to preserve their conventional delivery mode. That, however, doesn’t constitute a wholistic approach to customer satisfaction. Apple has an opening, but perhaps only with young families and students who aren’t really big fans of the cable companies. They’ve always lived on the Internet, and they’re not fond of their father’s old, fuddy-duddy, expensive cable TV system. AirPlay is the future.

For a long time, I never thought Apple could pull this off in a brute force kind of way given the size of the TV industry opposition and customer habits, and I pooh-poohed the idea. Now, I think that, in the end, it’s about patience, providing an alternative, and watching the trends of young people. In fact, Apple, after years of resistance to Netflix on Apple TV, Apple may have relented in order to, I’m guessing, collect analytics.  Like many other observers, I don’t think Apple can disrupt the living room’s main, large Plasma HDTV experience for many adults. What Apple can do is start to get its feet wet, leverage those 200 million iOS devices, seduce a new generation into a new way of doing things, and grow with them. For now, that’s all Apple may need to do.

Comments

Terrin

I think you make a lot of assumptions about what people are buying. Maybe more people are buying Plasma TV’s then LCD, but that is strictly because of 1) cost, and 2) probably eduction. The cost of LCD TVs are dropping as well.

I am almost forty. I bought a Sharp 40 inch LED TV recently. I paid $699. The TV is great in every aspect. The screen is out standing, the power consumption very low, it swivels, it has Smart Applications, the list goes on. It almost looks like something Apple would make.

You can’t tell me if Apple brings its own product to market people who already enjoy Apple products will not consider an Apple TV if the cost isn’t too much higher than comparable products by other top producers.

Further, Apple would be foolish not to enter this market. When looking for sets I came across a Samsung TV that has a full fledged web browser along with other web applications. It was very cool. I could read a website, while watching TV via picture in picture (I didn’t get it because of price, I don’t want to support Samsung, and Samsung’s LCD screens didn’t look as nice as Sharps).

For some people, I could see TV sets displacing a person’s need for a computer all together. I suspect there are many people who only use a computer to surf the internet and read email. TV’s are getting to the point where they can do both of those things very well. Apple wants a presence there.

ktodack

I agree with Terrin about the cost falling on LCD TV’s and It’s looking like they will cost compare with Plasma’s very soon.

Apple has always been about how normal humans (not geeks) interface with technology—they have spent huge amounts of research on how people can control devices easily to actually enjoy media video, music, web or to do actual creative pursuits. Looking at the history of Apple—Windows, mice, touchpads, touch screens—IPhone, IPad, IPod it’s not too difficult to see where Apple will go with TV. The biggest problem with TV is thats it’s moved from a device that just required channel selection and sound level adjustment to a complex system with many inputs each requiring their own selections and adjustments. I’m sure Apple has studied the problem extensively on how to take a complex system and simplify it—One Remote—the IPad comes to mind as an excellent remote that can change it’s controls depending on what you want to do. It will be interesting to see what Apple comes up with.

Mikuro

For some people, I could see TV sets displacing a person?s need for a computer all together.

I think the reverse is also happening. I haven’t turned on my TV in over a year. Never upgraded to Blu-ray or HD, let alone 3D. If I want a huge screen, well, I can get one…and hook it up to my computer.

I think if Apple steps into this game, they’re going to try to rewrite the rules. They’re already getting their toes wet with iTunes and AppleTV, but I don’t think these are really compelling for the masses. If Apple introduced an all-you-can-eat subscription service for TV on iTunes, it would be a lot more compelling. But even then….would Apple really need to make TVs? I’m imagining an AppleTV with a display built in.

Apple generally jumps into markets that need fixing. There were no decent Mac-compatible mp3 players before the iPod (and even the Windows ones were not so hot). Looking back on the smartphone world before the iPhone, I realize how much work it needed. The iPad, again, was basically the first tablet that Didn’t Suck.

I don’t think Apple has that kind of opportunity in the TV business. It’ll take more than making a TV that runs apps to get traction.

barryotoole

“I think the reverse is also happening. I haven?t turned on my TV in over a year. Never upgraded to Blu-ray or HD, let alone 3D. If I want a huge screen, well, I can get one?and hook it up to my computer.”


I quite agree with you. For the last 3 years, I’ve had no cable/dish and gave away my HT setup w/ a 51” LCD HDTV to my daughter.

Instead, I’ve invested in a 30/3 Mbps Internet service which I use to watch Hulu plus, Netflix and other video on the net on my 24” Apple Cinema Display. For sound, I’ve a pair of M-Audio BX5a Deluxe monitors. In addition, I can tune in OTA local channels, in HD if so broadcast, via EyeTV.

iPad, too, has helped alleviate the absence of a TV subscription. In addition to what I watch on my Mac Mini, I can use other apps, like ABC player, as well. For sound, the BT speakers from SoundStage, the FoxL 2.2s, are awesome.

My FoxLs are paired to my iPhone also, so I can listen to NPR and other radio stations, as well as my iPod.

I’ve ‘cut the cord’ and not missed it a bit. In fact, I’m enjoying my A/V media even more. With the M-Audio monitors, I hear instruments in the songs of my iTunes library that I haven’t heard before. Also, I can watch TV in bed with my iPad, and the FoxL 2.2s are amazing, and pack a ton of bass.

My only other purchase will be a 30” Apple Cinema Display, if they re-introduce it.

This is what I think Apple is going to do. Provide LCD cinema displays of 36” or more, with a built in ‘Apple TV’ running iOS, and some awesome built in speakers. The remote could be the iPad, which has a good keyboard, or the iPhone/iPod Touch.

Terrin

I agree with you. I certainly have replaced some TV watching with an iPad. I also don’t watch actual TV. I stream content through my X-Box like Netflix and Hulu. I don’t have cable.

The TV is much better for family entertainment. I don’t think that will ever be different.

I think the reverse is also happening. I haven?t turned on my TV in over a year. Never upgraded to Blu-ray or HD, let alone 3D. If I want a huge screen, well, I can get one?and hook it up to my computer.

Nemo

Whatever Apple does with TV, if it does anything, I expect Apple to enter the market with a TV that is not only the best TV experience but that is so significantly better in user’s experience that it will attract the premium buyer who is willing to pay fair value for that superior experience.  That is Apple.  Apple can be second or third in market share, but it must be first in the quality of user’s experience and first in revenues and profitability.  If it can’t do that, Apple won’t enter the market, unless it feels that it must do so for defensive purposes, such as, for example, if others, perhaps a Samsung or Sony, produces a type of Internet capable TV that could threaten Apple’s franchise of being on the screens were people spend at least a significant amount of their time.

But building an average TV with an unexceptional user’s experience for the price conscious buyer—the student or family on a budget—that is not Apple and isn’t a business that I think that Apple would enter.  So if there is to be an Apple TV it will be either a show-stopper TV or a necessary defensive product.

Pitchy

I agree with some of the others above me. 

I cancelled my cable about a year or so ago and have barely missed it.  I have two LCD TVs,a 32 inch the bedroom which is only hooked up to an Apple TV, and a 50 inch in the living room which is where the 360, PS3 and Wii are hooked up to.  I prefer Netflix streaming on the PS3 as opposed to the Wii and 360, but have been contemplating another Apple TV for the living room.

I think the most logical thing for Apple would be working with various TV manufacturers about getting the Apple TV software on their TVs similar to the Vizio VIA.  Having Apple TV built in to TVs would bring Apple TV to a huge and wider audience than those who would never walk into an Apple store and buy one, or for that matter even heard of it.

I think once people found out how easy AirPlay works with other iDevices, they would be all about it.  I would consider upgrading one of my TVs and with a new one if Apple TV was built in and I would shift one of the other ones to the kids room.

John Martellaro

Here’s something that may shed some light:http://www.businessinsider.com/apple-samsung-tv-2011-6

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