Recently, Apple's COO Tim Cook spoke at the Goldman Sachs Technology and Internet Conference. He mentioned the iPad, but also reaffirmed the irritating notion, to some, that the Apple TV remains a hobby. There may well be several good reasons to continue that apparently tiresome but useful label: a hobby.
When Apple does something odd and continues to do it, despite popular wisdom to the contrary, I always ask myself why that may be. Of course, there are pundits who believe they're smarter than Apple's Executive Team and have urged Apple to stop using that label. After all, the Apple TV has been a quietly successful product.
Apple COO Tim Cook
I believe Apple continues to refer to the Apple TV as a hobby for two key reasons:
Reason #1. This term takes the wind out of the sails of Hollywood and Network executives when it comes time to discuss new services. It's a documented fact that Apple has been slow to add to its movie selection. There are about 8,000 titles available, 2,000 in HD, and that's been fairly static since Q309. The same is true for TV episodes: 50,000 since Q309.
We know that these executives are gun shy when it comes to turning as much control over to Apple as the music industry did. So when an Apple negotiator suggests to one of these executives that Apple would really like to carry about 20,000 movies, 10,000 in HD, the dialog is likely to go like this:
Exec: Of course, we have many other distribution partners. We don't want it to appear that Apple is obtaining an unfair advantage over any of them, you see... [Smiles.]
Apple: Don't worry. Steve insists that the Apple TV is just a hobby.
Poof. That takes all the tension out of the conversation and disarms the executive on the other side of the table who came into the room loaded for bear.
The same discussion happens when Apple tries the camel nose under the text approach with a subscription service. Network executives are nervous about this emerging mentality of the home owner: "Honey, let's kill the cable bill and live on Hulu. Or Apple TV."
Again, the Apple negotiator nips that thought in the bud with the comment about the Apple TV being a hobby. It's a hard concept to overcome. It's not argumentative or something that can be overturned by force of opposing reason. It just is.
Reason #2. The second reason Apple continues to refer to the Apple TV as a hobby is so that they an justify the suppression of the real sales numbers. Apple doesn't break out Apple TV sales in its 10-K report and can get away with it because of that consistent, long term argument that the product is a hobby, noise, not something that generates a lot of revenue. This has several advantages.
- It keeps competitors in the dark
- It denies Hollywood executives the numbers they need to calculate the viewing habits and money spent per box. That could be key information when it comes to negotiating prices. Instead, Apple sends them a pile of cash periodically and depends on their greed to overcome their curiosity.
Piper Jaffray analyst Gene Muster has estimated that Apple sold 6.6 million Apple TV's through the end of 2009. That's fairly impressive when one considers that Netflix only has about 10 million subscribers. Keeping this number close to the vest allows Apple great liberty to bargain with Hollywood and the Networks without also unduly alarming them.
All in all, while some wish that Apple would crow more about its accomplishments with the Apple TV, negotiations with Hollywood and the Networks are so delicate and politically driven that it's best for Apple to maintain that consistent, if irritatingly modest posture.
"Don't worry! Steve says it's just a hobby. Now can we sign that contract and all make a little money?"