Hi all, I am just presenting the below as a discussion piece, please poke holes in it at your will

What is Apples next major billion+ earnings per quarter market?

Apple is a software company that also specialises in selling some of the worlds leading consumer electronic devices.

For apple to earn a billion dollars plus a quarter, it would likely do so within the broader industry it already inhabits.

iAds:

From the Software side of things, it has already recently added a new market with billion a quarter earnings potential with its iAd inititive. There is ample opportunity to expand this beyond iOS apps into Mac apps, web search and even TV streaming/episode sales via itunes. I think its only a matter of time before apple earns a billion a quarter from iAds.

TVs:

From the consumer electronic sector, I can only think of one large pre existing market that apple does not yet have a presence in at all. TVs sell 200 million plus units globally a year. And if apple targeted for 5-10% of that market it would most certainly reach a billion dollars in earnings a quarter. Apple would enjoy a significant competitive advantage over its competitors by having TV sets that include all the capabilities of the current AppleTV set top box. Apples TVs would be able to sync with users itunes accounts out of the box, and be compatible with the current and future capabilities of 200 million+ iOS devices already sold. The apple Halo effect would be in full operation.

Lets do the math:

10% of a 200 million plus unit market is 20 million TVs annually.

Apple can charge a premium for industrial design, integrated access and premium quality components, lets assume the cheapest apple tv is $999 and ramps up to $1999. Assume margins of at least 30%

20 million units annually at a minimum of $300 gross margin per device   =  6 billion in gross earnings

Or put another way, 1.5 billion per quarter

I know this has been suggested by quite a few wall street “professional“ analysts, so I am eager to hear the opposing viewpoints as to why apple hasn’t/or isn’t likely to do this in future?

Thoughts?

iPod redux

danthemason - 24 January 2011 07:57 PM

iPod redux

?

JMO, but an Apple TV would be a VERY niche product and would sell in a fraction of 1% of overall WW sales. TV’s are a hyper mature product cat and it wouldn’t be in Apple’s best interest to go there. There’s plenty of opportunity elsewhere….............  besides Apple has that NC server farm to exploit.

  cheers
    JohnG

I would like an iOS or OS X based Apple TV (an actual TV, not a set top box), with apps, an app store, and great integration with the Apple ecosystem. I would gladly pay a hefty premium for a beautiful TV from Apple.

johnG - 24 January 2011 08:11 PM

JMO, but an Apple TV would be a VERY niche product and would sell in a fraction of 1% of overall WW sales. TV’s are a hyper mature product cat and it wouldn’t be in Apple’s best interest to go there. There’s plenty of opportunity elsewhere….............  besides Apple has that NC server farm to exploit.

  cheers
    JohnG

Do you not think the TV market is similar to the cellphone market before apple entered it?

for example, the bulk of the market was regualr cellphones/featurephone. there were some smartphones, but for the most part - they were crap.

Tvs - the bulk of the market is regualr flat screen TVs. There are some high end premium"connected” tvs with “web widjets”, but for the most part - they are crap.

I think apple could/will kickstart the proper “Smart” TV massmarket the same way it did smartphones.

I think it’s only a matter of time before Apple launches a real TV - the issue is not so much the TV itself, but as SJ has said in the past, the cable industry in it’s current form does not leave much room for competition and/or profits. But they would not be in the set top box market (if you want to call the current Apple TV that) for this long and be working so hard on content deals if they didn’t have plans for having a real TV.

iOSWeekly - 24 January 2011 08:23 PM

johnG - 24 January 2011 08:11 PM

JMO, but an Apple TV would be a VERY niche product and would sell in a fraction of 1% of overall WW sales. TV’s are a hyper mature product cat and it wouldn’t be in Apple’s best interest to go there. There’s plenty of opportunity elsewhere….............  besides Apple has that NC server farm to exploit.

  cheers
    JohnG

Do you not think the TV market is similar to the cellphone market before apple entered it?

for example, the bulk of the market was regualr cellphones/featurephone. there were some smartphones, but for the most part - they were crap.

Tvs - the bulk of the market is regualr flat screen TVs. There are some high end premium"connected” tvs with “web widjets”, but for the most part - they are crap.

I think apple could/will kickstart the proper “Smart” TV massmarket the same way it did smartphones.

Agreed. Another way to look at this is the iPod/music market - would Apple be selling music (soon to be renting through the data center) without being in the music player business?

AHHA - 24 January 2011 08:29 PM

I think it’s only a matter of time before Apple launches a real TV - the issue is not so much the TV itself, but as SJ has said in the past, the cable industry in it’s current form does not leave much room for competition and/or profits. But they would not be in the set top box market (if you want to call the current Apple TV that) for this long and be working so hard on content deals if they didn’t have plans for having a real TV.

Right - so they are doing an end run around the other set top box competitors buy being the TV set already.

iOSWeekly - 24 January 2011 08:23 PM

johnG - 24 January 2011 08:11 PM

JMO, but an Apple TV would be a VERY niche product and would sell in a fraction of 1% of overall WW sales. TV’s are a hyper mature product cat and it wouldn’t be in Apple’s best interest to go there. There’s plenty of opportunity elsewhere….............  besides Apple has that NC server farm to exploit.

  cheers
    JohnG

Do you not think the TV market is similar to the cellphone market before apple entered it?

for example, the bulk of the market was regualr cellphones/featurephone. there were some smartphones, but for the most part - they were crap.

Tvs - the bulk of the market is regualr flat screen TVs. There are some high end premium"connected” tvs with “web widjets”, but for the most part - they are crap.

I think apple could/will kickstart the proper “Smart” TV massmarket the same way it did smartphones.

The short answer is NO. The cell phone market ‘was’ totally different than the TV market. i.e. cell phones were primarily primitive talk only devices. The whole concept of “smart phones” was barely even a glimmer in anyones eye when Apple sprung the iphone on the market. JMO, but there is no equivalent category of untapped “smart TV” growth.

A TV is just a dumb viewing display. The smarts and value are in the program content/distribution/synergy. Right now Apple owns virtually none of the program content/distribution. Hence they have no “in” to make a better mouse trap. The only thing Apple could possible bring to the TV cat is some sort of synergy between the net/itunes/ATV. This is a possible exploitation avenue but it seems to me that ATV already is attempting to do that. Don’t need to play the display game to push that concept with the NC data center. 

All that said, I’m open to being enlightened on an Apple TV product…................... 

  cheers
    JohnG

What advantage does Apple have in negotiations with TV content providers?

The pipe still must be paid for.

Boxee, Hulu, and others already exist at reasonable prices.

Great TV’s already exist at reasonable prices.

What major innovation would compel the masses to part with a few hundred dollars more, to get what they’ve already got?

For an app tv just output your iMac to a projector system. Bells, whistles and a Mac app store.

Scenario: joe bloggs walks into tv store to buy a new HDTV.
Joe already owns an ipod, ipad or iphone. - he sees a whole suite of tvs a bunch of different ones from different producers. Then for the same price Joe discovers one from Apple that automatically out of the box is able to:
- play all his previously purchased itunes content (music, tv episodes, movies)
- is able to stream content from netflix, itunes & youtube
- works with airplay apps from his iOS device or mac
- is made from the same company that made all his other quality devices.

Why on earth would Joe not buy the apple branded screen?

iOSWeekly - 24 January 2011 09:42 PM

Scenario: joe bloggs walks into tv store to buy a new HDTV.
Joe already owns an ipod, ipad or iphone. - he sees a whole suite of tvs a bunch of different ones from different producers. Then for the same price Joe discovers one from Apple that automatically out of the box is able to:
- play all his previously purchased itunes content (music, tv episodes, movies)
- is able to stream content from netflix, itunes & youtube
- works with airplay apps from his iOS device or mac
- is made from the same company that made all his other quality devices.

Why on earth would Joe not buy the apple branded screen?

Lets not forget that just about every TV out there now has streaming Netflix and Youtube.

The ATV takes care of itunes

I know for me, I want to watch TV on my TV, not fool with apps.

Oh, lets not forget the big one, Apple’s would cost $800 more than anyone else.

Seriously, Apple would have to make several different sizes along with different power supplies. A freaking nightmare if you ask me with to much to lose and not enough to gain. Niche market at best.

iOSWeekly - 24 January 2011 09:42 PM

Scenario: joe bloggs walks into tv store to buy a new HDTV.
Joe already owns an ipod, ipad or iphone. - he sees a whole suite of tvs a bunch of different ones from different producers. Then for the same price Joe discovers one from Apple that automatically out of the box is able to:
- play all his previously purchased itunes content (music, tv episodes, movies)
- is able to stream content from netflix, itunes & youtube
- works with airplay apps from his iOS device or mac
- is made from the same company that made all his other quality devices.

Why on earth would Joe not buy the apple branded screen?

Because for $100, he can just use his Apple TV which can be replaced at minimal cost if new technology comes out. Much more expensive to do that with an expensive TV.

They need to figure out how to bypass the Comcasts the world. TVs are cutthroat, low margin commodities these days.

Lets add holographic capabilities to that.

A TV with a virtual 3D store where one can buy anything they want as the mimic the actual movements of walking and looking at items on shelfs.  A shopping experience in 50” HD that will leave Amazon and ebay boring webpages in the dust.

A TV that has a camera and mini cameras thru out the other iPad devices on the walls and suddenly you have video conf in HD like never before and one can roam while doing the call.

A TV that has a screen where can use hand movements to control actions and one can access and send any message simply by talking into it.

The TV becomes the main computer and the iPad is just an extension of it.  In fact you can place about 3 or 4 of those throughout the house.

Yes in 5 to 10 years this is what I see.

And Apple can make billions on so many other devices that we buy.

Folks we are entering a world of technology that will blow our socks off in 10 years.

omacvi - 24 January 2011 10:40 PM

Lets add holographic capabilities to that.

A TV with a virtual 3D store where one can buy anything they want as the mimic the actual movements of walking and looking at items on shelfs.  A shopping experience in 50” HD that will leave Amazon and ebay boring webpages in the dust.

A TV that has a camera and mini cameras thru out the other iPad devices on the walls and suddenly you have video conf in HD like never before and one can roam while doing the call.

A TV that has a screen where can use hand movements to control actions and one can access and send any message simply by talking into it.

The TV becomes the main computer and the iPad is just an extension of it.  In fact you can place about 3 or 4 of those throughout the house.

Yes in 5 to 10 years this is what I see.

And Apple can make billions on so many other devices that we buy.

Folks we are entering a world of technology that will blow our socks off in 10 years.

you remind me - we can add facetime to the list of features an Apple screen can have that competitors cant.