“The ability to learn faster than your competitors may be only sustainable competitive advantage.” —Arie de Geus |
Yesterday, in Part I, I laid out the general considerations in the living room TV market, cited what I call the Seven Elements that dictate success in the market, and described Google TV. In this second installment, I’ll look at Apple’s prospects.
It’s the UI, Stupid. Maybe
I’ve spent some time in Part I discussing technology items, but in this kind of market, the user interface (UI) is very important. Mr. Joe Miller at TiVo, with whom I chatted recently, pointed out that the UI on the DVRs provided by the cable and satellite TV companies is fairly primitive and hasn’t changed in years. I can personally attest to that because I started with a ReplayTV unit in 2002, and my current DIRECTV DVR is hardly better in some ways and worse in others. For example, my ReplayTV jumped forward instantaneously by 30 sec. The DIRECTV makes a concession to advertisers and jumps through the 30-second forward skip at a high rate, keeping the content visible — just in case you glimpse a commercial you might want to go back and view. ( I can’t complain, I’ve caught some new Apple ads that way.)
As testament to that UI problem, Comcast just announced that they’re going to take on Netflix. Think about that for a second. Comcast has access to enormous content, but it hasn’t spent the money and time to develop a fabulous UI the set top box, and its own pay-per-view revenue has suffered the consequences. Comcast’s competition, DIRECTV, has likely also recognized the problem and is working on a remedy. At last, the TiVo UI will come to DIRECTV DVRs in January 2011, according to Mr. Miller. Perhaps both of these providers have finally realized that by locking their customers into an old fashioned, inadequate UI, they were losing pay-per-view money. Content isn’t always king if you don’t like the process of selecting it.
If you don’t have an Apple TV, the process of selecting content is delightful. In the case of a movie, you get to see the movie poster. You get to view the trailer. There’s a synopsis and list of actors.You can generally select SD or HD streaming or buy — with some exceptions. You can see what other movies have been viewed by people who watched this movie. It’s a great buying experience.
Apple is not only the expert on UI, but on how customers react to a physical product as a whole. They’ve wrestled with Apple TV as a hobby, however, because they haven’t quite figured out the magic combination of the Seven Elements. If it were just a matter of great UI, Apple TV wouldn’t be a hobby. If it were just a matter of technology, then techno-centric predictions like this one at PC World by Barbara Hernandez would apply. No, it’s something more.
Apple TV Take 2. Now What?
Here’s what I think Apple has figured out.
- Customers love their iPad and iPhone. But using it as a dumb remote to a TV system isn’t a fabulous, 21st century experience.
- Customers aren’t going to watch TV with a wireless keyboard on the lap - even if the keyboard is on the back of a small remote. It’s only a matter of time before the kids break it or coffee is spilled on it. TV viewers don’t want to type, they want to watch.
- Only a percentage, high tech and collector customers, are keen to have a Blu-ray copy of a movie — given that the 1080p video jumps off the disc at 35-40 Mbps. (Compare that to yet further compressed 720p on the Internet at 2 to 4 Mbps.) Customers buy Blu-ray movies for other reasons, namely portability, tradition, pride, fascination with tactile goods and ease of the setup. (Plug and Play) The rest, after a dreary day at work, just want to crawl into the couch and engage in their fantasy. Any wife can tell you that. Of course, Blu-ray will still be around for along time — it’s just not something Apple wants to distract itself with.
- Customers, especially those with iPads and iPhones, do, in fact, time share with TV viewing, but they want the TV simple and they love their iPad/iPhone interface. They’re are not keen to run apps on the TV screen because the UI support isn’t there. But they don’t mind having an iPad or iPhone in their lap to make things happen on the TV screen.
- Customers don’t want to pay a lot for the hardware, and they don’t want to be confronted with geeky subnets, IP addresses and DHCP licences just to get a device installed. Cable/connector choices need to be minimal, hence only HDMI and no concession to protocols of the past. Any new set top box needs to be cheap and trivial to install and use. Apple’s US$99, simpler, Apple TV does that.
Apple’s New Idea
To that end, and given the above observations, I believe that Apple is up to something with Airplay. Airplay allows one to browse the Internet in an iOS environment, which is pleasing, and then narrowcast that content to the new Apple TV for viewing in HD. And not just iTunes content, but anything on your iPad or iPhone, including iPhone home movies.
This may be the UI that hits the nail on the head — in contrast to all other methods. An Internet acquaintance of mine, Seth Weintraub, has done a bang-up job explaining the Airplay angle in more detail. If you click on any link I’ve provided here, click on this one.
Another hint regarding Apple’s intentions comes from the discovery, in an SEC filing, of Apple’s licensing agreement with Rovi, a company that specializes in home and mobile entertainment on-screen guides and secure device to device media syncing. John Paczkowski at All Things Digital explains that it may be a core patent that Apple is after. Gene Munster with Piper Jaffray believes that it portends Apple’s entrance into the HDTV market in 2 to 4 years.
Whether Airplay is Apple’s avenue to success, however, is not guaranteed. Not every living room customer who’s a candidate to buy the new Apple TV is guaranteed to have an iPhone. But the halo effect and market synergy certainly would point customers in that direction. Sure, there will be customers who insist on an Android smartphone and an Xbox, but Apple’s depending on that elegant integration of products to make its case.
When it comes to apps, Apple is keeping that card close to the vest. There are strong indications that the new Apple TV is an iOS device. If so, then at some point, if the Google TV seems to be a smash hit thanks to 50,000+ Android apps, Apple is in a position to compete. For now, however, Apple’s focus on minimalism trumps that temptation. (Even if a few of us geeky types whine.)
I’m not going to get into Xbox and PS3 here. They’re game boxes that have been pressed into service as TV access systems and are well understood. The primary emphasis has been Google vs. Apple. However, I can’t resist mentioning a wild card in the bunch, the forthcoming Boxee Box. This is another very open device that will be built by D-Link for Boxee, and some consider it a repudiation of what Apple is trying to do. That is, it’s designed to be completely open.
One notable feature is a keyboard on the back of the remote for surfing. Potential problems include the high price (US$200) and the lack of ability to play DRM content, pretty much relegating it to all the free stuff found on the Internet. Nick Bilton with the NYT in the link above quotes the co-founder of Boxee: “…the company doesn’t draw a line between types of content because its users don’t either.” That notion by Boxee tells us a lot about the intended audience, and so this looks to be a niche product, unlikely to be serious competition for Apple.
Of course, Apple’s new approach, using iOS devices to direct content to the Apple TV, may be something that Google and others could duplicate if they tried. The problem, in Google’s case is that the company, from what they’ve seen so far, appears too focused on technology for the sake of technology, a violation of the Seven Elements. Also, right now, it lacks decades of experience, both with UI and OS, brought to the table like only Apple can. Time, however, will tell. The Android OS has the capability — if only Google has the will, patience and the savvy. Google is not guaranteed success nor is Apple.
The Future of TV
One thing is certain. The nature of TV viewing is changing. TiVo’s Mr. Miller pointed out to me that viewers no longer have allegiance to specific TV networks. Instead, as I myself have observed, they seek to pick and chose the shows they like at the time of their choosing. They’ll pay to avoid commercials in some cases. They want an easily accesible library to TV shows with a great UI. They want live sports.
No company has yet figured out how to seize the new, semi-open TV market — if that’s even possible. Technology is changing quickly. Customer interests are fragmented. Contracts for content come and go and, as a result, some content that was available via one outlet may not be available in the future. Content providers juggle partner preferences and contract conditions to maximize revenue, and that means making their advertisers happy. Some customers will pay a keen price to avoid ads, other will tolerate them in the name of free content. Add to that the fact that no single company has hit on the magic combination of the Seven Elements, and one can expect turmoil for the foreseeable future. What’s become clear to me, however, is that Google is unlikely to blow away the competition with Google TV. No single, newbie product can achieve that anymore. It’ll be just one more experiment, subject to fine tuning, just as Apple has fine tuned the Apple TV.
An aggressive hobby can be a money making business.
That said, don’t expect sanity, coherence, consistency, a great selection of content, a great UI and low prices from any one provider anytime soon. What you can expect is a lot of change. You’ll have to keep track of your content options and maybe even delete and add boxes connected to your HDTV. (I did that — bought a new LG Blu-ray player to obtain access to Netflix streaming.) It could well be that, given the vested interests of the players and customers, no single winner ever emerges in this new 21st century battleground.
In the final analysis, that’s why many customers just give up and pick one box, even if the choice is irrational. Maybe, in the end, that’s the 8th magical element a company like Apple, with its history of great customer satisfaction, can exploit.
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References:
1. Cord Cutting is Real, and it’s a Problem says Verizon CEO