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.
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.
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.