The Apple TV Hobby is Riding High. Apple’s HDTV Display on Hold

| Analysis

Long ago, Steve Jobs coined the Apple TV as a hobby. It's not one of the major legs of Apple's business. Yet, the Apple TV has about 10 million active units, is generating over 4 billion dollars in annual revenue, and has a peak in growth nowhere in sight. Is this fabulous hobby affecting Apple's thinking about an HDTV display?

Slowly, Apple is revealing more and more information about the sales of its Apple TV. At Apple's 2013/Q1 earnings report on January 23, Tim Cook said that Apple sold two million units in the December quarter vs 1.4 million a year ago in the same quarter.

Backing out the sales for the calendar year, 2012, Apple sold an estimated 5.9 million Apple TVs which amounts to about a half billion dollars in hardware revenue.

At the same time, Apple's CFO Peter Oppenheimer stated that Apple's iTunes quarterly revenue was US$2.1 billion. From previous estimates of total Apple TVs in service (about 10 to 10.5 million) and typical purchase patterns, Apple is likely generating about $1.0 billion in movie and TV sales per quarter.

So that's a hobby generating a total of about $4.5 billion per year. Most other companies would be happy to have a hobby like that.

Apple TV Still on the Rise

Perhaps more importantly, the rate of Apple TV sales is rising at a steady rate and shows no signs of peaking. Here's my best estimate, but one that's been sanity checked, of sales per calendar year based on what Apple has told us so far*.

This has been converted to calendar year.

There are several issues worth consideration here. First, why should Apple jump into a speculative sale of expensive HDTV hardware when the Apple TV sales show no signs of leveling off? Second, is the fact that Apple has about 10 million Apple TVs in active service itself something that might be leveraged thanks to technological serendipity?

After all, why kill the golden goose in the process of looking for the platinum goose?

Apple's Real End Game

Previously, I looked at the problem Apple has with acquiring enough TV content rights that it could make a dent in the business of the cable and satellite providers. It isn't happening thanks to the content holders cleverly parcelling out rights so that no one provider can achieve domination. That could mean, in turn, that Apple would have to exercise a clever use of Internet technologies to augment the current TV watching experience, independent of content rights. Back in December, Bryan Chaffin and I wrote an analysis of that in "Breaking Down the Fundamental Issues for Apple & TV.

The question raised was: what is Apple's end game and when does it make sense to depart from the Apple TV hobby and engage in Apple's real, long term goal described in that article? With Apple TV sales still on a remarkable rise, perhaps it's a good idea to see where that leads before jumping off into a new venture, one that's still under development by Apple's engineers. After all, wih current rate of technology development, waiting a little longer can reap great rewards -- even as the Apple TV rakes in the bucks.

Apple, because of Tim Cook's statement that the TV industry remains "an area of intense interest" and that "there is a lot that Apple can contribute to this space" we believe that Apple's end game is to disrupt the TV watching experience, and a dedicated HDTV display that can fold in Apple's unique brand of software and hardware integration is required to do that.

Just when Apple decides to depart from its fantastically lucrative Apple TV hobby in order to achieve its end game will be interesting to watch.


* Total units in current service is not the same as lifetime sales for all models because of several factors: decommissioning or failure of the early generation models and upgrades/replacements from generation to generation.

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I wish they would just open the thing up to third party apps with a store like the App Store. If this is a hobby then doing so would seem like a worthwhile experiment.


This really makes no sense:
Apple TV has about 10 million active units, is generating over 4 billion dollars in annual revenue…

That would be an average of $400/active unit…. And the 10 million number looks to include EVERY apple tv ever sold - so there can not realistically be 10 million active units.

Even if they sold 10 million devices every year at $99/device that would only be 990,000,000, then each one of those 10 million units would have to purchase over $300 worth of content….


John Martellaro

dan:  It makes perfect sense.

1. Apple sold 5.9 million units in CY 2012.  Times $100 each, that’s about half a billion dollars.  Check.

2. $400 per unit per year is exactly right.  The average customers watches 1.0 movie per week @ $5 = $250.  Plus some TV shows.  Total is about $400/yr. Check.

3. Actually, Apple has sold slightly more than 10 million units. Add up the numbers for each bar in the chart above.  But only about 10 to 10.5 million remain in service for the reasons cited in the footnote. Check.

4. Apple isn’t selling at the rate of 10 million per year, but if they do, then, yes, that’s a billion in revenue for the hardware. Refer to the #2 above, this article and the link to the previous article for the estimate of content purchased. Check.

I’ve been following this for years and have a spreadsheet. All looks good to me.



I disagree that an Apple designed or even just branded HDTV is required for Apple to disrupt the TV market. Control of content is the key and that means the store. The quality, timing, pricing of offerings. A better box with more storage, faster wifi etc sure, but the monitor that box is attached to doesn’t really matter so long as it can support the content.

IF Apple makes anything it is more likely to be a revamped Cinema Display with the proper specs to also work as a TV including a larger size option like 40-46 inches. But given that Apple seems to be trying to be an alternative to cable, a ‘real’ TV with a cable turner and such isn’t likely in the works and never has been.


All I need to do is look around my TV and at the remote/s to see there is why the only way Apple could really shake up this industry is design a complete solution. They could do this working with Sharp; but the design would be Apple’s. Shaking up the set top box add on business isn’t what this is all about.


Personally, I feel Apple needs to work with cable companies as well. Most people’s TV experience comes from using the cable box and those things are horrendous. If Apple were able to build a device - a set top box or actual TV set - that took over the cable box experience, then Apple could affectively make a difference. Otherwise, what’s the point of all this if your device is sitting behind the cable box?


John, I guess I’m atypical. We have three AppleTVs and have only rented one movie ever, and got a refund because we could never get it to start. Apple has gotten zero dollars from us past the purchase price. AppleTV is the best gateway (IMO) to all of my ripped DVDs on my Mac and my Netflix and Hulu+ account and is the main reason I just dumped cable. So, for example, here’s my PBS app on the AppleTV so I can stop using the PBS app on the iPad to stream through Airplay, through the AppleTV, to the TV. That seems unnecessarily complicated.


I suppose for every @FripFriddle and myself there are the super-spenders, but adding an additional $150 per year to every Apple TV seems like a stretch. (Referring to Mr. Martellaro’s comment above). I would have to agree with @dan that based on my own and others that I know use, $400 per unit seems a little rich.

I use the Apple TV as a way to share pictures and music on the big screen and big speakers. It’s a great device and while Apple would love it if I used their iTunes store, they keep making money off of me as I purchase and promote phones, iPads and laptops that all work together.

Rob DeRosa

I predict that Apple’s first foray into the high-end television business will be the introduction of a line of Apple branded OLED monitors that will seamlessly connect with other Apple devices.

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