Mixed Signals

Apple TV: The Paradigm of Enigmas?

5/24/2013 9:28 AM

Cupertino, Calif.-based Apple, in the form of its AppleTV product, remains the Paradigm of Enigmas.

That is to say, sadly, what so many people are still thinking today, years after Apple was first expected to revolutionize the TV space, and that is: “While so many other Apple competitors are smartly rounding more and more of this odd new TV business’ square edges -- e.g., Intel TV, Xbox TV, Roku, Boxee, Sling, Samsung, LG, and Sony -- the folks at Apple still seem somewhat confused.”

Yet, quite conversely, the Saint of Digital Music, Smart Phones, and Tablets is far from being written off, even as it relates to the world of TV-like content being delivered to devices via Internet Protocol and streaming media. Its iTunes and AppleTV platforms continue to introduce improvements, such as remarkable new apps, that excite and amaze its rather large and loyal following of TV aficionados.

So, when it comes to just really changing TV (as Apple did with music, smart phones, apps, and tablets), just what’s taking so long? Perhaps Apple’s culture of hyper-secrecy and an inability to communicate – at least with so many of the other telecoms, content providers, and other professionals in the outside world – is having its related problems and/or showing its downsides? Or maybe so many of those key folks with whom Apple has to deal – especially the content folks – just don’t want to relinquish rights to a company/ecosystem uber-controller, like Apple? Or perhaps Apple techies believe the underlying IP technology and bandwidth is still not ready for primetime? Or…?

Strengths

When one talks about the strengths of the core product behind what may one day be a truly dominant Apple TV service/product, i.e., iTunes, one sees a service today that offers “...inner device compatibility and cloud storage for music, movies, TV shows, books and photos” (See, Apple’s website, at http://www.apple.com/appletv/).

As is true with most Apple consumer products, Apple TV offers a top-level user experience, solid customer care (Apple touts its choice to keep its customer services reps in the U.S. of A, versus rivals’ and others’ decisions to ship those jobs to foreign lands and foreign cultures). Apple also brags of superior “device functionality and connectivity” (as long as the device you are connecting with/to is an Apple consumer electronics (CE) product in the Apple ecosystem...if not, there may be a big problem).

Another strong Apple plus is the volume of its user base. Many say that more based upon its name and brand recognition factor than upon its obvious technical superiority, that Apple TV’s base is way ahead of rival Roku’s. Whatever the reason, current comparative figures, dating to last September, suggest AppleTV’s user base is in the low double digit millions, while Roku has an estimated 5+ mil. Such a breadth of subscribers bodes well for the future of AppleTV’s growth and expansion.

Apple also benefits greatly from the dual revenue stream of hardware income from AppleTV devices starting at $99, but longer term from content licensing income. Apple’s unique name and brand recognition are additional assets that are so valuable, yet tough to quantify. Plus, Apple’s hoard of cash on hand presently gives it a unique advantage when it comes to outbidding rivals for companies and rights. 

The iCloud storage service further permits Apple customers to link all their stored content across all their Apple devices, especially furthering customers’ love of using 2d screen devices – such as laptops, tablets, and smart phones – while viewing a main TV monitor.

 

Challenges

AppleTV’s list of perceived weaknesses includes the overall view held by some that AppleTV has already failed, because it has not yet knocked the “TV” cover off the ball, like it did with apps, tablets, smart phones and music. Indeed, Apple has talked about (and outsiders have talked about) AppleTV’s big time ultimate unveiling for a long time now. Yet, as of this publishing, no future AppleTV date stands, by which critics might view the complete product and service much more favorably. And some critics doubt that that time will ever come.

Moreover, many say that one of the keys to that impasse is that so much of Apple is limited to Apple. This differs markedly from Apple rivals, such as Google, that rely on more open ecosystems, in the form of universally accessible formats, such as Android. Traditionally, open ecosystems with common standards also tend to create greater sales of hardware items, such as set-top boxes, because the ecosystem’s stakeholders can more readily combine to create far greater economies of scale. In short, pick your Apples from Apple’s orchard, and you’re good; pick your other fruits, or even apples, from another orchard, and you’re often, well, compromised.  

Another concern to AppleTV has to be the possibility of major CE dealers ganging up against Apple, and themselves building systems closed to Apple products and services.

Plus, AppleTV has still yet to offer an AppleTV interface with the current crop of smart TVs that differentiates itself in any way. The same holds for Blu-Ray players.

And even though Apple came out with the iPhone 5 recently, that product was not particularly well-received, thus tarnishing Apple’s current image as a true and consistent innovator. 

Finally, from one who wrote an NAB/Focal Press 300+ page book, which is a primer on DVRs called Digital Video Recorders – DVRs Changing TV and Advertising Forever, this author cannot help but ask, “Why didn’t AppleTV simply add a DVR storage capacity?”

Other

As alluded to above, Apple has a huge base of customers and admirers. Apple is the No. 1 video on demand and top Electronic Sell Through (EST) provider in the world. Estimates from late 2012 suggest a global EST share of above 75%, based upon nearly 15 million estimated transactions. Its estimated VOD share is well above half, with an estimated 35 million transactions.

In addition, the AppleTV and iTunes count of content titles exceeds 100,000 movies and TV shows. Even more impressive is Apple’s device footprint, which suggests an estimated 400 million iTunes-connected devices that have been sold since 2012, and more than 50 countries around the world that offer TV shows and movies in digital form.

Apple company staff members number approximately 50000 globally, which does not include another 25,000 that clerk and manage Apples stores globally. Apple’s current movie service presence is in 60 countries and growing, which is the most, by far, of any movie service.   

In its pricing strategy, Apple competes against rival services like Amazon and GooglePlay, all three of whom are considered price leaders when it comes to TV shows and movies online. New Apple releases in HD cost $19.99, while in standard definition (SD) the same titles run for $14.99-$9.99 apiece. HD catalogue items run $19.99-$14.99, and SD catalogue charges are $14.99-$16.99.    

Summary

Tim Cook and company will be facing an awful lot of additional pressure in the months ahead, to not only get some new and innovative products into the Apple chain (certainly including some new and much better rounded edges on an AppleTV product/service), but as a result to get a stock that now trades in the low 400s back up into the 700s.

Jimmy Schaeffler is a telecom author and chairman and CSO of the Carmel-by-the-Sea-based consultancy, The Carmel Group (www.carmelgroup.com).

 

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