Time For Apple To Get Serious About Apple TV (AAPL)

Time For Apple To Get Serious About Apple TV (AAPL):

Apple executives continue to refer to their Apple TV set-top box business as a “hobby” — which is a polite word for “failure.” Time for that to change: If Steve Jobs wants to make a serious run at owning our living room’s “digital hub,” then Apple TV needs a serious overhaul, ASAP.

Why now? Because even though the industry is still nascent, the Internet-connected living room is becoming more of a realistic proposition. And the market is quickly getting more crowded.

Actually, it’s a polite word for “we’re dipping our toe in the water and seeing how the market matures. But the basic premise here is correct: the market has started maturing in a serious way, and it’s time for Apple to either decide to be a player, or get shoved into a niche. It may well decide being in a niche isn’t a bad idea here, by the way.

The two missing components to this market are starting to come together. First, bandwidth speeds; more and more people have network connections fast enough to support this. Second, the biggie: content.

I loved the concept of the Apple TV when it came out — and didn’t buy it. I loved the upgrades of Apple TV 2.0, and didn’t buy it. I think the Roku is an interesting box — and didn’t buy it.

Why? because the amount of content available for use via these streaming systems is still seriously limited. Compare the Netflix library with the iTunes movie/TV library (just try, for instance, to watch The Big Chill or The Dresser on either Apple TV or Roku. Unless your primary interest is whatever’s available on DirectTV/Cable Pay Per View, these other options aren’t really options yet.

Add to that the Blu-Ray/HD-DVD war, which caused a lot of people to sit on the sidelines and wait for a victor before committing. You’re now seeing the product cycles that began when HD-DVD failed hitting market, and that’s going to be a major accelerator here.

Yesterday, LG announced it would begin selling a Blu-ray player in September that can play Netflix (NFLX) streaming movies — and other digital content — for “well under” $500. Wednesday, Dell (DELL) showed off a sexy new mini computer, starting at $499, with a built-in HDMI port for hi-def TVs and an optional Blu-ray drive. So on and so forth.

And Microsoft bringing Netflix to the Xbox 360.

Suddenly, Apple TV has lost most of whatever edge it may have had. It can play iTunes movies, and YouTube videos, and… well, that’s about it. Piper Jaffray’s Gene Munster estimates Apple has sold 2.6 million Apple TVs since spring 2007, which sounds high to us. But no matter what the number is, Apple TV isn’t a mainstream product.

Apple never really had an edge here, didn’t really try to. In many ways, they simply threw this out to convince people there was a market here to develop (while minimizing their costs in developing it). Not the first time Apple has committed into a technology and waited for the rest of the industry to dive in. Apple realizes that a lot of industry players hate being first (think about it — Apple was the first to commit fully to CD-Rom’s on all computers, dropping floppy drives, USB, Firewire…) so sometimes they doo something to give the rest of the industry the ability to follow, because they know it’s a good long-term play.

So, no criticisms for Apple TV not being something it was never intended to be. It’s not a market driver, it’s not a market leader, it’s not a mainstream product. it was exactly what Apple said it was: a hobby, a toy/tool waiting for a market to happen.

Well, it’s happening. Time for Apple to get serious and get going.

So how can Steve Jobs change that?

It should be more like Apple’s Mac mini, which some serious home theater-types actually do use in their living rooms.

In theory, this also means that Apple is eventually inviting iTunes competitors like Netflix (NFLX) or Amazon (AMZN) onto its box, since they offer browser-based video services of their own. But better to have to compete for space on your own platform than have a platform no one uses.

Add an optional Blu-ray drive.

Yes, yes, yes. It needs to be the hub of the home theater — look at what Microsoft is doing with Xbox 360 (I love mine, by the way. Microsoft needs Blu-ray, too). Right now, it’s a stub on the home theater, tied to another mac. It needs to become the central player in the home theater, more like a console, less like an iPod. We’re not THAT far from where a computing system tied to the television is what ties all of the other devices in the home together. Apple TV has to decide to be that computing system, or it’ll be just another peripheral tied to something.

Right now, microsoft and the Xbox 360 is closest to what I want. I’ve been considering upgrading the DVD player to a blu-ray. originally thinking about a Playstation 3 (not a bad investment once you decide you’re buying a blu-ray anyway), but after Microsoft announced the netflix deal, I’m waiting again; rather see Xbox 360 add a blu-ray and buy a second blu-ray for the TV set than buy a PS3, and Playstation’s home theater strategy doesn’t impress me.

the LG box also intrigues me. The Apple TV is too dependent on iTunes, and iTunes’ library is too limited (I know, I know, my friends in iTunes-land are tired of me saying this, but they needed to buy Netflix years ago, or at least integrate access via iTunes). I’ve been gone from Apple 2 years and still nothing.

The next year is going to see massive changes in this space, a lot of maturing, really fast. and two years from now, the fight will be basically over. Here’s hoping we see Apple TV updates for the holiday market, if Steve waits for MacWorld in January, he may be too late.

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