The Apple TV has not failed…

One of the memes I’m seeing in the discussion of the iPad is that the Apple TV is one of Apple’s failures. It seems to be a common idea and an easy target, but I think that idea is dead wrong. Yes, it hasn’t sold 800 billion units like the iPod and the iPhone, but that it hasn’t been an insanely successful product doesn’t make it a failure.

(quick digression; when people decide to go talking about “apple’s failures”, the common commentary is something like ‘Apple’s failed products like the Apple TV and the Cube’ — when you realize that the Cube was released in 2000 — that’s ten years ago — and people looking for anything to criticize in Apple’s product line can really only come up with two examples in a decade, well, that says a whole lot about Apple’s success, no? )

I’ve got two arguments why the Apple TV isn’t a failure. It’s subjective and certainly open to discussion, but hopefully this will cause you to stop and consider…

First: Apple doesn’t consider it a failure. If it did, Apple would have dropped the product and moved on by now. They’re still selling it, supporting it and enhancing it — so Apple clearly sees a future to it. Otherwise, it wouldn’t be available to buy.

Second: I’d argue that for a product to lose, some other product has to win. The product that beat the Apple TV is…. It is… Um…

See? The answer is “nobody”.

And that’s why Apple still has the Apple TV and what gives the people who like making immediate judgements on things the quivers. The market the Apple TV is in is still forming. Nobody has won. Nobody has lost. The fight is still in the early stages.

I’m frankly a little surprised at this, I thought the market would mature and mainstream faster than it did. One component that has slowed it down is the lack of standardized interconnects — i.e. the failure to launch of the Cablecard. It’s not clear to me if Apple was ever really looking at the Cablecard as a solution here, but if they were, it didn’t happen and it never really became an option.

So Apple’s real solution here is downloadable content, and that’s dragged by the relatively slow adoption of fast/cheap broadband in the states. It’s also dragged by the owners of the video content being in no super hurry to hand over control of the market to Apple the way music was handed over to it. the music studios hate how Apple can dictate business to the studios instead of the other way around, and so there’s been this deadly and slow dance for control between the studios and Apple, and since the volume (i.e. “money”) isn’t there, the studios can take their time and push for better deals and hope for alternatives so they can play someone off against apple for leverage. So far, nobody’s really come up with something that remotely competes with iTunes in numbers and scale, though.

What can push this market forward is a change in the dynamic. Apple TV wasn’t the product to drive adoption of iTunes for video on a mass scale, so there’s no strong incentive for studios to buy in and get on board. Because of that, it’s been a slow and steady grind to get content into itunes, so things move in slow motion.

But just suppose Apple were to come out with another product, one that hooked up to iTunes, was a good experience to watch video on, was priced in a way that the general consumer would buy it — and sold a zillion units? Suddenly the studios are going to hear cash registers, and more importantly consumers complaining loudly about the things they can’t watch because they’re not in iTunes. And that creates incentive to cut deals to make it available, because now there’s demand (and revenue). And that demand (and revenue) puts titles in iTunes, so suddenly the iTunes/AppleTV option is a viable alternative to Netflix or pay per view.

So my argument isn’t that Apple TV had failed, but it was waiting. Waiting for something to come along and do what Apple TV alone couldn’t do, which was drive demand and sales and rentals via iTunes to generate revenue which attracts the studios which brings in the titles which generates more sales of units which an Apple TV can leverage because the consumer wants ot be able to watch their movie both on their — device — as well as their TV without buying it twice.

And it seems to me Apple just announced that device. And that device has the potential to create the environment where Apple and the studios can sit down and work out getting all of the content into iTunes for consumers to consume. And when they do, suddenly people will realize Apple has this device they sell where that content also will end up on their TV’s!

And gee, Apple just happens to have it sitting there, waiting for consumers to discover it. And because Apple, unlike the pundits, realized the market was still creating itself and was willing to be patient, it has a product there and ready to succeed when the market matures enough to allow it to. That’s a LOT easier than trying to create a product to catch a market as it explodes any day…

So if you ask me, Apple’s stupid like a fox here. It knew that sooner or later, it’d need the Apple TV. It put it out there, it learned from it, it let it help Apple figure out how to create and own the market and bootstrap the functionality they needed to do so (like video rentals, which now exist and are sitting there waiting for the tablet. That wouldn’t have happened without Apple TV being there to implement it for). And when the market starts to grow because tablet sales drive content sales whichget the studios on board which drives consumer interest (and tablet sales which drive content sales which….), Apple can introduce an updated Apple TV to take advantage of it and start the buzz and hype to push it into the success curve — and because they started the process years ago and were patient and didn’t cut off support of the device when it wasn’t an immediate insane success, they’ve made these next steps a whole lot easier for themselves…

Apple TV isn’t dead. It’s in make up waiting for the second act to begin.

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  • Andrew

    I'll second that. Even without a hearing impairment, I watch some programs with captions on because the speech isn't clear.

  • reinharden

    Chuq,

    For awhile we've been of an opinion that, as you allude in your final paragraph, that the Apple TV was there to, if you will, prepare a path.

    The Apple TV created a larger ecosystem for video content. Thus helping to keep the video content owners on board and cooperative. Thereby ensuring that the iPad would have a rich selection of video content upon its eventual arrival.

    But even more, the Apple TV helped educate the consumer base about the benefits of a “home content server”. While somewhat limited in scope, one could stream content from the Apple TV to other locations. And the Apple TV wasn't a computer. It could easily be argued that this was a step in convincing consumers of the viability of a device with more limited storage, one that was, and I hate to use this term, more “cloud-based”. Thereby putting the “net” back in “netbook”.

    The iPad is very nearly optimized for remote storage of content, with a small concession to local storage space. The Apple TV, the computer with file sharing or iPhoto sharing or iTunes sharing enabled, perhaps even a Time Capsule or an Airport with a hard drive — all provide “nearly local” net services. One imagines that Mobile Me (and Google Docs — although with less integration considering the increasing coopetition) will see further integration. And that iTunes “streaming” of known to be owned content might not be far down the road.

    Anyway, long version short, the Apple TV isn't a failure because its major role isn't to be a standalone device, but to be part of the Apple ecosystem to support it's other offerings. If the right device came down the pike, I don't think Apple would care at all about losing a role in what is destined to be a hardware commodity market in the long-term anyway — so long as the devices enable the functionality that Apple desires to provide to its customers.

  • BJ

    I've owned an TV since it was first introduced. I even bought mine before I bought my first HD LCD TV. It sat in it's box for almost 6 months before I got the TV and was able to hook it up.

    When friends and visitors ask me how I got my photos on the TV like that with the “really cool” transitions and music, I tell them the TV is like an iPod for your TV. They then get it immediately. “It syncs with iTunes, it plays music and video and it can do all of these *other* things as well.” TV==iPod for TV.

  • oomu

    ho my god !

    I'm seriously serious here : I didn't think of the synergy the ipad can bring to rental of tv show (“ho a new episode , okay I pay it, so simple”) and when the huge market will be there, “suddenly”, the apple tv will really be useful AND a mature product…

    very astute.

  • http://www.webomatica.com/wordpress/ Webomatica

    Agreed, even *after* hooking up a Mac Mini to the TV – it's very telling I still haven't unplugged the Apple TV. It's still great as a media bridge, renting movies that haven't hit Netflix Watch Instantly or Hulu, and even purchasing tv shows. The biggest reason – the UI of the Apple TV is designed for a big television, and I've spent countless hours trying to shoehorn the Mac Mini to do likewise (Front Row doesn't get close enough).

    I really hope that second act begins; I'll be among those who get the next rev.

    • mkmcfr

      thanks web, i guess you saved me buying a mac mini. let's just get safari on tv and we'll be ready to rock n roll…

  • http://www.flickr.com/photos/mkmcfr/sets mike

    funny you would like the tv. i've had an tv for a couple of years now (does that make me an early adopter?) it made sense to me right away. one of the reasons is i'm an american living in france and i wanted to watch “the wire” and it was discontinued here after season 2. i have an account with the stateside itunes store, using my american credit card and what is great is itunes doesn't check your ip address and then tell you you can't watch because you're not in the states (ie: hulu, pandora, lala, etc) i understand it is because of distribution rights, but hey, sometimes you can't get the stuff over here, anyway. what do american businessmen do when they are traveling? why shouldn't i, as an american citizen, with a us address and bank account, while traveling abroad, be able to get american content on my computer (or tv)? thank god for itunes! anyway, i am getting off the track. the tv thing works great, it syncs effortlessly with airport express to play my own content (my photos look great on the big screen and i have them in a loop as a screen saver whenever i'm not watching something else, i can get rachel maddow and keith olbermann podcasts the next day by noon and the latest dvd released movies either to rent or buy and you can start watching them right away without waiting for them to download completely. i don't know the netflix experience, but tv has more diverse sources, with podcasts and youtube and flickr. what i would really like to see on it is safari, but would that cannibalize the ipad? i guess i could get a mac mini and hook it up to the tv, but they could do both of them together in a future version of tv.

  • Beth Macknik

    One important feature of Apple TV is closed captioning. The Amazon & Netflix streaming video technologies do not currently support closed captioning. This doesn't just affect the profoundly deaf—folks who are hard of hearing are pretty common. (Think Bill Clinton.) Federally financed studies show that over 10% of adults have a hearing impairment.

    • http://www.chuqui.com chuqui

      agreed. My mom is both hard of hearing and sight limited, so support of closed captioning and the Mac accessibility features like zoomed text are both important and things I look for in anything I'd consider having her use.

    • Andrew

      I'll second that. Even without a hearing impairment, I watch some programs with captions on because the speech isn't clear.

  • carldec

    Interesting post, Chuq. I have never lusted after the AppleTV and have never really figure out what its for exactly. But I have an old eMac hooked up the the TV/Stereo stack in the living room. I guess it makes since if you don't have old macs laying around gathering dust.

    If the ipad is a success and the next version of the AppleTV has a doc port for it, that might just be a path to success. If I was a doc maker for ipods my head would be spinning at the possiblities for making great ipad docs. An AppleTV that is also a Dock might be a powerful combination.

  • Flip

    Cablecard is a fake standard.

    If you search the web, you'll find many complaints about users buying Tivo's and then having endless issues with the Cablecard not working and the cable company continuously replacing the cards to get it working.