Debunking Apple TV myths

Talk of Apple disrupting the global TV business is grossly optimistic and it's unlikely that the tech giant is going to win the race to our living rooms.

Financial Times 

How could Apple hope to disrupt the global TV business when there’s almost no scope for changing the two things that most define the experience of watching TV - the screens themselves and the shows that most people want to watch on them?

That is the conundrum the company has been grappling with as it tries to turn Apple TV- a product Steve Jobs once described as a hobby - into the fourth pillar of its business. Next week brings its annual developer conference, the biggest event in its calendar since Mr Jobs died in October last year. Since this is a software event and the answer to disrupting TV lies in software, it might just be the moment for Apple to make its next hotly anticipated move into the living room.

First, consider two things that Apple is highly unlikely to do.

One (despite persistent rumours to the contrary) is sell TV sets. Consumers are already well served by the cut-throat competition that is bringing big screens with amazing clarity to living rooms everywhere. Apple could hardly hope to produce better or cheaper sets.

But then, it doesn’t need to: quite the opposite, in fact. A global platform of super-sleek but largely dumb screens is already in place. The opportunity lies in changing how they are being used.

Apple is also unlikely to try to upend the entrenched system of content owners and distributors who have locked up the pay-TV business. These companies see no need to break apart the monthly plans under which they sell packages of content. You only have to look how iTunes unbundled the music industry’s main product, the album, to understand their resistance. If it can do little to change the hardware or the content, Apple can at least have an impact in one area that it knows a lot about: the user experience. Unwieldy channel guides, multiple remote controls and set-top boxes - not to mention video-on-demand and online DVR services of mixed quality - can all make watching TV a drag.

With the arrival of internet services to TV sets, things have become even more complicated. The ability to watch anything, any time is still, for most viewers, a half-realised promise.

Apple has two main assets to bring to bear here: the app and the iOS software platform. Turning both shows and channels into apps would create a new way for viewers to interact with TV content. The app could open a library of video, as well as related material to be browsed from the sofa on an iPhone or iPad. Finding a show to watch on one of these personal devices and “throwing” it on to the TV set promises to be a far better experience than scrolling endlessly through an online channel guide in the vain search for something to watch.

For the content companies, it would also bring deeper consumer engagement and the potential for a new, direct relationship with viewers. This is the main lure for the existing TV industry, which otherwise would balk at the idea of app-ifying the TV set. After all, in this world The Sopranoswould have to fight for its place on the screen next to an app for the latest YouTube sensation and one for throwing video calls on to the screen.

As the army of iOS app developers responds to the opening up of another screen, viewers would spend less time watching “traditional” TV. They would almost certainly end up revolting against the fixed monthly payments they would still face for bundles of content. Apple’s success would depend on persuading the TV industry that this is the future regardless, and it is better to face it with a partner that at least has a history of trying to bring extra value to content through new digital channels.

One question this approach would leave unanswered: how big a business could it be for a hardware company like Apple? Even if it managed to ship a $US99 Apple TV device with, say, one in four of the 250 million TVs sold each year, the $US6 billion or so this would bring in would still be less than the revenues the iPad generated in the latest quarter alone - and the iPad is still in its infancy. For a company with expected revenues this year of $US162 billion, it is getting hard to move the needle.

Rather than the next big pillar of its business, though, the TV should be seen as strategically important for Apple as it tries to secure a place in the living room, eventually helping it to sell many more iPads, iPhones and Macs. If it doesn’t win a foothold on the TV set it will cede ground to rivals like Microsoft, which this week showed off a way to throw TV shows from tablets to TV screens via its Xbox 360 games console, of which 67 million have already been sold. Apple can’t afford to dally with its TV hobby any longer.

Richard Waters is the Financial Times’s West Coast Managing Editor