1 million Apple TV sales seen as 'positive, but fairly immaterial'

Posted:
in AAPL Investors edited January 2014
Though the Apple TV "hobby" is starting to take off, sales of the $99 set-top box just aren't enough to have a major effect on Apple's bottom line.



Reacting to Apple's announcement that the new Apple TV is expected to reach its one millionth sale this week, analyst Shaw Wu with Kaufman Bros. said in a note to investors on Wednesday that he views the figures as "positive, but fairly immaterial." If the device continues to sell a million units per quarter, it would amount to $400 million in annual revenue -- just a drop in the bucket for a company expected to earn $88 billion in revenue in its fiscal year 2011.



However, Wu said he believes the Apple TV is now positioned to become a "more material contributor and game changer in the TV space." But he believes a major catalyst for the set-top box would be the addition of an App Store, allowing users to download new applications for the Apple TV.



Wu estimates that about 40 percent of downloads from the App Store for the iPhone and iPad are games, and he believes that games could be a major selling point for the Apple TV.



"This capability isn't available today, but we believe it could be added fairly easily as Apple TV uses a similar A4 processor architecture as the iPhone, iPad and iPod touch," Wu said.



"One question many investors have asked us is how does Apple add multi-touch capability to a TV? Our answer is the ability to connect the Magic Trackpad, similar to adding multi-touch to its desktop Macs including iMac, Mac mini and Mac Pro. We also see the potential in other peripherals including game controllers."



He also added that many users want the device to be able to record TV programs for viewing later. He said the holdup is not a "technology issue," but is being held up because of "licensing terms."



Kaufman Bros. has maintained its "buy" rating for AAPL stock, and reaffirmed its price target of $395.
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Comments

  • sdw2001sdw2001 Posts: 16,332member
    Quote:
    Originally Posted by AppleInsider View Post


    Though the Apple TV "hobby" is starting to take off, sales of the $99 set-top box just aren't enough to have a major effect on Apple's bottom line.



    Reacting to Apple's announcement that the new Apple TV is expected to reach its one millionth sale this week, analyst Shaw Wu with Kaufman Bros. said in a note to investors on Wednesday that he views the figures as "positive, but fairly immaterial." If the device continues to sell a million units per quarter, it would amount to $400 million in annual revenue -- just a drop in the bucket for a company expected to earn $88 billion in revenue in its fiscal year 2011.



    However, Wu said he believes the Apple TV is now positioned to become a "more material contributor and game changer in the TV space." But he believes a major catalyst for the set-top box would be the addition of an App Store, allowing users to download new applications for the Apple TV.



    Wu estimates that about 40 percent of downloads from the App Store for the iPhone and iPad are games, and he believes that games could be a major selling point for the Apple TV.



    "This capability isn't available today, but we believe it could be added fairly easily as Apple TV uses a similar A4 processor architecture as the iPhone, iPad and iPod touch," Wu said.



    "One question many investors have asked us is how does Apple add multi-touch capability to a TV? Our answer is the ability to connect the Magic Trackpad, similar to adding multi-touch to its desktop Macs including iMac, Mac mini and Mac Pro. We also see the potential in other peripherals including game controllers."



    He also added that many users want the device to be able to record TV programs for viewing later. He said the holdup is not a "technology issue," but is being held up because of "licensing terms."



    Kaufman Bros. has maintained its "buy" rating for AAPL stock, and reaffirmed its price target of $395.





    Due to the low cost, I went ahead and asked for one from Santa I still don't see why they don't include a blu-ray/dvd/cd player and internal storage. I suppose it's price point. But they could offer an "AppleTVPlus" or something for $299. With a blu-ray player and storage, that would be a steal, and I think doable for them at that price point. The last hurdle is DVR, but that is much tougher as Steve has said (due to the cable industry's business model).
  • appleaddict2011appleaddict2011 Posts: 45member
    Quote:
    Originally Posted by AppleInsider View Post


    Though the Apple TV "hobby" is starting to take off, sales of the $99 set-top box just aren't enough to have a major effect on Apple's bottom line.








    It is just a hobby. The folks buying it don't really expect a finished product. Apple folks don't buy Blu-Ray players, so ATV is the best way to access Netflix, and for only $99 it works great.
  • market_playermarket_player Posts: 140member
    Quote:
    Originally Posted by SDW2001 View Post


    The last hurdle is DVR, but that is much tougher as Steve has said (due to the cable industry's business model).



    I believe you have the concept wrong from the start if you are thinking "Why is there no physical media player and how are they going to do DVR"



    Well I can tell you iTunes is the reason for no physical media mate, Apple TV is 90% about selling content off the iTunes store and 10% about getting Apple's foot in the door of the living-room at a great price point.



    When it comes to DVR; personally I feel it's so yesterday, I do not want to go though the bother to fast forward though commercials on a DVR for the small number of shows I would actually record.



    DVR, plus the cost of the service actually works out to more money than if I were to just rent the HD shows from iTunes commercial free, Apple has done a wonderful job at making content available at pretty responsible pricing points.



    Apple TV2 was the prefect gateway for me to completely cut the cable service coming into my home, obviously this will not work for everyone, however people looking for a minimal amount of content will see this is a winning choice.
  • tmctmc Posts: 2member
    Apple will increase the utility of ATV2 when they move itunes to the cloud, then they can charge us all the yearly fee for Mobileme to access itunes in the cloud.
  • patsfan83patsfan83 Posts: 156member
    Quote:
    Originally Posted by AppleInsider View Post


    "One question many investors have asked us is how does Apple add multi-touch capability to a TV? Our answer is the ability to connect the Magic Trackpad, similar to adding multi-touch to its desktop Macs including iMac, Mac mini and Mac Pro. We also see the potential in other peripherals including game controllers."



    Kinda like the Remote app for iPhones and iPads, right?
  • rbonnerrbonner Posts: 632member
    I hope they improve the service soon. Previews work great, but have tried to rent a movie a few times and it failed every time. Long downloads, or it starts only to stop about 3 mins in. I even ran a network connection to the box, same issue. (Screaming network connection here at the home)



    Love the concept, just thinking that the delivery systems are not quite ready.
  • sdw2001sdw2001 Posts: 16,332member
    Quote:
    Originally Posted by Market_Player View Post


    I believe you have the concept wrong from the start if you are thinking "Why is there no physical media player and how are they going to do DVR"



    It depends on one's perspective.



    Quote:



    Well I can tell you iTunes is the reason for no physical media mate, Apple TV is 90% about selling content off the iTunes store and 10% about getting Apple's foot in the door of the living-room at a great price point.



    I doubt that. When Steve Jobs talks about, say, the iPod, he says that he looks at iTunes as a "way to sell iPods." That's really been Apple's stance since the beginning. They aren't making gobs of money from the store, believe it or not. Most of their profits are from hardware. I don't see why the AppleTV is different.



    Quote:



    When it comes to DVR; personally I feel it's so yesterday, I do not want to go though the bother to fast forward though commercials on a DVR for the small number of shows I would actually record.



    DVR, plus the cost of the service actually works out to more money than if I were to just rent the HD shows from iTunes commercial free, Apple has done a wonderful job at making content available at pretty responsible pricing points.



    I don't think that's true for me. I DVR a lot of stuff. And there is a whole load of content one cannot get on iTunes.



    Quote:



    Apple TV2 was the prefect gateway for me to completely cut the cable service coming into my home, obviously this will not work for everyone, however people looking for a minimal amount of content will see this is a winning choice.



    It doesn't work for most people. That's why the it's still a niche product. And, that's why I'm speculating on the next step. It depends...if Apple wants the AppleTV to someday be able to take the place of other content-providing hardware/services, it has to add features. Like it not, physical discs are still necessary, especially if you want true HD content and true theater-like sound. 720P is sufficient for regular TV viewing, but not for home theater. Add the compression to that, and it looks downright bad next to blu-ray and even an upconverting DVD player.



    If it becomes a true media hub, it needs storage and and optical drive. Most of us don't want to fire up our Macbook Pros to stream a movie to the AppleTV. In fact, I don't even blu-ray support on my 2009 MBP. I would have to rip movies off an external drive.



    Don't get me wrong, I have no problem with the product. That is why I asked "Santa" for one! But consider this...how much pontential would this product have if it had what it does now (streaming, networking, iTunes, etc) as well as a blu-ray player and ability to store movies. What if it had a 1 TB drive? What if they found a way to work out DVR functionality (and I think they can)? Then, all you'd need is to purchase HD signal access. All of a sudden my $165 Verizon bill drops by $20-30 a month, and I don't have to deal with their horrible interface.



    It's just a question of what Apple wants it to be someday. Right now it's a hobby product of sorts. It could be more.
  • wurm5150wurm5150 Posts: 763member
    Apple TV combined with it's iOS siblings (as controls) will quietly become Apple's unofficial game console and it's answer to PS, Xbox and Wii..
  • blastdoorblastdoor Posts: 1,431member
    I think the only way to defeat the cable companies and content owners is to turn appleTV into a trojan horse. Get people to buy it because it provides useful functionality that has little to do with traditional TV. Apple has been trying to take that approach, but so far it hasn't generated the volume necessary to make this an effective trojan horse. That's basically because creating such a trojan horse is easier said than done. Other than watch TV and play games, there just aren't a lot of other things that people want to use their TV for. The only other obvious thing is accessing the music/video/photo content in one's computer, and that's what AppleTV does well. But it doesn't appear to be enough to really drive mass adoption. Maybe adding app support will help, but other than games, I'm not sure what types of apps people would want to sue on their TVs (anything that I can think of would probably be better on an iPhone or iPad).
  • bcahill009bcahill009 Posts: 163member
    Quote:
    Originally Posted by rbonner View Post


    I hope they improve the service soon. Previews work great, but have tried to rent a movie a few times and it failed every time. Long downloads, or it starts only to stop about 3 mins in. I even ran a network connection to the box, same issue. (Screaming network connection here at the home)

    Love the concept, just thinking that the delivery systems are not quite ready.







    The people reporting similar problems have found that by changing their DNS it fixes the problem.



    http://www.appleinsider.com/articles...oogle_dns.html
  • drfreemandrfreeman Posts: 111member
    Quote:
    Originally Posted by PatsFan83 View Post


    Kinda like the Remote app for iPhones and iPads, right?





    Maybe we could use the Magic Trackpad for that? The controllers could be on the screen and we use the trackpad to control,zoom etc.





    Just a thought!
  • wally626wally626 Posts: 72member
    Apple just took the hard drive out of the Apple TV so I do not see them adding it back in. There is no particular reason to add an optical disk to the player, it just raises the cost of the device to way over $99 plus making it bigger. A lot of people like DVRs but the economics are horrible, every cable company offers them with no-upfront cost. Apple would have to charge for the capability and add in circuits and software to talk to the cable companies servers. Not impossible but a lot of work for very little money.





    The most likely changes I see going forward for the AppleTV3 would be to add back in some more SSM and allow game/app play using iPods, iPhones, Magic Trackpads etc. as touch controllers.
  • reiferreifer Posts: 25member
    AirPlay is the killer app that has the potential to make ATV a huge success. It's cheap, easy and works incredibly well from a wide range of devices. As it's use is expanded and the masses figure out the magic, sales will surge. I wouldn't consider a home theater set up without one.
  • bcahill009bcahill009 Posts: 163member
    Quote:
    Originally Posted by DrFreeman View Post


    Maybe we could use the Magic Trackpad for that? The controllers could be on the screen and we use the trackpad to control,zoom etc.





    Just a thought!



    Why would you reply to someones comment without reading what they replied to??
  • mknoppmknopp Posts: 257member
    "many users want the device to be able to record TV programs for viewing later"



    As usual, many people are looking backwards while Apple is looking forward.



    Sometimes this looking forward has blown up in their faces (see the Newton), but often it has worked out very well for them.



    The DVR concept is old, and while there are still a lot of people who use it and like it, that isn't what Apple is concerned with. Apple is looking to the future where you don't need a DVR because a backlog of all TV shows will be available online. Heck, that day is almost here already. I had a PVR, but retired it once I figured out that it was much easier to just go to Hulu or the network's website and watch an episode that I missed.



    As for DVD, that is yesterday's technology as well, with Blu-Ray and digital downloads replacing them. And I doubt the "bag of hurt" surrounding licensing of Blu-Ray has gotten any better.



    Honestly, I think that if Apple wants the AppleTV to really take off they need to address the major TV market that is still grossly under served by internet TV, sports fans. They need to be focusing on inking deals with MLB, NFL, NBA, MLS, Nascar, etc. To offer packages like the one offered by Major League Baseball to pay a yearly fee and gain on-deamnd access to every MLB game over the internet. Sports fans typically have disposable income and a large desire to escape the constraints of traditional TV.
  • habihabi Posts: 317member
    But where is the content??? It could be a nice box to own IF there was any content here in EUROPE. There are UK moviestore i guess but thers a lot of other countries here than that....



    What do you do with something that has no content???
  • lkrupplkrupp Posts: 4,362member
    Quote:
    Originally Posted by rbonner View Post


    I hope they improve the service soon. Previews work great, but have tried to rent a movie a few times and it failed every time. Long downloads, or it starts only to stop about 3 mins in. I even ran a network connection to the box, same issue. (Screaming network connection here at the home)



    Love the concept, just thinking that the delivery systems are not quite ready.



    Why do people always assume their personal experience is the norm? Apple doesn't need to improve service. You need to fix your problem.
  • thomprthompr Posts: 1,467member
    Quote:
    Originally Posted by SDW2001 View Post


    Due to the low cost, I went ahead and asked for one from Santa I still don't see why they don't include a blu-ray/dvd/cd player and internal storage. I suppose it's price point. But they could offer an "AppleTVPlus" or something for $299. With a blu-ray player and storage, that would be a steal, and I think doable for them at that price point. The last hurdle is DVR, but that is much tougher as Steve has said (due to the cable industry's business model).



    Apple's decisions - even the seemingly small ones - are not arbitrary. On the contrary, they are very deliberate, and can usually be seen to be consistent with an overall goal. Steve likes consistency and focused goals.



    There is a ton of evidence which suggests that one of Apple's goals is to kill off physical media and move entirely to digital distribution of all content. (Movies, music, software, etc.) Putting any type of disk reader on the Apple TV would not be inline with that goal. Not going to happen.



    Thompson
  • mdriftmeyermdriftmeyer Posts: 6,926member
    AppleTV doesn't use a similar architecture. It uses the same architecture.
  • saareksaarek Posts: 975member
    Quote:
    Originally Posted by AppleAddict2011 View Post


    Apple folks don't buy Blu-Ray players



    Well I'm an Apple user, I use one hell of a lot of Apple products and I've got a Blu Ray player.



    Just because you use Apple products does not mean you won't own Blu Ray players etc!



    On to the rest of the article, the App store..... Damn right captain obvious, this thing needs an app store badly, perhaps not so much for the US customers but for us Brits and the rest of the world.



    The App store would allow the BBC to role out iPlayer within the UK for instance which would be a major selling point over here.



    I love my new Apple TV but it's not nearly as awesome as it could so easily be.
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