Apple positioned to introduce connected HDTV within 2-4 years
Apple is expected to join the lucrative home entertainment market, estimated to be worth $31.8 billion in the U.S. alone, in the next two to four years by offering a $2,000 Internet- and content-connected HDTV.
In a note to investors issued Tuesday afternoon, analyst Gene Munster with Piper Jaffray said the move makes strategic sense for Apple, as the Cupertino, Calif., company has a history of success in redefining mature markets.
"As connected TVs gain traction, software, content and portability will become the key differentiators and Apple is uniquely positioned to deliver a premium all-in-one solution (different than Apple TV)," Munster wrote.
The analyst said he believes Apple will combine hardware, software and content in one product with a competitively priced $2,000 HDTV. When combined with a potential iTunes TV subscription plan priced between $50 and $90 per month, users would no longer have a need for their monthly cable bill.
Munster said Apple's established brand with iTunes and its 125 million accounts overlap into the U.S. HDTV market, which is projected to move 32.4 million units in 2010. He said an Apple-branded HDTV would "move the needle" for the market, with the hardware maker delivering a product that would serve as the replacement for an entire entertainment center, beyond just the display.
In addition, the established iPhone and iPod touch brands, along with the forthcoming iPad, could bring portability to the TV industry, allowing users to take their content with them and watch it anywhere. He said Apple's established brands puts the company in a "unique position," allowing it to be on the forefront of a coming line of HDTVs that will be constantly connected.
In his analysis, Munster said although HDTV shipments are up 268 percent in the last five years, average selling prices for the devices have dropped by 50 percent, and the market's revenue is expected to contract in 2010. He believes if Apple introduced a device that would negate the need for a Blu-ray player, digital video recorder, cable box and game console, the company's $2,000 HDTV could represent a significant change for the market.
He noted that Apple has a great deal of experience with high-definition displays on its iMac desktop. Late last year, Apple introduced a new, big-screen, 27-inch iMac desktop.
The need for a cable box and DVR could be replaced with an iTunes TV pass priced between $50 and $90 per month. And without separate components, consumers would no longer need to pay a professional installation fee.
Another important component of the living room experience is games, a business segment that Apple has found great success in, with the iPhone and iPod touch. With a connected TV with access to the existing App Store, Munster believes Apple could enter the market quite easily.
"Given Apple's recent success in portable gaming," the analyst wrote, "an all-in-one TV could be a logical next-step for the company to expand its reach further into the gaming market with limited risk using an existing technology infrastructure."
Even though the TV hardware market is currently a "challenging, low-margin business," the analyst said he believes Apple could "change the rules of the game" by offering best-in-class hardware, software and content at a premium price.
"If history repeats itself, Apple would find a way to compete in a commoditized market with a premium priced product," Munster said. "An Apple Television would address more than just the HDTV market, as it would likely include audio and video features that could replace the TV itself."
Rumors of an HDTV from Apple are nothing new, and Munster and Piper Jaffray have long been proponents of Apple entering the TV and set-top-box business.
Last September, Apple Chief Financial Officer Peter Oppenheimer cooled speculation that the company might introduce its own set top box with integration with cable providers. The Apple executive said a new box, or functionality added to the existing Apple TV product line, just doesn't fit the company's business model.
A major factor in Munster's forecast calls for Apple to offer a subscription TV plan that would compete with cable operators. Apple is believed to have recently pushed the concept to networks, and while some showed interest, it is believed the company has since tabled that plan and instead pushed for 99 cent TV episodes.
In a note to investors issued Tuesday afternoon, analyst Gene Munster with Piper Jaffray said the move makes strategic sense for Apple, as the Cupertino, Calif., company has a history of success in redefining mature markets.
"As connected TVs gain traction, software, content and portability will become the key differentiators and Apple is uniquely positioned to deliver a premium all-in-one solution (different than Apple TV)," Munster wrote.
The analyst said he believes Apple will combine hardware, software and content in one product with a competitively priced $2,000 HDTV. When combined with a potential iTunes TV subscription plan priced between $50 and $90 per month, users would no longer have a need for their monthly cable bill.
Munster said Apple's established brand with iTunes and its 125 million accounts overlap into the U.S. HDTV market, which is projected to move 32.4 million units in 2010. He said an Apple-branded HDTV would "move the needle" for the market, with the hardware maker delivering a product that would serve as the replacement for an entire entertainment center, beyond just the display.
In addition, the established iPhone and iPod touch brands, along with the forthcoming iPad, could bring portability to the TV industry, allowing users to take their content with them and watch it anywhere. He said Apple's established brands puts the company in a "unique position," allowing it to be on the forefront of a coming line of HDTVs that will be constantly connected.
In his analysis, Munster said although HDTV shipments are up 268 percent in the last five years, average selling prices for the devices have dropped by 50 percent, and the market's revenue is expected to contract in 2010. He believes if Apple introduced a device that would negate the need for a Blu-ray player, digital video recorder, cable box and game console, the company's $2,000 HDTV could represent a significant change for the market.
He noted that Apple has a great deal of experience with high-definition displays on its iMac desktop. Late last year, Apple introduced a new, big-screen, 27-inch iMac desktop.
The need for a cable box and DVR could be replaced with an iTunes TV pass priced between $50 and $90 per month. And without separate components, consumers would no longer need to pay a professional installation fee.
Another important component of the living room experience is games, a business segment that Apple has found great success in, with the iPhone and iPod touch. With a connected TV with access to the existing App Store, Munster believes Apple could enter the market quite easily.
"Given Apple's recent success in portable gaming," the analyst wrote, "an all-in-one TV could be a logical next-step for the company to expand its reach further into the gaming market with limited risk using an existing technology infrastructure."
Even though the TV hardware market is currently a "challenging, low-margin business," the analyst said he believes Apple could "change the rules of the game" by offering best-in-class hardware, software and content at a premium price.
"If history repeats itself, Apple would find a way to compete in a commoditized market with a premium priced product," Munster said. "An Apple Television would address more than just the HDTV market, as it would likely include audio and video features that could replace the TV itself."
Rumors of an HDTV from Apple are nothing new, and Munster and Piper Jaffray have long been proponents of Apple entering the TV and set-top-box business.
Last September, Apple Chief Financial Officer Peter Oppenheimer cooled speculation that the company might introduce its own set top box with integration with cable providers. The Apple executive said a new box, or functionality added to the existing Apple TV product line, just doesn't fit the company's business model.
A major factor in Munster's forecast calls for Apple to offer a subscription TV plan that would compete with cable operators. Apple is believed to have recently pushed the concept to networks, and while some showed interest, it is believed the company has since tabled that plan and instead pushed for 99 cent TV episodes.
Comments
I'd buy a TV with Apple TV functionality and ease of use built in. I can't figure out any of the advanced features on my Samsung.
And BTW while I don't care about this possibility, it would be nice to see what develops. I think Piper Jaffrey is just making things up though.
Since when does your average consumer care about quality?
That's a fair point, a lot of people don't care about quality, but the average consumer does seem to care about "cool" and Apple has that in buckets.
Am sorry but they must be smoking something ..
Here in Germany you can buy a great HDTV for under 1000 Euros ..
And the Apple TV ain't selling much at all already ..
On top they think people will pay what ? 60-90 a Month for a TV Service ? Where do they live ?
Not here thats for sure ..
Here Customers expect DSL / Landline Fone Service with a Landline to Landline Flatrate and TV for something that costs 60 or more ..
I Pay 60 EUROS for a 50MB Down 10Up stream DSL Line with a Landline and flat with a Tivo like Tv Receiver 60 Channels and Free Films / TV Shows plus Rental Film and Films ..
(T-Home Entertain)
You think i Pay another for a TV and subscription on top of this ? NEVER ..
BTW .. i am NO Apple Hater far from it i looooveee Apple ..
Also, in this imaginary scenario, I don't see Apple coming out with "only" a full-fledged TV. I can't imagine Apple not also buffing the current Apple TV to provide these features for those of us who already own our own, perfectly functional, "dumb" TVs.
Since when does your average consumer care about quality?
What the average consumer cares about is irrelevant. That's not Apple's target market.
They aim at the high-end of the consumer market (which results in higher margins). Apple dominates the U.S. luxury PC market (>$1000) at 91% marketshare.
Apple isn't catering to the crowd that is picking up $499 bargains at Wal-Mart.
Anything not able to be streamed is available via DVD. Suck it up while you can, Jobs want's to put a end to Netflix really bad as it's undercutting iTMS.
It's true that a lot of consumers don't care about quality, but for those of us who do, that desire for me doesn't mesh with the narrow sort of offerings that Apple likes to offer. Personally, a TV for me should last around 10 years+. It needs to have a great picture and be easy to use. There's marketing BS that gets put in with TV's and other products that might help with the sale, but rarely gets used. I don't see iTunes going anywhere, but I don't know about buying a TV based on that.
My TV is not a computer. I don't want to actively be interacting with my TV unless I have my computer hooked up to it to show off some photos or videos or something. I want to sit on my butt, channel surf, and veg the F out. Interacting with a DVR is the most you'll get out of me, and that's only if there's nothing on. I'm not lazy in general, but when I'm watching TV that's my time to turn my brain off and relax, so if Apple wants to integrate iTunes, well go ahead, but it had better be trans-freakin-parent.
It makes much more sense if Apple actually made the TV a more powerful and flexible home theatre add-on. Something that plugs into ANY TV on the market from an el-cheapo Westinghouse to high-end Sony or a B&O, or a Loewe:
Merge TV with a Mac mini and call it something Mac media or Mac theatre?
Or introduce a new, high-end model TV running iOS?
Or maybe something like an iPad with beefier specs, capable of supporting Full-HD output, capable of drive an entire home theatre system from your sofa with multi-touch.
The Mac mini route is for the geek and doable now. I'd vote for some sort of iOS device replacing the current TV.
The tv market is not one Apple would do well in; pricing changes so fast Apple would never be able to keep up; new models come out in the spring for $1,799 and by Christmas you can pick them up for $1,050. If Apple isn't prepared to adjust prices accordingly they'll be collecting dust at the end of the isle; people pick tvs first and foremost by picture quality, and it's doubtful Apple will be able to keep up with the Panasonics and Samsungs of the world in that regard. Anyone who would be willing to spend $2k on an Apple-branded 40" television because it has a $229 Apple TV stuck inside is a complete tool.
You still need to pay for internet service. Kind of hard to download off of iTunes without it.
I guess that makes it a one-sided comparison then.
The receiver skews it too, because TVs do include built-in speakers. The Apple counterpart is only stereo, so the TV's speakers should compare well enough.
My 50" plasma cost $1000 with taxes late last year.
Making a box - a better Apple TV makes a lot of sense. Let people pick whatever set they want and connect it to a better box leverages all the expertise Apple already has with none of the risk of the consumer television market.
If Apple brings down the price of the Apple TV to under $99 or $150, and adds a few features, it would be a home run.
Though in some sense it already is successful - based on estimates I read here, it has outsold all other similar devices combined (linksys, dlink, netgear, etc, etc)