Analyst urges Apple to add cable box support to Apple TV

Posted:
in iPod + iTunes + AppleTV edited January 2014
As sales triple year-over-year and a new cable communication standard arrives on the scene at the same time, a new-and-improved Apple TV could become the center of your digital home, according to a Wall Street analyst.



Sales of the Apple TV are up more than threefold over the past year. Bernstein Research analyst Toni Sacconaghi says it might be the perfect time to start taking more seriously what Apple chief Steve Jobs has long referred to as a "hobby." (Acting chief executive Tim Cook used the same terminology only weeks ago.)



"We [at Bernstein] believe the device has the potential to become a major product line," Sacconaghi writes. "In our view, Apple TV could relatively easily evolve into a full-featured digital media hub that can access not only iTunes and personally generated media content but cable TV as well."



That could bring Jobs' vision for the device closer to reality. At the official release in 2007, Jobs described the Apple TV as a potential "fourth leg" for Apple's business where the Mac, iPod and iPhone make up the other three supports.



Most people who use DVRs with digital cable must rent the box from the cable company in order to do so, or subscribe to services like TiVo. But new emerging standards could open up the market to products like Apple TV, according to Sacconaghi.



He adds that new software standard called Tru2way might help Apple in this regard. It eliminates the need for special tuning cards and allows two-way communication from the user's box to the cable system, making services like video on demand and interactive programming guides a real possibility.



Third-party manufacturers can use the Tru2way technology to build their own devices with their own features, creating a new market where customers can choose a set-top box for use with their existing cable service. Apple, Sacconaghi says, is "uniquely positioned" to deliver a compelling device given its experience in hardware and software integration, intuitive user interfaces, and a large installed base of iPod/iTunes users, not to mention the foundation that already exists in the Apple TV.



If the Intel-powered media hub is eventually made to access cable content and act as a DVR, Sacconaghi sees a widely-expanded market for the device than the estimated one million or so units already sold.



"Given roughly 65 million cable TV households in the US, capturing a modest 10% penetration in two years would lead to cumulative Apple TV units of 6.5 million -- or more than 6x the sales rate seen so far," he explains. "Assuming an average sale price of $300 per unit... given the increased functionality, the product could contribute roughly $1 billion in hardware revenues per year."



Additionally, the analyst predicts, the new machine would drive adoption of other Apple products like Macs, iPods, and iPhones, giving customers seamless integration of their content whenever and wherever they choose, with the Apple TV serving as the media server at the center of it all.



Apple TV and its Netflix-capable rival from Roku.



Elsewhere, BusinessWeek's Arik Hesseldahl suggests Apple could follow the iPhone model and open up the Apple TV platform to third-party applications which users could download and install, enabling integration with online services like Hulu, Joost, CBS, and any other features Apple doesn't provide itself.



Hesseldahl argues Apple should foster the same flexibility that helped the iPod take off, allowing users to bring together a variety of file formats since relatively small portions of most libraries are actually purchased from iTunes. Applied to the Apple TV, users could bring the videos they already own into the unit; however, whether or not customers would be able to digitize or even play DVDs is still a legal gray area and frequently opposed by movie studios.



Apple introduced the Apple TV primarily as an easy way to wirelessly play iTunes content, including movies, TV shows, music, photos and podcasts, on a widescreen TV at Macworld 2007. Apple later added YouTube functionality that June.



Since then, updates have been slow. It wasn't until Macworld 2008 when a new software update accompanied a price drop to $229 for the 40GB model, while users could also quadruple their storage with the 160GB unit for another $100. Dubbed Take 2 and available free to existing Apple TV owners, the new software added the ability to rent movies from the iTunes Store directly from the device, including HD video and, later, HD television shows.



Apple has added Flickr and Mobile Me photo gallery integration since the original release, but Macworld 2009 was the first in three years not to see any updates concerning the Apple TV.
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Comments

  • Reply 1 of 61
    Where they hell are they getting any notion of Jobs' "vision" for the device when all he's said is that it's a hobby, something which Cook has reiterated?



    Never mind that the device, all on its own, has tripled its sales without the vision thing from Apple.



    Apple has a history of creating its own channels for content, not dipping into current ones. The iTunes Music Store. iTunes Movies. iTunes Rentals. The iTunes App Store.



    Does Apple have an interest in releasing a box there's little profit in and giving it access to content that's in competition to iTunes. Given that it would also have to start following all the hullabaloo of supporting Cable Cards...



    There's no upside for Apple there.



    As for already supporting Flickr and YouTube? They're no threat, and they in fact help draw people away from content that's available thru...wait for it...cable companies!
  • Reply 2 of 61
    Quote:
    Originally Posted by AppleInsider View Post


    As sales triple year-over-year and a new cable communication standard arrives on the scene at the same time, a new-and-improved Apple TV could become the center of your digital home, according to a Wall Street analyst.





    I hate the closed iPhone business model but if they really wanted to make this a success they would partner with Time Warner Cable or AT&T U-Verse to sell as an exclusive product. The company would subsidize the cost to the consumer because it would generate so much new business and they would work with Apple to ensure that there was compatibility with the network and even create many advanced services that would take years to develop were they not collaborating. Seems like a no-brainer to me. Plus, the added marketing that the partnership would bring and the entrenched consumer base to the cable operator, I think a LOT of people would pick this up.
  • Reply 3 of 61
    wijgwijg Posts: 99member
    Makes sense to me.



    Except...

  • Reply 4 of 61
    Quote:
    Originally Posted by WIJG View Post


    Makes sense to me.



    Except...



    Please... all it would take is a software app for the iPhone/iPod Touch. Instant remote control.
  • Reply 5 of 61
    Don't misunderstand, I love my AppleTV, but I never liked the notion of adding more to my home entertainment system especially as Apple's "philosophy" seems to focus on simplicity. At the time of AppleTV's release, I recall commenting that becoming an all-in-one home entertainment device would be ideal. A device that could replace your Cable box and DVD player, bridging devices such that only an AVR and AppleTV device would be required for a home entertainment system. Granted, AppleTV does not have a Blu-Ray/DVD player, however with advancements in technology perhaps high-definition DVD's will become less necessary in lieu of high-definition digital wireless media (again, as technology advances and 1080p over-the-air media downloads are improved). Again, it's all about simplicity, and bridging devices into a capable all-in-one unit would be ideal.
  • Reply 5 of 61
    galleygalley Posts: 971member
    Every single person I know has satellite service.
  • Reply 7 of 61
    wijgwijg Posts: 99member
    Quote:
    Originally Posted by makkystyle View Post


    Please... all it would take is a software app for the iPhone/iPod Touch. Instant remote control.



    Such an option would be a natural feature to include, But it couldn't be the whole solution--too expensive, no battery life, no power over the remote. How would you block a family member from usurping channel control via their iPhone?



    EDIT:

    Plus, how do you change channels when you're talking to someone on your phone?
  • Reply 8 of 61
    aaarrrggghaaarrrgggh Posts: 1,583member
    Problem is now there are three options: Cable, Fios, and Sat. Can't do all three, so all it can really do is take advantage of IP backhaul common to all.
  • Reply 9 of 61
    Quote:
    Originally Posted by WIJG View Post


    Such an option would be a natural feature to include, But it couldn't be the whole solution--too expensive, no battery life, no power over the remote. How would you block a family member from usurping channel control via their iPhone?



    I'm not sure how that's a problem. You can accomplish the same thing right now with IR remotes (if you have two of them... like many households do). In fact it would be easier to limit the number of active remotes because you could limit the number of BT or WiFi connections (a la iTunes Remote for the iPhone/Touch). Ultimately though, there would have to be an included remote that was more basic, but I have a feeling apple would opt for something very similar to what iTV uses already and just use on screen cues to perform more than just basic functions (similar to using a PS remote to control a DVD). The iPhone/Touch app would just be a bonus if you had one... or an incentive to buy one
  • Reply 10 of 61
    Quote:
    Originally Posted by aaarrrgggh View Post


    Problem is now there are three options: Cable, Fios, and Sat. Can't do all three, so all it can really do is take advantage of IP backhaul common to all.



    Hence my suggestion above. The same way visual voicemail is only possible through partnership with a service provider.
  • Reply 11 of 61
    hmurchisonhmurchison Posts: 12,307member
    If this latest recession has taught me anything it is to take a close look at my monthly expenditures and assess what these services offer me.



    I and my gf have come to the conclusion that Comcast simply isn't worth near $1000 per annum.



    I don't watch that much TV nor do I have to watch an episode the minute is broadcasts. I'm perfectly content with catching up on series via netflix and with Hulu and other service joining the fray I don't quite view the Apple TV becoming cablco extension as something that is likely to cause a sea change for Apple or consumers.



    If I've bought into the whole Bronze/Silver/Gold "all I can eat" boodoggle then I'm going to gorge myself on this content which means i'm certainly not going to be buying much iTunes content. Apple's goal is to sell iTunes content not become a conduit for Comcast or the like.



    What Apple needs is smartly priced content that encourages more iTunes use. I'd certainly suggest they support Hulu as the networks are behind that and frankly they need to investigate what pricepoints are teneble for consumers for content broadcast for free. Seeing as how Hulu is add supported Apple needs to find a way of delivering this content cheaper than what they are doing today.



    My immediate plans are for HD OTA (Off The Air) and Netflix. I don't plan on returning to 80 buck a month plans anytime soon.



    Though if you watch a lot of TV and want to package'up then True2way and Apple TV may just be what you're looking for.
  • Reply 12 of 61
    (Not too many) years from now, the idea of getting content by being at the right place at the right time (on channel 4 at 8:00 PM) is going to seem ridiculous.



    AppleTV doesn't have a DVD drive because they consider it old tech. Interfacing with a cable box is no different and would really be a near-sighted move (and difficult at that!)



    What'd be far more useful and forward-looking is interfacing with Hulu and ABC.com and other places where on-demand, streamable content is freely available.
  • Reply 13 of 61
    wijgwijg Posts: 99member
    Quote:
    Originally Posted by aaarrrgggh View Post


    Problem is now there are three options: Cable, Fios, and Sat. Can't do all three, so all it can really do is take advantage of IP backhaul common to all.



    Wired magazine has a good article about Comcast. Page 2 addresses the alternatives to cable and explains why they may be doomed. Basically, cable is faster and cheaper.



    If the Apple TV goes cable box, I can't really see Apple partnering with a cable provider to do it. The only partner that would make sense would be Comcast and people hate Comcast.



    Even so, a partnership could have great advantages. In addition to those named by makkystyle, Apple could arrange to secure priority network access for users downloading content from iTunes. (This is an argument against net neutrality.)



    (A cable Apple TV box could also include WiFi. That could actually help promote downloads from iTunes.)
  • Reply 14 of 61
    pmjoepmjoe Posts: 565member
    Quote:
    Originally Posted by AppleInsider View Post


    He adds that new software standard called Tru2way might help Apple in this regard. It eliminates the need for special tuning cards and allows two-way communication from the user's box to the cable system, making services like video on demand and interactive programming guides a real possibility.



    Third-party manufacturers can use the Tru2way technology to build their own devices with their own features, creating a new market where customers can choose a set-top box for use with their existing cable service. Apple, Sacconaghi says, is "uniquely positioned" to deliver a compelling device given its experience in hardware and software integration, intuitive user interfaces, and a large installed base of iPod/iTunes users, not to mention the foundation that already exists in the Apple TV.



    There is definitely an opportunity with Tru2way. Other than some Panasonic TVs that almost nobody will buy, pretty much everything announced is heading to cable companies for rental units. If Apple made an ATSC OTA/Tru2way capable Apple TV I'd buy one right away.
  • Reply 15 of 61
    irnchrizirnchriz Posts: 1,591member
    Not going to happen.... ever!



    Why would Apple even consider such a move? They provide their own movie/TV rental/purchase store. Why mess about with cable providers?



    Maybe they should look at Netflix and provide a streaming subscription service but with Apples slick sales and hardware behind it.



    e.g. Apple TV and iPhone/Touch streaming services etc.
  • Reply 16 of 61
    wijgwijg Posts: 99member
    Quote:
    Originally Posted by irnchriz View Post


    Not going to happen.... ever!



    Why would Apple even consider such a move? They provide their own movie/TV rental/purchase store. Why mess about with cable providers?



    Maybe they should look at Netflix and provide a streaming subscription service but with Apples slick sales and hardware behind it.



    e.g. Apple TV and iPhone/Touch streaming services etc.



    As some people will often point out (especially when discussing the prospect of Apple licensing OS X to clones), Apple is a hardware company. Like pmjoe, I'd buy one. (I'd never buy Apple TV without BluRay and/or cable.)
  • Reply 17 of 61
    Apple adding a TV tuner and/or DVR functionality to Apple TV has as much chance as them adding a built-in radio tuner (analog, digital, satellite, or otherwise) to iPods. It's simply not going to happen. The same goes for adding a DVD or BluRay drive.



    The content for Apple TV, like the content for an iPod, comes from or through iTunes and the Internet (including ripped CDs, YouTube, Flickr, podcasts, etc.).



    More likely are deals with studios to get their TV show content available through iTunes without the 24 hour waiting period that currently exists.



    Imagine that you've purchased a season pass to a show you like on iTunes. Then a few minutes before the show is first scheduled to air in the U.S. your Apple TV and/or iTunes starts buffering the download of that show and allows you to stream it just like watching a movie through Apple TV. Voila, you get to watch the show starting at the same time as everyone else (the buffered part will be "locked" until the time the show is supposed to start airing on broadcast). To make up for the lack of commercial revenue for the studios you'll have to pay an extra "Plus pass" type fee (like $5 on top of the season pass), and/or there will be single commercials inserted into the commercial breaks a la Hulu (and just like on Hulu, you WON'T be able to skip past them!). Fortunately, those commercials won't actually be saved on disk with the show, so subsequent viewings (or maybe viewings after the first 24 hours) will be commercial free.



    There's simply no way Apple is going to do something with Apple TV that just gives revenue to the cable/satellite/etc. providers, when *they're the competition.*



    Notice how the current sources of content for the Apple TV and iPods are largely non-commercially supported (the exceptions are some podcasts, and maybe with some Internet streaming radio apps for the iPhone and iPod Touch).



    Bear in mind that unlike Apple's other products Apple TV is hardware designed to sell content, which is a reverse of Apple's usual content/software to sell hardware model. This is a large part of why Apple still considers it only a hobby.



    Other makers of set top boxes, PC tuner hardware, etc. are actually selling their gear more like Apple's non-Apple TV products where the majority of their revenue comes from the hardware (TiVo is in-between, trying to make money off both hardware sales and subscription fees for their guide). Those other hardware makers are more likely than Apple to add cable/satellite/etc. functionality as a result.



    A big problem these so-called "analysts" (and many followers of tech) have is that many of them simply can't see Apple TV as anything but just another set top box. For some reason they just don't grasp the fundamental differences I've described above.



    Lun Esex
  • Reply 18 of 61
    trip1extrip1ex Posts: 109member
    Yeah they'd have to partner with the cable companies. Really since cable companies don't have much overlap you could partner with all of them eventually. Otherwise the cable companies have too much power. HIstory has shown they don't support these open standards very well.



    Plus it would be hard (for Apple) to compete against free. Ask Tivo. The cable cos give out boxes for free.



    (Actually I think Satellite companies would be a more logical partnership since they don't do 2-way communications as well as cable cos.)





    As for DVR functions it would be hard to beat Tivo which is quite slick.



    Realistically though Apple is competing against the cable cos.



    So I like the idea of supporting 3rd party apps and letting ATV access Hulu and more sites like that.



    And I think Apple needs a Netflix model for video content. The biggest problem with ATV is the content is too expensive.
  • Reply 19 of 61
    wijgwijg Posts: 99member
    Quote:
    Originally Posted by Lun_Esex View Post


    Apple adding a TV tuner and/or DVR functionality to Apple TV has as much chance as them adding a built-in radio tuner (analog, digital, satellite, or otherwise) to iPods.



    The difference is:



    People want iPods; iPods contribute to Apple's business; nobody cares if their iPod has a radio or not.



    People don't particularly want Apple TVs (much less want to pay for them); until that changes, Apple TV will remain a "hobby"; lots of people want BluRay/cable TV.



    When you consider that Apple TV requires: a computer, a flat-screen TV, and WiFi...

    and offers very little functionality...

    I think a cable box is a great idea.



    It would offer cable that works with any TV, opening up sales to a vast number of people. Consumers that already have a flat-screen and a computer would get to use Apple TV as originally envisioned. They wouldn't have to shell out extra bucks for a wireless router either (provided it's included in Apple TV).



    It's worth remembering that a lot of would-be Apple consumers just can't afford it. With iPods, Apple started to change that. All the requirements of Apple TV are impediments to its success. I understand Apple wants to sell content in addition to hardware, but it will have to do it like they did with the iPod--by first making it ubiquitous, relatively cheap, and compatible with content appart from iTunes.



    Bottomline: Apple has to add value (somehow) to Apple TV if they ever want it to sell.
  • Reply 20 of 61
    Over on the apple.com support forum, the highly-rated members will waste no time to tell you that AppleTV is a low-end consumer device, incapable of anything approaching quality reproduction of the media it plays. Mediocrity rules.



    Does Apple plan to change AppleTV's design goal of striving for mediocrity?
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