Apple fit with early lead in "digital living room"
While some investors may question Apple's ability to carry its lead in music into the digital living room with Apple TV, researchers at PiperJaffray & Co believe the iPod maker is entering the market with a tenfold edge over its closest competitor.
"We believe iTunes is a trojan horse media center, which will give Apple a significant early lead in the digital living room," Sr. Analyst Gene Munster told clients in research report on Friday.
Although the Cupertino-based company does not disclose its iTunes user base statistics, Munster estimated that there are at least 110 million users of the digital jukebox software which will combine to represent the preliminary addressable market for Apple TV.
By comparison, the analyst said the closest Windows-based product is Windows Media Center with an estimated 23 million Media Center-enabled PCs in the market. However, he said there appear to be only about 12 million actual Media Center users.
"In other words, Apple has a 10x headstart in the digital living room," he wrote.
PiperJaffray believes the digital living room could emerge into $4.7 billion business by 2008 if Apple is able to maintain its 70 percent share of the digital music market and one in ten iTunes users buys an Apple TV that year.One of the device's strongest selling points is expected to be the simplicity it offers consumers looking to view their iTunes content on a living room television set.
"The product answers a problem many users don't even know they have," Munster said. "Viewing downloaded content on a TV is presently too difficult for the average iTunes user. But with AppleTV, the connection with iTunes is made automatically and all of the setup takes place in the familiar iTunes environment."
On that chord, the analyst said he believes the adoption of Apple TV will arrive in three phases, starting with tech-savvy iTunes users who have pre-ordered the device and expanding over the next six months to iTunes users with large media libraries.
Looking into the longer term, Munster eventually expects that Apple TV will blossom into the de-facto standard for the widespread adoption of digital movies in the living room, helped along the way by incremental additions to the iTunes movie catalog.
"With the proliferation of digital video content, the adoption curve for the AppleTV will become steeper," he wrote.
iTunes has seen a surprisingly quick start to its video sales that supports the confident stance, according to recent statistics. Over 50 million TV shows and 1.3 million movies have been purchased from the online store since it first began selling video in October 2005.
Up close and personal: Apple TV photos from Macworld.
In his report, Munster was also careful to calm fears that the $299 price of Apple TV would scare away shoppers, who are used to receiving Windows Media Center being factored into the cost of a new PC. A media hub such as Apple's may be more expensive, he said, but owners also expect more value to come out of using dedicated hardware than they do a software bundle tied to a computer.
"Media Center is often looked at as a throw-in," the analyst commented, having been convinced that Apple could ultimately make a more compelling argument by feeding into customer expectations of where and when they can watch their content. The need for a traditional computer is also on the decline.
"Apple is betting on people wanting to watch video content on their televisions rather than their computer screens," Munster added. "We believe [that] is a strategy that consumers will prefer as the computer and the TV slowly converge."
"We believe iTunes is a trojan horse media center, which will give Apple a significant early lead in the digital living room," Sr. Analyst Gene Munster told clients in research report on Friday.
Although the Cupertino-based company does not disclose its iTunes user base statistics, Munster estimated that there are at least 110 million users of the digital jukebox software which will combine to represent the preliminary addressable market for Apple TV.
By comparison, the analyst said the closest Windows-based product is Windows Media Center with an estimated 23 million Media Center-enabled PCs in the market. However, he said there appear to be only about 12 million actual Media Center users.
"In other words, Apple has a 10x headstart in the digital living room," he wrote.
PiperJaffray believes the digital living room could emerge into $4.7 billion business by 2008 if Apple is able to maintain its 70 percent share of the digital music market and one in ten iTunes users buys an Apple TV that year.One of the device's strongest selling points is expected to be the simplicity it offers consumers looking to view their iTunes content on a living room television set.
"The product answers a problem many users don't even know they have," Munster said. "Viewing downloaded content on a TV is presently too difficult for the average iTunes user. But with AppleTV, the connection with iTunes is made automatically and all of the setup takes place in the familiar iTunes environment."
On that chord, the analyst said he believes the adoption of Apple TV will arrive in three phases, starting with tech-savvy iTunes users who have pre-ordered the device and expanding over the next six months to iTunes users with large media libraries.
Looking into the longer term, Munster eventually expects that Apple TV will blossom into the de-facto standard for the widespread adoption of digital movies in the living room, helped along the way by incremental additions to the iTunes movie catalog.
"With the proliferation of digital video content, the adoption curve for the AppleTV will become steeper," he wrote.
iTunes has seen a surprisingly quick start to its video sales that supports the confident stance, according to recent statistics. Over 50 million TV shows and 1.3 million movies have been purchased from the online store since it first began selling video in October 2005.
Up close and personal: Apple TV photos from Macworld.
In his report, Munster was also careful to calm fears that the $299 price of Apple TV would scare away shoppers, who are used to receiving Windows Media Center being factored into the cost of a new PC. A media hub such as Apple's may be more expensive, he said, but owners also expect more value to come out of using dedicated hardware than they do a software bundle tied to a computer.
"Media Center is often looked at as a throw-in," the analyst commented, having been convinced that Apple could ultimately make a more compelling argument by feeding into customer expectations of where and when they can watch their content. The need for a traditional computer is also on the decline.
"Apple is betting on people wanting to watch video content on their televisions rather than their computer screens," Munster added. "We believe [that] is a strategy that consumers will prefer as the computer and the TV slowly converge."
Comments
I'm most interested in the Audio and Photo playback abilities. I do agree that most MCE edition PCs aren't used in that fashion. My gf has a MCE Laptop and she doesn't have a clue about what it could do.
Can Apple make a dent in the home video industry with a device that cannot playback surround sound audio?
Isn't that what the TOSLINK output is for?
Edit: Oh, there were some problems with QuickTime and output of surround on optical, were there not?
1. iTunes TV Show subscription service with some free live content (not including Podcasts, YouTube or Google video, I'm talking news)
2. Make Apple TV connect directly to the internet without the need for a computer.
3. Make Apple TV with bigger hard drive.
4. Manufacturer actual TV's with built-in Apple TV.
Isn't that what the TOSLINK output is for?
Edit: Oh, there were some problems with QuickTime and output of surround on optical, were there not?
Nope. Apple TV only does stereo. It can therefore do Dolby Pro-Logic surround sound, as the surround-sound info is embedded in the stereo signal.
I'm pretty dumbfounded that the ATV doesn't do proper 5.1/6.1 surround sound, or natively decode MPEG-2. If the ATV supported AC3, DTS, MPEG-2 and DVD's CSS copy-protection system (all of which are easily technically achievable), Apple would be able to provide a solution to watching ripped DVDs from your computer without them contravening the DMCA.
iTunes could just copy the data from DVDs, with the CSS and region coding etc. still in tact, then stream that info to the ATV which would de-scramble the content, decode it, and show it on your TV.
As it stands, users in America who want to watch their own legally-purchased DVD content via an ATV would have to risk breaking the law (I believe removing CSS for personal use purposes still hasn't been tested in court) by ripping the content to disk, removing CSS, converting the video to MPEG-4 (losing quality) and the audio to Stereo AAC or MP3 (again losing quality).
I honestly can't believe the ATV sucks so badly and hardly anyone's noticed.
I honestly can't believe the ATV sucks so badly and hardly anyone's noticed.
Well, I guess the people who have ordered it are not buying it to watch DVDs streamed from their computers... Most of us do have DVD players already!
Furthermore, there are millions of us who never had "proper 5.1/6.1" sound. For those of us, this will not be a step down at all.
I don't doubt that Apple will offer better sound output some day, but many of us don't see it as an earth shattering omission.
My biggest problem is still content. Like hmurchison said, if I got it now, it would be for photos and iTunes streaming. Course, at $300 I don't see that happening. I would do it in a heartbeat, however, with a near DVD quality movie rental/streaming service. I like Netflicks fine (I hate Blockbuster) but I would drop them in a sec for this. $10 a movie will not fly for me--not for casual watching.
I am intrigued, but I will just wait and see for now...
If we look back on VHS vs. Betamax, porn was available on VHS but not Betamax. If we look at the earliest success of media and the net, it was porn.
My guess is that there are a large number of people who would also love to watch their internet porn on their TV and many would purchase an AppleTV to do so (although I doubt many would admit this). Look at how many TV shows and movies have been downloaded from iTunes. These statistics are nothing compared to the amount of porn consumed over the internet.
Apple, as a fortune 500 company can't get distribute porn? The large hotel chains do and no one seems to care. I also don't think that we would see the DRM issue from the porn studios (if we can call them that) - my gut feeling is that most of us wouldn't admit to consuming porn, let alone sharing it with our friends.
Well, I guess the people who have ordered it are not buying it to watch DVDs streamed from their computers... Most of us do have DVD players already!
But do a lot of people not also have a CD player and yet have all their CDs ripped to iTunes?
This is what is so frustrating about the AppleTV - all the technology (hardware wise) is right there for iTunes + AppleTV to do for video from DVD what iTunes + iPod did for music from CD, and yet Apple is not doing it.
Imagine a small, low power server with large storage capacity hidden away somewhere, that has all the household's music and video content, most ripped from CD and DVD and some bought from iTunes, stored on it, that can then share that content to clients around the house - e.g. Airport Express or Roku Soundbridge for music, AppleTV for music and video, or computers running iTunes for music and video.
Gene Munster is clueless. Apple needs to do "four" things to take the digital living room:
1. iTunes TV Show subscription service with some free live content (not including Podcasts, YouTube or Google video, I'm talking news)
2. Make Apple TV connect directly to the internet without the need for a computer.
3. Make Apple TV with bigger hard drive.
4. Manufacturer actual TV's with built-in Apple TV.
The AppleTV to be ubiquitous has to be industry compliant and not give a crap about the output device. Apple should not make a Television for it.
There is always an external drive option.
Freelive content is up to the producers of such content. Apple is not a Broadcasting Company that produces Film/TV.
Google Video for AppleTV ala .Mac where people can upload and vend their AppleTUBE broadcasts is an interesting idea and somehow I imagine Apple would put uploading such content on a staging system. If the content isn't ripped from other copyrighted material and is proven to be yours then I can see it happening. Otherwise, Apple will wait for Google to either go down in flames with Viacom to get that gutsy.
The AppleTV to be ubiquitous has to be industry compliant and not give a crap about the output device. Apple should not make a Television for it..
You don't really get it, I'm not talking about a TV for Apple TV.. I'm talking an Apple TV that is a TV, as in a TV screen with a built-in Apple TV box - a TV from Apple with a 250GB hard drive, a slot load DVD drive and wireless Apple TV-like connection.
Most people are going to use it to play audio through the TV and speakers.
A second gen machine should address more demanding options.
Tech savvy iTunes users or just plain tech savvy computer users in general did not pre-order this device, as they have already configured a way to view their iTunes and other media on their TVs.
This is just more proof that analysts are idiots.
Gene Munster is clueless. Apple needs to do "four" things to take the digital living room:
1. iTunes TV Show subscription service with some free live content (not including Podcasts, YouTube or Google video, I'm talking news)
2. Make Apple TV connect directly to the internet without the need for a computer.
3. Make Apple TV with bigger hard drive.
4. Manufacturer actual TV's with built-in Apple TV.
You hit the nail on the head perfectly. Youtube/googlevid type stuff is crap. Nothing worthwhile besides a few minutes of laughter twice a year. No real content of value whatsoever. I've already said in previous statements how pointless I think the iTV is at this stage so I won't go into it again [hence no DVR type support, no point to having it in my living room. I'm not going to pay $2-$10 for a TV show that I can get on my cable for free. And yes my cable service fee is being factored into this as "free" because unless there is massive free content or an AppleCable-type subscription service with hundreds of live channel/feeds, there's no way I could cancel my cable tv service]. 3 shows at $3.00 each or whatever just isn't going to cut it. What a total waste of money.
I've already said in previous statements how pointless I think the iTV is at this stage so I won't go into it again [hence no DVR type support, no point to having it in my living room.
The AppleTV has "DVR type support".
EyeTV/Migilia hardware connected to Mac; encode in H.264; auto-load into iTunes when complete; available via AppleTV. Using your Mac as a DVR is cheaper than buying TiVo/subscription or renting DVR from your cable company, and comes with many many other benefits.
Damn "Porky's" and their howling girls....
Nope. Apple TV only does stereo. It can therefore do Dolby Pro-Logic surround sound, as the surround-sound info is embedded in the stereo signal.
I'm pretty dumbfounded that the ATV doesn't do proper 5.1/6.1 surround sound, or natively decode MPEG-2. If the ATV supported AC3, DTS, MPEG-2 and DVD's CSS copy-protection system (all of which are easily technically achievable), Apple would be able to provide a solution to watching ripped DVDs from your computer without them contravening the DMCA.
iTunes could just copy the data from DVDs, with the CSS and region coding etc. still in tact, then stream that info to the ATV which would de-scramble the content, decode it, and show it on your TV.
As it stands, users in America who want to watch their own legally-purchased DVD content via an ATV would have to risk breaking the law (I believe removing CSS for personal use purposes still hasn't been tested in court) by ripping the content to disk, removing CSS, converting the video to MPEG-4 (losing quality) and the audio to Stereo AAC or MP3 (again losing quality).
I honestly can't believe the ATV sucks so badly and hardly anyone's noticed.
will police come to each ATV users' home and check?