Why Apple TV Just Became Apple's Most Important Product

There are coincidences in this world, and it's important not to read too much into them. Spotify playing the song stuck in your head doesn't make you psychic. But then there are coincidences you can't help but think might mean a little bit more. Like, say, three heavy hitter holdouts all hopping on Apple TV within two days of each other.

Giz AU editor's note: This is a US-centric speculative piece. It's unclear what it could mean for Australian users — if anything at all — but feel free to read and make up your own mind.

Maybe it's just one of those things. Or maybe it's a sign that something major is in the works. Let's embark on some wild conjecture, shall we?

The Big Three

Two days ago, word came out that Hulu Plus had crash-landed on Apple TV units in the US. It's hard to overstate what a big deal this is; the assumption had long been that Apple didn't want Hulu on its streaming box because it directly competes with Apple's own highly profitable iTunes offerings. Who's going to buy a $US30 season pass to Modern Family when it's rolled into your $US8/month Hulu Plus subscription?

That's not just idle speculation either. Hulu Plus had reportedly been ready to go — and running on Apple TVs in Cupertino — for nearly a year already. The reason for the delay, according to 9to5Mac, were concerns that Hulu Plus would eat into iTunes sales. For some reason, as of this week, those concerns were cast aside.

And then yesterday Amazon Instant Video debuted on American iPads. Amazon Prime members have wanted this for a long time, but it was an even bigger weed in Apple's walled garden than Hulu Plus. Not only does Amazon have a selection of for-purchase digital movies and TV shows that rivals Apple's catalogue, its prices are always competitive with iTunes (and often cheaper). It currently makes zero sense for Apple to allow Instant Video on the iPad, and it's not like Cupertino had to open that door for any reason. Apple can — and does — reject any app it deems too similar to iTunes.

But Amazon Instant Video slipped through, albeit with some notable restrictions. You can't purchase content through the app, for one. That's unsurprising since Apple takes a juicy 30 per cent bite out of every in-app sale, and Amazon's warehouse-model margins are thin enough already without conceding that cash. And, for now, the app doesn't support video AirPlay streaming, which Amazon appears to have opted out of.

In fact, Amazon's approach to Instant Video on the iPad seems remarkably similar to the one it took for Kindle: point people in the right direction and they'll make plenty of purchases in a browser that they can access later from the app.

Finally, Apple recently added Sky Now TV in the UK Apple TVs. That makes three major content providers (read: competitors) that Apple's embraced in two days.

So what gives?

A Turning Point

This is a major change in attitude for Apple, a company that's kept a dragon-filled moat around its content castle since the foundation stone was laid. This is all happening at once. We know — or at least firmly suspect — that Hulu Plus had been in the works for a year before Apple relented. Who's to say Instant Video hadn't been waiting for approval just as long? It's a marquee product that Amazon has been pushing for months and months. The economic model for it to work on the iPad was laid out by the Kindle app forever ago. Why the delay? An Amazon spokesperson declined to comment.

So we're left with two possibilities: either Amazon was just lazy, which doesn't sound very much like Amazon, or Apple finally conceded.

Here's where the speculation ramps up even more. Why would Apple suddenly agree to put Amazon Instant Video and Sky Now on the iPad, and Hulu Plus on Apple TV? Because Apple TV is getting serious, and Apple's laying the groundwork for it to finally have apps.

Pulling the String

Apple's ambitions for Apple TV have been muted at best, but there's no question the company sees a future for it. Despite repeatedly calling it a "hobby", CEO Tim Cook also had the following to say about Apple's wee streamer:

"There's a lot of people here that are believers in Apple TV and we continue to invest in it and see where it will take us… We [keep pulling the string] because we think it can lead us somewhere, so we'll see."

That could mean anything or nothing. But the pieces that make up a supercharged Apple TV are gradually falling into place. Apple TV 2's 1080p broadcasts in near-Blu-ray quality fidelity. Its revamped menu system echos iOS in a way that would accommodate a much fuller screen. And Mountain Lion's biggest upgrade — desktop mirroring — could actually be reasonably considered an Apple TV feature.

The one thing Apple TV doesn't have on its competitors is content. As of last December, there were over 500 official channels available on Roku, along with a handful of private streamers that sneak in live TV and other goodies. Xbox has content and games. Not counting the features powered by your iTunes account (Podcasts, Music, Movies), Apple TV now has 10 offerings.

Apple's clearly committed, both in word and actions, to steadily improving its most famous "hobby". And right now there's only one gaping hole in its game, one that's easily filled with the likes of Hulu Plus, Amazon Instant Video and Sky Now TV.

A Numbers Game

Here are a few numbers for you to toss around in your brain: 1.3 million, 663 million, two billion. They're all crucial to what we may be watching unfold.

  • 1.3 million: That's how many Apple TVs the company sold in the last quarter alone. Want a jaw-dropping frame of reference? Apple sold more Apple TVs in the last nine months than it did iMacs and Mac Pros combined.
  • 663 million: That's how many dollars in revenue Apple gobbled up in that same quarter from the combined sales of Apple TV, its AirPort and Time Capsule devices, and displays. It's by far the company's lowest-revenue product category.
  • 2 billion: Apple's dollars in revenue — again, just last quarter — from iTunes, App Store and iBookstore sales, with the odd iPod accessory tossed in. It's the fastest-growing source of cash for Apple behind the iPad. Because it's almost entirely composed of 30 per cent bites out of content sales or in-app purchases, the overhead is practically nonexistent. More bluntly: it's a cash cow.

Why would Apple concede a large chunk of that content cash by allowing competitive products into the fold? Because it knows it's chasing bigger game.

Four million Apple TVs have been purchased in the last nine months. That's with zero promotional effort for a product with no apps and only a handful of partners. Again, perspective time: last quarter, Apple sold more total Apple TVs worldwide than Lenovo or Acer sold PCs in the US.

Now imagine if Apple TV got a full-on marketing push. Imagine if Apple opened up that Apple TV SDK or put it on a strict iOS diet. Your iTunes users are still there, because AirPlay's a joy, and people love feeling snug in their ecosystems. But you also bring in Amazon users, and Hulu Plus users, and, I dunno, the three or four Crackle devotees. Why would you ever get a Roku then?

And at that point, why would Apple need an HDTV?

Cracking TV

Steve Jobs told Walter Isaacson that he believed he'd "cracked" TV. Did he do it with a television set, as so many analysts continue to insist? Or did he understand that asking people to spend over $100 on a little black box with TV superpowers that gets upgraded every year is much easier than asking them to spend $2000 on a TV set they keep for five?

And there's no reason an app-filled Apple TV couldn't be the centrepiece of your home entertainment system right now. Apps have been on jailbroken Apple TVs for almost two years at this point, and an Apple TV SDK was a strong favourite to be revealed at this year's WWDC.

So why the wait? Who knows. Maybe Apple couldn't decide which was king — content or hardware. Maybe those 1.3 million units surprised them as much as it did the rest of us. Or maybe Hulu and Amazon were holding out, but they read the tea leaves — or were tipped directly — and got in line.

Hulu Plus. Amazon Instant Video. Sky Now TV. A levee broke in Cupertino this week, and those Apple TV and iPad apps are just the first trickles of a deluge of content rushing to your television. Toss in HBO Go and you've got yourself a juggernaut.

In six weeks, Apple's going to announce a new iPhone, sure, and maybe an iPad Mini. But its biggest announcement will be Apple TV apps. And with them, the conquering of your living room.

Or maybe it's all just a coincidence.


Comments

    Next stop Flash compatibility?

      Flash is dying son

        No, not really.

      Next stop the late 90's?

    I know a lot of people who have purchased AppleTV and installed XBMC on it instead of Apple's software. Side note: I would be willing to bet that Apple had no choice to give the public what they wanted or suffer a big legal issue to make them do it or else due to the share market that the iPad has. Remember what happened to Microsoft??? Willing to make a bet that this had something to do with it as well

      The first thing I do when I get a new computer, is install Flash, followed by RealPlayer.

        Replied to the wrong comment - Giz, you should clear the comment textbox if you click on a different reply button.

    The other giants who have been making TV for ever will come out with all the bells and whistles built into their TV's. Samsung...who already sells the most TV's and has the best smartphone (Samsung Galaxy 3) on the market will completely destroy Apple TV.

    End of Discussion...next!

      Hahah! This is the most ill informed, opinionated argument ever. Have you ever used a samsung's 'smart tv'? It's horribly slow, laggy and pretty much unusable. I have used it on one of their bottom end LED tv's and one of their top ends. Its still horrible.

    Um... Hulu/Amazon are probably a direct reply to the success of both the Kindle Fire and Nexus 7. Apple releases a 7" tablet with all the same access, only it's Apple and wella; the masses go wild and Apple has another 'innovative' *(read: not innovative at all) super product.

      Exactly Rhys. I think the cracks are finally showing at Apple in a post Steve Jobs era....interesting times ahead

      You really loathe 'the masses' don't you?

    XBMC on ATV2, that's why they sold so many to start with, once people seen there was more to em...

    ATV2 JB sell for over $250 on ebay, not bad for a box that cost people $130 last year... not many device increase in value over time, let alone double in value, after being discontinued...

    Gee, that looks a lot like my WD TV Live. Western Digital should needs to be afraid of this maginificent Apple innovation! Any lawyers lurking?

      When the Apple TV sells 4million and your nearest competitor (Roku) sells 1.5 million in the same time period, you'd bet they should start worrying. Sales for Apple means content providers want in, and they will go with the device with biggest market share first, or at least they will try to.
      A lot of Gizmodo readers wonder why Apple do well despite their continued lack of innovation. Their innovation doesn't need to be the actual technology (though it sometimes is), it's the packaging of that technology into something that is dead simple to use, and that's why people buy it. It might be too bold to say that the "Apple tax" is a charge for the extra time you get from not having to spend hours of your week configuring and tweaking your stuff.

        This +1.

        Our house has a PC, and RaspberryPi, an iMac, a Macbook Air, an Apple TV2 and assorted other apple and other manufacturer phones and gewgaws. The apple stuff exists in a walled garden, but it works really smoothly, and each of the bits plays nice with the other. The other stuff can be a bit cranky and requires regular tending and maintenance, or exists solely for hacking purposes (the Pi).

        My family likes the Apple stuff because they turn it on and it works. I like both Apple and 'other' stuff, but each for different reasons.

        Bottom line? There are a lot more people out there like my family than like me.

        They are the people who want to get in their car and get from point A to B, without having to understand how the internal combustion engine and the GPS system works. Those of us who like to upgrade to the latest version of Android/Windows or a new Linux distro are more akin to the people who are comfortable working under the hood of their car.

        Apple makes money from people who want to use technology, but not have to think too much about it.

    I bought an Apple TV and it's just sitting in a drawer. Piece of junk.

      I have a couple of kids 4 and 5... They love the aplle tv because it is easy to use for them. Might be the market being aimed for... you never know...

      really ? seriously ?

      I disagree commenting from a mere mortal perspective

      I have 5 (2 x ATV2s & 3 ATV3s) all of which get used daily. Send your unused ATVs to me and I'll see that they get used properly.

      What did you buy it for then? :) I have one that I use to stream movies from my HDD to the tv, works brilliantly for what I want to do.

      I'll be glad to buy it from you. Since it is junk to you, how about $30.00? I'll even pay the shipping cost.

    Plan looks simple: use others for content just to get the platform out there, amass their own content pool, then oust the old content and replace it with their own monopoly pool (and block all future competitors from the platform).

    People, Apple is a Media Company that sells devices and software to facilitate access to that Media. When people understand this, they will understand Apple.

    "asking people to spend over $100 on a little black box with TV superpowers that gets upgraded every year is much easier than asking them to spend $2000 on a TV set they keep for five"

    This is key. This is why the AppleTV has better prospects than integrated media centre software from Samsung, Panasonic or Sony. A smal, cheap, physical box you can move from TV to TV, upgrade for cheap, and easily jailbreak to install your own software is a far more attractive product.

      Noting as always that most people are happy to use the Apple TV as it was designed, and that Apple will make their money off the larger group of consumers who access their content this way.

      The fact that you can jailbreak it gives them a second niche market for the hardware, but it is not where they make their money.

    Annual subscription models is the way for all online services (generaly speaking). Though, still having the ability for single purchases is a must.

    If this allows me to install the Plex Media Client on an ATV3/4 then I'm all for it. I know I could go the ATV2 jailbreak route, but I'd prefer to have a device under warranty.

    Bought an Apple TV device.
    Used it twice and gave it away. POS.
    First (and last) Apple device I ever wasted my money on.
    even with XBMC installed, it was still hopelessly slow.

      If you're the kind of guy that installs other software on it, I'm not sure it was the right device for you in the first place. A new ford focus isnt a POS because it doesnt do 10 second quarter miles :)

      Posting twice with different names won't make your posts any more believable. If you're talking about ATV1, then if you're using out of date technology with modern day services you deserve a POS experience.

      ATV3, love it. Use Airplay all the time from my phone or iPad, and now, my laptop. Can you do that with any other POS?

    I love my Apple TV, gets used all the freakin time, whether its home sharing music or streaming stuff to the spare room for my girlfriend to watch so she leaves ma alone to play games... for the price its a great investment...

    Ive been using ATV2 for a year now with firecore

    Ive been using ATV2 for a year now with firecore add-on. It's friggin great. I never use the crappy xbmc interface. Wider format support and streaming from a NAS...near perfect. Add amazon app and I'm ready to get rid of my GFs roku.

    What about the BBC App? That's been on for a year now and it's subscription based offering videos that you can get on iTunes.

    This might be a jump but with Ouya grabbing OnLive, Vevo and Twitch TV maybe Apple wanted to completely close the door to the possibility of an open hackable ANDROID streaming device that is all about APPS (albeit predominately games) jumping into bed with Hulu or Amazon?

    I bought an Apple TV in Australia, and all the content is American and can't be viewed here (sports) and there aren't any sports that Australian's ACTUALLY watch? Crap! BigPondTV is way better for programming.

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