Entertainment

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.


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