The Apple TV Rumors Are Wrong

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Rumors and speculation about a possible TV set made by Apple are overwhelming the rumorsphere, re-ignited by three events.

The Wall Street Journal reported today that Apple is testing TV prototypeswith Asian suppliers. Everybody is quick to say this fact doesn’t mean Apple has decided to build a TV. But still, it’s an interesting development.

The news comes days after Apple CEO Tim Cook told NBC’s Brian Williams that bringing TV usage into the modern era is “an area of intense interest” for Apple.

And finally, Morgan Stanley’s Katy Huberty talked this week about a surveythat found that nearly half those surveyed would be either “extremely” or “somewhat” interested in buying a TV set from Apple. On average, consumers would be willing to pay about 20% more for a TV if Apple made it.

Why TV Is a Mess

The speculation is driven by the fact that Apple has repeatedly entered new markets where the content-consumption experience was terrible, and reinvented those markets.

First, Apple re-invented music discovery, buying and listening with its iPod and iTunesproducts.

Then, Apple re-invented the phone-using experience with the iPhone and the App Store.

Most recently, Apple re-invented the tablet market with the iPad.

As pundits and users cast around for remaining content-consumption experiences that need Apple’s unique touch, the TV experience seems most urgent.

Apple has been selling a product called Apple TV since 2007, a product line the late Apple founder and CEO Steve Jobs called a “hobby.”

The problems with using a TV is manifold, and they’re problems we’re all familiar with. First, most people with big screen TVs, cable subscriptions and other enhancements find themselves with a coffee table full of confusing, complex remotes that never seem to be programmed or set up in a way that makes using the TV convenient.

Second, the user interfaces we use for finding, recording, and playing content on our TVs are torturous.

Third, there are no elegant ways to find and play content across all the sources, from broadcast TV to cable to DVDs and Blu-Rays to Netflix, Hulu, YouTubeand all the rest.

Fourth, the way cable TV is provisioned, you end up having to pay a fortune for a small number of shows — in order to watch only one cable show that produces only 12 shows per year, you’ve got to subscribe to a 24-hour-per-day channel.

And finally, even “smart TVs” are used like dumb TVs. They’re not social enough, the apps aren’t compelling or useful.

These are precisely the problems some believe Apple is in the unique position to solve. And so we’ve got rumors and speculation galore.

Why the Rumors and Speculation Are Wrong

First, it’s important to note that despite the sheer volume of chatter about Apple’s plans in for television, not a single one of these speculative guesses is informed by a verifiably reliable source. Here’s why I think nearly all the rumors and speculation and assumptions about Apple’s future plans for TV are completely wrong.

Rumor: Apple will ship a TV set soon.

Not likely. Apple is apparently nowhere near the point where it can ship TV sets out the door. Even the testing of TVs, reported today, is something companies might do a year or two before shipping anything.

The component-supply chain is already buckling under the demands of other consumer electronics devices, including tablets, to supply high-quality screens. It would take Apple a very long time to ramp up this capability.

Assumption: Apple’s TV set will replace Apple TV.

There is no chance that Apple will be able to achieve its likely goals via a TV set alone. They’ll need an Apple TV-like box used on another brand of TV set as a way to get the market power to influence Hollywood to cut advantageous distribution deals with Apple.

In fact, a TV set is optional; but the hockey-puck plug in media box will always be a requirement for Apple.

Remember that it was iTunes for Windows that made the iPod and iPhone become so massively popular. Apple can’t get the user numbers if they try to achieve that with just a TV set alone.

Speculation: Apple will not ship a TV set.

There’s really no good reason for them not to. If you imagine that at a minimum you take an iMac and bolt the Apple TV onto it, that by itself would be a high-margin product that would be a coveted item in their Apple Store locations.

All Apple really needs to do is build the Apple TV electronics into an elegant, big-screen, iMac-like TV set and they’ll win millions of customers. They’ll probably do more than that, and they would be foolish not to do a TV of some kind.

Assumption: TV is a lousy business for Apple because of low turnover.

For starters, Apple could conceivably make TVs a higher turnover business, getting their best customers to buy a new set every two years. But even if they didn’t, they need only make the Apple TV part software upgradable, and they can use a TV set line to bolster their bid to own the living room.

Assumption: Apple’s TV business is about selling hardware.

Apple is famous for making profits on all aspects of their business. Yes, Apple can sell TVs and Apple TV boxes at a profit. But they’ll also gain profitability from apps and content, and that’s the gift that keeps on giving for Apple, even with low hardware turnover.

Assumption: The hardest thing about an Apple TV set is hardware.

Any TV product is likely to be less complex and difficult to make than existing iMacs. The hardest part is the content deals — getting Hollywood to make more movies available in more flexible ways than they currently do. Creating a compelling user interface and minimizing the need for remote-control buttons is the second hardest.

Assumption: Apple’s TV initiative will be mostly about TV.

When Brian Williams raised the subject of Apple’s TV initiatives, Tim Cook gave a telling response.

Williams said: “What can Apple do for television watching?”

Cook replied, in part: “You know, I used to watch “The Jetsons” as a kid.” And “we’re living ‘The Jetsons’ with this.”

If you recall, the Jetson’s TV was used most spectacularly as a videophone. And I think that’s a clue to how Apple is thinking about the TV — it’s an opportunity for social interaction, apps and cloud services, and not just for watching Seinfeld re-runs.

Speculation: Apple’s big improvements will involve video quality.

Much of the speculation around any future Apple TV set dwell on whether the set will be a high-end 4k display, or involve some amazing new kind of 3D.

Yes, it’s safe to say that Apple will think different with a new approach to television. But these improvements are unlikely to be about improving video quality.

First, video quality is a virtue that existing high-end TVs already have. In fact, it’s the only major selling point for standard TVs these days.

Besides, consumers aren’t generally bothered by the quality of video or 3D on their displays. They’re bothered by the interfaces and by the frustration that results when they can’t see what they want when they want to see it.

And these are the areas Apple will innovate.

In generally, the rumors, speculation and assumptions around Apple’s future plans for television are right: They’re probably going to make a TV set. But the details of all this guesswork are mostly way off.