Is TV finally more than a hobby for Apple? It will be a catalyst for online video

editor's corner

Jim O'Neil

Apple (Nasdaq: AAPL) CEO Tim Cook, speaking at yesterday's Goldman Sachs Technology Conference, carefully negotiated his way around Apple TV and the company's interest in the television space. Cook said the company has sold 3 million Apple TV connected devices, included 1.4 million in the most recent quarter, its biggest sales quarter ever.

"It's clearly ramping, but the reality, the reason we call it a hobby, we don't want to send a message to our shareholders that we think the market for it is the size of our other businesses."

Apple, Cook said, "doesn't do hobbies as a general rule. We believe in focus and only working on a few things." But Apple TV has shown some legs, he said, and it's a product--and a segment--the company remains intrigued by. "Despite the barriers in that market, for those of us who use it, we've always thought there was something there," Cook said. "If we kept following our intuition and kept pulling the string, we might find something that was larger. For those people that have it right now, the customer satisfaction is off the chart. We need something that could go more main-market for it to be a serious category."

The connected Apple TV device, of course, is only the tip of the iceberg. On the (near) horizon, analysts believe, is an Apple HD TV, a product that has been high on the "What if..." scope for a couple of years and one that recently has been cropping up more regularly. Most observers believe it could debut this year, possibly even in the first half of the year.

The product has gotten enough wind under its sails to have prompted Britain's largest broadcaster, ITV, to write to Apple and warn it away from calling a new product iTV, à la the iPad, iMac and iPhone. The initial contact was made in late 2010, but it has again become a worry since Cook took over the top job at Apple.

Rumors that the computer maker was looking harder at a TV product gathered speed last week after it was reported that Apple TV, with Siri voice control and motion control, was being trialed in Canada by Rogers Communications and Bell.

Also causing a stir was a report that Best Buy had surveyed customers about a 42-inch flat screen TV that could be controlled with an iPad or iPhone and featured iPad-style apps. The "theoretical" device even included a price: $1,499.

Pocket Lint said the specter of an Apple TV hasn't caused a ripple in the TV industry. At least, not publicly.

Samsung's AV product manager, Chris Moseley, told Pocket Lint: "We've not seen what they've done, but what we can say is that they don't have 10,000 people in R&D in the vision category. They don't have the best scaling engine in the world, and they don't have world-renowned picture quality that has been awarded more than anyone else...There is no way that anyone, new or old, can come along this year or next year and beat us on picture quality."

As AllThingsDigital's John Paczkowski pointed out, Palm CEO Ed Colligan dismissed Apple's chances in the smartphone market back in 2006: "We've learned and struggled for a few years here figuring out how to make a decent phone," he said at the time, words that should be the forward to any book written for tech-business wannabes. "PC guys are not going to just figure this out. They're not going to just walk in."

Bismarck Lepe, Ooyala's co-founder and its president of product, yesterday told me he believed an Apple TV would provide a huge spark for the online industry when, not if, it launches an Apple TV this year.

"I expect Apple to launch both a service as well as a device at the same time," he said. "And that will require that either a lot of the pay-TV providers partner with consumer electronics providers in order to deliver an integrated solution, or that consumer electronics providers launch their own services," as Microsoft (Nasdaq: MSFT) last December said it planned as a way to continue to keep consumers engaged on its devices.

"Like everything else, it's about sparking people's interest," Lepe said. "And I think that what the Apple TV is going to do. It's going to change the overall form factor and its going to push consumer electronics providers to push the connected TV experience as opposed to it just being a feature of their TVs."

Connected TV sales are dominating the segment, with more than three-quarters of the TVs sold today being Internet ready. And, although just 15 to 20 percent of them actually are currently connected to the Internet, that's still a significant number.

"Every year it basically is more than doubling the number of subscribers that TiVo has," said Lepe. "And TiVo has been around more than a decade."

Connected TVs, and an Apple TV especially, is the spark the online video space needs, he said.

"What's going be crazy is when the Apple TV comes out it's going to be a catalysts in the same way as it was for the smartphone market," he said. "We're going to get to a point where we're seeing $50 billion dollars in IP-driven video advertising come to this market in less than three years.

"Even the chipmakers are realizing that they need to take a vertical approach to this industry. What you're going to see is more and more of what Apple has done with the music industry, with the video industry... Just very vertically integrated devices and services."--Jim