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Apple TV: Can they dominate the living room too?

Posted on March 21, 2007 by Jeremy Toeman

So AppleTV is officially shipping, and as I saw on Engadget, Walt Mossberg has already reviewed it.  Some excerpts:

… we can easily recommend it for people who are yearning for a simple way to show on their big TVs all that stuff trapped on their computers.

Apple is hoping that, just as the iPod trumped earlier, but geekier, rivals, Apple TV can do the same by making a complex task really simple.

The review continues on, and Walt gushes about the device quite a bit.  The only competitor he points out is the Xbox 360, which he dismisses because it’s twice the price.  I think this is a dangerous dismissal, as the price points aren’t really the issue in this category yet.  We are in early early adopter-land, which means the people who really want it, are gonna buy it. $299, $399, $599, whatever.  The bigger question to ask is: is this really a market they can dominate?

In 2 years, over 20 million Xbox 360s have shipped, and as The Online Reporter observes, the biggest Apple TV competitor could already be on the market.  Xbox 360 owners who have the Live service tend to love it, my friend (and fellow blogger and now Sling Media employee) Dave Zatz told me he felt the 360 was the best device he bought last year. Also, the NETGEAR EVA8000, which I reviewed last week boasts a more robust feature set at a similar price point.  I read a lot of conjecture about how “Apple TV is just like iPod year 1” but folks, I’m saying now it’s not anywhere close.

When Apple launched the iPod, the category already existed (even if you ignore other mp3 players, people already were comfortable with buying portable music devices).  The problem then was: there was no really convenient way to get existing and new music collections on to portable MP3 players.  I had a Rio Karma, it was great (like really great), but you had to be pretty savvy to get music onto it, and there was ZERO services on the Internet with new content.  In the living room, on the other hand, it’s not just a question of simplicity and furthermore, there’s tons of content out there.  It’s not hard to get “mainstream” video to a TV set, especially in comparison with the challenge of getting “mainstream” music to an MP3 player (circa 1999).

Now I’m not dismissing the product, nor am I dismissing Apple’s ability to move their marketing muscle into the living room.  But this certainly isn’t a slam dunk.  Take a time out to read Thomas Hawk’s list of why he isn’t interested in the “dongle”, then go check out Phil Swann’s reasons why he thinks Apple TV will “bomb”.  If you aren’t too saturated, I’d also stop by WIRED’s fair and balanced thoughts on why it “rules and sucks”.

Here are some of my specific problems with the product (note that I haven’t used it hands-on, so I have no comments about it’s user interface, which is probably great):

  • No YouTube support.  This is a very questionable move at this stage of Internet/video/PC/TV convergence.  The EVA8000 does it, and after a few days using it, it’s a very fun application. 
  • Widescreen-only.  I love the HDTV market, and about one third of all new TVs sold are flat (which implies widescreen), so that’s a lot of screens (I’ve read before the number of households is in the 20 million range, but cannot find that source to quote here).  But this is the kind of product decision that creates returns, something I have a feeling Apple doesn’t have to deal with in other categories.  Also, there’s a distinct lack of HD content offered at launch, which makes this even more… ironic?
  • A computer must be on all the time.  One thing I like very much about my Sonos and EVA8000 setups are they work directly with my networked hard drive (aka a “NAS“).  With the Apple TV, I need a PC/Mac on all the time, and while this is clearly a growing trend, it’s a requirement I don’t like in a product this expensive (it’s one thing for a $99 media adapter, it’s another at $299). UPDATE: I was corrected (by Ben at EngadgetHD), I misread the usage with it’s internal hard drive.

Is it a good product?  Probably. After all, Walt is a pretty picky guy, and even though he clearly has an affinity for Apple products, he seemed impressed (although he didn’t really talk about video quality in the review, which is an interesting omission).  Also, Apple does tend to make the product experience great, and I’ve got to assume that heavy iTunes customers are going to think this thing was sent down from the stars above.  As Sonos’ worldwide PR manager Thomas Meyer said to me, “Mr. jobs is definitely going to do this right.” 

My hunch is they’ll do a very good job appealing to that core market, but have a tougher time getting beyond.  I don’t think they’ll be as strong in the HDTV segment as they want to be, as even enthusiasts such as Ben Drawbaugh (contributing editor at Engadget HD) who thinks “it’ll be awesome” (and has blogged about wanting one) doesn’t think it’ll be all that useful for HD content.   If I were Apple, I’d be doing everything I could to get associated to HDTV, as betting on the future is more important than the past.

I’d guess they can out-market a company like NETGEAR in this space (but will probably drive them unit sales for some of the reasons I stated above). I think they’ll probably be the #1 leader in “digital media adapters” by the end of this year, and can probably move over 100K units in 2007 alone.  That said, I don’t think they are positioned to utterly dominate the living room the way they do in the portable space. 

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Posted in Convergence, Video/Music/Media | 8 Comments
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8 thoughts on “Apple TV: Can they dominate the living room too?”

  1. Jessica says:
    March 21, 2007 at 11:35 am

    I think this product could take the early lead, then get surpassed by other similar, but ad-supported offerings.

    I personally like to see my shows without commercials, and am willing to pay for this privilege. However, I think most people are happy with the free-tv model, and (since this has dominated since the start of TV) it will probably reign in the internet TV era.

    I hadn’t considered much about the advertising angle, until I read Shelly Palmer’s media blog — which had an essay on the tv/web-tv inversion. He points out how much money is currently spent on TV, and how that money will need to shift to the web. Logically, it will have to be spent on internet video.

    So, there will be a whole lot of money (aka power) pushing for ad-supported TV. Too much for it not to dominate.

    – Jessica

    Reply
  2. Ryan says:
    March 21, 2007 at 11:58 am

    I think the Xbox 360 is a neat unit, but I’d also dismiss it but for a reason other than price: it’s a game system. Not that there’s anything wrong with that, and yes, in “early adopter land,” that might not seem like a disadvantage… but it wouldn’t have ever occurred to me to look at an Xbox, just like any other game system, even if it does so many other things.

    One point Mossberg makes that I agree with is that simplicity will be the Apple TV’s strength. It’s not a TiVo, it’s not a game system, it’s basically a oversized iPod that uses your TV as a screen. It has “TV” in its name, so there’s no need to dig through specs to figure out what it does. And that’s going to be exactly what lots of people want to see in this age of do-everything gadgetry. I’ll bet it passes the “my mom can use it” test (and I’ll let you know next week sometime how that turns out)!

    Reply
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  4. Mujibur says:
    March 21, 2007 at 10:03 pm

    100k in 2007? They will sell 100k by August easily. Probably outmarket Netgear? Are you out of your gourd?

    Reply
  5. Jeremy Toeman says:
    March 21, 2007 at 10:54 pm

    Jessica – good points!

    Ryan – can’t dismiss Xbox360 because too many of the target market have it and love it already. Also, the price point isn’t really that far off!

    Mujibar – first off, selling 100,000 units of anything ain’t as easy as you think. Second, don’t take everything quite so literally…

    Reply
  6. Michael Markman says:
    March 22, 2007 at 11:41 am

    Apple has been very clear about the benefit of this product: it’s for getting iTunes onto you TV. It’s not a DVR, it’s not or putting internet videos on your TV (except for video podcasts and movie trailers–which come through iTunes). It’s not an open PC to TV device. It’s a window into a walled garden. Apple’s brand, iTunes huge installed base, and the simplicity of set-up and operation will make it a winner.

    When I blogged about the incompatibility with older TVs, someone commented that there are enough new TVs to keep Apple very happy.

    I’d say the same to geeks who want a more general-purpose PC to TV or Internet to TV solution. Apple TV isn’t or you. You have other choices. But, given the power of the Apple brand, the savvy of their marketing, the size o the iTunes installed base, and the hunger or an easy to install, easy to use solution, there’s enough out there to keep Apple very happy.

    Reply
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    March 26, 2007 at 11:13 pm

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Jeremy Toeman is a seasoned Product leader with over 20 years experience in the convergence of digital media, mobile entertainment, social entertainment, smart TV and consumer technology. Prior ventures and projects include CNET, Viggle/Dijit/Nextguide, Sling Media, VUDU, Clicker, DivX, Rovi, Mediabolic, Boxee, and many other consumer technology companies. This blog represents his personal opinion and outlook on things.

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