Apple has called its Apple TV set-top box a "hobby" since it first launched the device seven years ago. Since then, Apple has refined the Apple TV repeatedly -- adding high-profile streaming content, developing AirPlay as a way to stream content from a Mac or iOS device and adding mobile device management (MDM) features that allow schools and businesses to remotely configure Apple TVs in classrooms and conference rooms.
Despite those advancements, and Apple CEO Tim Cook's acknowledgment last year that Apple has sold 13 million Apple TVs (half of them between 2012 and early 2013), the device has yet to shake its "hobby" moniker.
There's been a common assumption that Apple's real motive is to develop a platform and the needed partnerships to launch a full fledged HDTV, no set-top box required. Predictions along those lines have come from analysts like Piper Jaffray's Gene Munster and were even called out in Walter Isaacson's biography of Steve Jobs, where Apple's late CEO said he had "finally cracked" how to disrupt the television industry much as Jobs and Apple disrupted the music and mobile industries.
But Apple has yet to turn Apple TV into anything more than it is now, and on Monday one of its biggest competitors may have beaten it to the gate.
Roku, which first shipped its own set-top box for streaming Internet content in 2008, announced at CES 2014 that it has partnered with Hisense and TCL of China to bring to market HDTV models ranging in size from 32-in. screens to 55-in. screens. All models will include built-in Wi-Fi and deliver the full Roku experience, plus traditional broadcast television channels. Users will get Roku's Channel Store, which boasts 1,200 streaming services, many of them developed by broadcast and cable/satellite networks. Users will also be able to navigate content using an iOS or Android app and the devices will feature "casting" support that will allow users to project content from mobile devices or PCs onto the TV screen -- similar to the integration of Apple's AirPlay service in newer Apple TV models.
Roku has been the primary competition for Apple in the smart or connected TV market and the two companies largely dominate that market. As Apple has sold more than 13 million Apple TVs, Roku has wracked up sales of 8 million devices across its lineup. According to market research firm Frost & Sullivan, the two companies represented more than three quarters of the global streaming device market in July 2013. (Apple had 56.1% of the market to Roku's 21.5% at the time.) A separate study from Park Associates the following month showed Apple in a more precarious place: It found that among U.S. households with a streaming device, 37% used Roku hardware while 24% had an Apple TV.
The advantages of deep integration
There a number of potential advantages to having deep integration with both the TV and content providers.
The most significant of these is the ability to control the entire user experience. When setting up or using any of Roku's existing devices or an Apple TV, you need to use the remote that came with the TV to navigate to the appropriate input. Although this is rarely a herculean task, there is a clear delineation between the experience of your TV's menu system, some of which are poorly designed and confusing. The user experience, however, doesn't always stop there. Other devices like cable boxes, DVRs, Blu-ray players and game consoles that users navigate on a regular basis each has its own interface making for a disjointed user experience from the get-go.
Apple prides itself on delivering clear, easy to navigate, unified experiences that entertain and "delight" users. This is so deeply embedded in Apple's culture that user experience goes beyond just the user interface and often includes a product's packaging, the buying experience at an Apple store and the setup process of a new device. That experience is easily compromised when there are half a dozen or more inputs and devices and interfaces. This has been described as the reason an Apple HDTV makes sense for the company and its customers. It's also clear that Roku recognizes the challenge, based on the blog post by Roku CEO Anthony Wood announcing Roku TV.
That simplicity also enables easier setup and troubleshooting. Often it can be challenging to determine whether a problem is caused by the TV, a connected device, the cables connecting them, or a misconfiguration by the user. As devices become more complex and people add more devices to a single TV, the setup process -- and, if needed, the troubleshooting process -- can become unwieldy. Building a service directly into the TV means a much clearer process for users, help desk agents or service technicians.
A better remote
One of the points Roku touts about its new TV initiative is a simplified remote control. Apple has already done that with its remotes, which can also be used to control content on a Mac or TV. Apple's remote has been pared down to just seven button. Both Roku and Apple also allow users to control devices with their smartphones or tablets, which can streamline functionality even more. The advantage when a service is built directly into the TV is that you only need one remote.
Another advantage is integration with traditional content providers like cable and satellite companies. Roku's Channel Store already includes streaming access to content providers such as Time Warner Cable, HBO Go and WatchESPN. They let customers access live broadcasts as well as streaming content on demand. With the right set of partnerships, this environment could obviate the need for set-top cable or satellite boxes. The effect, if not the exact technology involved, would be similar to devices like Tivo that use the cable card standard.
This ubiquitous combined access to traditional and Interent content from a single interface on a single device is actually the ideal that Google was shooting for with Google TV. But it wasn't able to fully develop the system, in part because it couldn't establish the partnerships needed for success. The challenge for any company is to develop partnerships with content owners, networks and studios and content providers. The ideal service -- one that is effortless and delivers a full plate of free, subscription and purchase/rental contenton demand --- by nature includes some level of unbundling, something that content owners and providers see as undermining their business models.
Allowing ala carte access to a network or studio's entire library of content poses real risks to most media companies. It is also the approach that most people picture when they see Jobs' comment about cracking the TV industry. That could indeed be as disruptive as iTunes was to the recording industry a decade ago. It's commonly assumed that the reason Apple hasn't come out with its own HDTV is because it hasn't been able to secure the partnerships needed to meet Jobs' vision, though the gradual addition of content apps on Apple TV indicates that may be changing.
How would an Apple HDTV compare to a Roku TV?
It's hard to know how an Apple-made TV would stack up to the Hisense and TCL-made Roku TVs. The one definite difference is that Apple would almost certainly take on the entire design, production and sales processes. Roku, in contrast, is largely presenting existing TV makers with a platform that they can use rather than build their own. Roku is also reported to be open licensing its platform to other manufacturers, which could give it quick dominance in the market if it can line up a range of TVs from manufacturers across the price/feature spectrum.
Apple would most likely focus on the premium segment of the market. That might not drive the greatest marketshare, but it would likely deliver better returns than the typically razor-thin margins for consumer TVs, and better profits. It's essentially the same strategy Apple employs today in in the desktop/notebook, smartphone and tablet markets.
Apple would likely keep much closer tabs on the apps or channels available to users and to the experience that they provide. It's unlikely it would provide a full SDK for the Apple TV and allow anyone and everyone to create apps for the platform.
The other competitors
Roku and Apple may dominate this market at the moment, but they are far from the only players. Google is currently on its third attempt to penetrate the market with its $35 Chromecast. Although the initial Chromecast feature set was limited, the platform has grown in recent months to include a range of apps and content providers. The biggest appeal of Chromecast is, of course, its price tag, which is significantly lower the Apple TV's $99 cost and notably lower than Roku's entry-level Roku 1, which retails for $59.99. Google's two previous efforts included the Google TV platform, which was built into some early smart TV models as well as dedicated set-top boxes and some Blu-ray players; and the Nexus Q streaming device that never made it to market.
Samsung has developed its own smart TV ecosystem that includes an iTunes-style store and integration between the company's other devices, including smartphones and tablets. LG is also announcing a new smart TV platform based on webOS, which the company purchased from HP. Many Blu-ray players, some DVRs like those from TiVo, and game consoles like Microsoft's Xbox and Sony's PS3 offer support for streaming content from a handful of services. Lesser known set-top boxes like those from Western Digital also offer streaming of local and Internet content.
Out of the living room, into the classroom or conference room
One area that Apple is seeing some success compared to rivals is outside the consumer market altogether. AirPlay is a killer feature of the Apple TV for home users, but it is also a killer feature for schools and businesses. Although Apple didn't initially promote AirPlay in such environments, the company has gotten on board with making the Apple TV education and enterprise friendly.
Because the second and third generation Apple TVs are iOS devices with a unique interface, they can be managed like iPhones and iPads. Apple began introducing management capabilities with Apple Configurator and iOS 6, but has ratcheted up them up significantly with iOS 7. Apple TVs can now be managed over-the-air using the iOS MDM framework, meaning that if a company or school has implemented MDM for iOS devices, basic network configuration and passcode requirements for Apple TVs can be managed just as easily. iOS 7 also allows IT departments to create whitelists of Apple TV devices that can be provided to user iPhones and iPads based on the classrooms (or conference room, theater space or office) where access is needed. Along with the white list of devices, secure passcodes for approved Apple TVs can be sent to a user's device without the user having to enter or even know those passcodes.
In some respects, this is a market where having a separate device can be an advantage over a TV with built-in smart capabilities. The Apple TV's size and relative ease of setup also makes it a good portable presentation system for business users on the road. The device easily connects to a TV or projector with an HDMI port (and through the use of an adapter with other devices as well. Likewise, it can be connected to a local Wi-Fi network, via ethernet, or even to a portable hotspot or a network created from the user's MacBook or PC notebook.
AirPlay's maturity is also a powerful advantage in these markets. Not only does AirPlay allow projection or casting of content to an Apple TV, it also allows for full screen mirroring for both iOS devices and Macs. For Macs running OS X Mavericks, an Apple TV-equipped TV can serve as an additional screen without mirroring. That delivers immense additional screen real estate at a moment's notice.
Ultimately, it's too early to tell how the smart or connected TV market will evolve. Roku may stand a better chance than many of its competitors or it may suffer a fate similar to Google TV. Apple's plans are, as always, something of a mystery. One thing that does seem clear, however, is that the pressure is mounting for Apple to develop the Apple TV into something more than just a hobby.
Ryan Faas is a freelance writer and technology consultant specializing in Mac and multiplatform network issues. He has been a Computerworld columnist since 2003 and is a frequent contributor to CITEworld.com. Faas is also the author of iPhone for Work (Apress, 2009). You can find out more about him at RyanFaas.com and follow him on Twitter ( @ryanfaas).
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