JamieG Analysis

AppleTV is called the white elephant of the Apple product line. Low Margin. Poor sales. Called “An Experiment” by Steve Jobs. I, however, see it very differently. And, in my opinion, Steve Jobs does too.

Steve has always been big on diversions. The “AppleTV experiment”, the now lack of Apple TV in Christmas promotions. One would either think Apple was pulling back from a market they see no future in, or trying to get you to take your eye of the ball.

In my opinion, Apple and the future of entertainment on a screen has always been a primary target for Steve and his Apple future. If Steve plans to keep iPods and Itunes as dominant as it is now, video has to be a big part of its future. Now let’s look at some reasons why.

Firstly I would like to point out that Steve has been involved with Pixar for a long time. Pixar being a producer of content for the screen.

Every product Apple produces pushes you to the Itunes software. (In some ways, this is how Steve won over Bill.) The key to Itunes is that it is the hub for digital content. Currently, this is pretty much true for audio. It is a very nice program that few match. It was there first, and built the following. And really, has not given users a reason to change. (But this has changed of late but not because of Apples doing.)

The AppleTV in many ways was an experiment. It was under spec’ed. Limited in functionality. It was a very Apple product. In many ways to Apple, and this is why I think it has done poorly compared to what it could have.

If we look at current market forces we have two major issues happening right now that makes it “THE TIME” to get into online video.

1. The writers’ strike. This is not a new idea. The main issue here is that it will get content consumers considering different content sources. I.e., online. Currently there is no end to the strike in site. The current incumbent players must be as arrogant as it comes to have let this happened. I like to look at this like the French revolution. Point being the revolution has already started, and the aristocracy does not even realise it yet.
2. The change over to DIGITAL TV. This is a major issue, as, when the deadline does come. The online video distribution of video will be going like a train. As such, if you have to purchase a new TV or Set Top Box to watch digital terrestrial TV. You will very soon be given the choice of not just a Digital-Tuner, but a STB that can also watch and download Podcasts, Rent Videos. etc. They may even be free.

In real terms, the writers’ strike has accelerated this by a few years. As such, Steve has had to put the afterburner on.

Apple has been building up to this. Taking on all the TV shows. (then losing them) Using their dominance in the online area as power to bargain the cost of the content to ensure Apple’s dominance. This, of late, has not being going to well. The incumbents do seem to know what’s coming, but are trying to keep as much control of it as they can. This meant they had to bring Apple down a peg or two. And recently I think they have.

For example, Apple went back on its word regarding variable prices for content. For example, movie Downloads are no longer all a set price. This to me is a sign that Apple/Steve is getting nervous. They hoped to have more ducks lined up before they had to release an AppleTV product that was truly useful. Apple “needs” to release this product at this MacWorld.

This is an important issue to Apple, as if they intent to keep the dominance they have, they need to make sure Apple has the best or equal best products in this field. Being great at Audio, and good at Video will not maintain dominance. They need to have great product for both.

Signs that this is coming to a head is that both PS3 and Xbox360 now support DivX. The vendors are realising they need to give consumers what they want. And they want products they can use to watch any content, in any format, from any source. (Specifically Torrents)

And it has to be dumb arse simple out of the box.

So, what do we expect from apple… A STB that can play any codec from any data source, NOT just Itunes and podcasts. Has an option of Digital-TV-Tuner (Or possibly satellite). Has a full function programmable remote. And you purchase your legal content via Itunes and download all your illegal content from wherever…

20071228 Update: More movement by Apple to bolster its video market. “Apple To Offer Fox Video Rentals On iTunes“