Rumors continue to heat up that Apple will enter the television market next year, stepping up its Apple TV "hobby" into a greater revenue-generating vocation. The company would clearly like to repeat the kind of rousing success it has seen in smartphones. There, it entered a market at least as crowded and competitive as that for televisions whereas most of its Windows rivals have barely been able to eke out a few models with nominal share.
Indeed, the challenge is not as much about competition as commoditization. At first glance, this would be a curious time for Apple to enter the TV space. The HD and flat-panel transitions on which premium manufacturer brands and retailers once feasted has long passed. "Flat-panel TV" and "HDTV" are now just "TV." And prices for smaller sets are settling into a range familiar to those who remember what they cost back in the heyday of CRTs.
What's different, though, is that the state of the smart TV market looks strikingly like the smartphone market did before Apple's entrance. The market essentially has "feature TVs" that present a few popular canned services (YouTube, Netflix, Hulu, Pandora, etc.) and "smart TVs" that are a fractured mixture of homegrown offerings (from companies such as Panasonic, Samsung, LG and Toshiba) and an experience-challenged licensed OS (Android from Sony and Vizio).
The company has clung to the idea of TV as a passive experience.
This doesn't mean, though, that Apple would necessarily see its television as a way to extend the iOS developer base any more than it has opened up the Mac to such apps, at least at launch. Switched On has previously discussed the challenges that TV-based apps face. If putting such apps on a TV was Apple's plan, why wouldn't it get it started via support on today's Apple TV box? Even if Apple exceeds its wildest dreams for success with an Apple-branded television, there will be a much, much larger base of Apple TV-accessible HDTVs from other brands available for the foreseeable future.
The company has clung to the idea of TV as a passive experience. Indeed, enabling iPhone-like apps on a TV would likely require some Magic Trackpad-like remote, which is not, in the words of Steve Jobs, "the simplest user interface you could imagine." So, what is Apple's opportunity then? There are at least two paths it can take to creating a compelling, differentiated TV experience. They are:
Aggregation: Switched On has also previously discussed the promise of an iTunes-based subscription alternative to cable. Alas, it has been difficult for any company to coax content owners to abandon their lucrative cable compensation deals. And while Apple may have the cash to do so, it doesn't seem like the sort of spendy deal in Apple's character. Of course, user interface and input would play a huge role. Siri or some Siri-like agent could pluck shows from across services such as Netflix and Hulu if Apple can't pull together an integrated subscription service of its own and repeat the disruption it originally made with the iTunes Music Store.
Integration: The cliche "if you can't beat 'em, join 'em" hasn't worked in the world of broadband television. As difficult as it has been to assemble a competitive show lineup to facilities-based incumbent TV service providers, it hasn't been much easier to integrate the richness of that platform. Most have tried either the kludgey (IR emitters used by early TiVo boxes and the Logitech Revue) to the obscure (CableCARD, used by modern TiV0 boxes, which is hardly universal in the U.S. much less Apple's other global markets).
If Apple were to find some way to remix the content that most consumers were already paying for, it would have a huge advantage versus other TV makers. But Comcast and TimeWarner have been slow to provide the keys to the content kingdom to even current high-volume TV companies such as Samsung and Sony. Historically, Apple has been one ring away from Netflix on cable company dartboards, although many of them can't seem to rush enough video to the iPad today. Perhaps Apple could use the iPad as a leverage point. After all, a simple cable or AirPlay support is all that separates its display from a television today.
Over the next few years, Internet connectivity will become a common feature in TV sets. It is already becoming so in 40-inch+ models. Apple seems to be under no pressure to enter the market. With its current Apple TV, it can send a wide range video content up to a television with ease, and future versions of Wi-Fi will easily support the ability to do so in the best quality available. It's almost certain that an Apple-branded television would (and would have to) differentiate on user experience well beyond an engagement level that Apple TV delivers today. Beyond that, optimizing the selection and presentation of the content consumers want is the critical task for any company that would seek to reinvent the TV.
Ross Rubin (@rossrubin) is executive director and principal analyst of the NPD Connected Intelligence service at The NPD Group. Views expressed in Switched On are his own.