The Apple TV and iPhone were both formally introduced to the world on January 9th, 2007. One went on to sell over 700 million units and is now responsible for an active installed base of approximately 500 million users. The other was classified as a hobby and went on to sell "only" 20 million units. In 2014, Apple reportedly shelved the idea of selling its own television set. Given renewed focus around the launch of a new Apple TV platform, have the odds of Apple having second thoughts about selling its own branded television set gone up? No. Upon closer examination, there are very few reasons to justify an Apple-branded television set. In fact, a very strong case revolving around the television's ultimate value in a mobile world can be made demonstrating why an Apple television will not receive the green light to market.
The Long Journey to Today
The technology industry has struggled for the past decade in trying to define TV's future. Countless attempts to make TVs "smart" never caught on. The problem wasn't that companies weren't thinking outside the box, but rather that they were overthinking it. The future wasn't going to be found by turning our television into a desktop computer with an accompanying keyboard. Instead, TV's future became visible only after recognizing that a television is inherently a consumption device in need of content and an easy user interface.
The new Apple TV is a product that has literally been years in the making, dating back to Apple's sneak preview of the "iTV" project in late 2006. Over the years, as the iPhone and iPad gained momentum and priority within Apple, Apple TV and the entire television category was negated to a long-term opportunity. While early Apple TVs were okay for consuming iTunes content, the value proposition to the average consumer just wasn't too appealing. We knew television was going to change and had a general framework as to what was needed to make that change happen, but we weren't sure when that change would unfold. All the while, speculation grew that Apple would unveil its own branded television set with a built-in Apple TV box.
Enter Netflix, Hulu and HBO Now. With a growing number of new content companies gaining strength and giving the consumer revamped content bundles that went up and beyond what we were used to with traditional broadcast and cable programming, the future started to come into focus. Meanwhile, instead of pushing forward with its own television, Apple reportedly canned the project to instead focus on taking lessons learned from iPhone and iPad in terms of how voice and touch could create a user interface that works with large screens positioned a few feet in front of us.
The New Apple TV
There are two key elements to the new Apple TV that make the product stand out from previous reiterations: a new voice-based interface and an App Store.
New Voice-Based Interface. I had one "wow" moment while interacting with the new Apple TV for the first time: using Siri to navigate my television. Relying on Siri to search for movies or TV shows, and in the process being able to avoid the tedious task of using text to search, demonstrates that voice is an attractive way to navigate a large screen positioned a few feet away. I found voice so compelling that not being able to use Siri to search for videos within YouTube quickly led me to avoid using the YouTube app on Apple TV altogether. I simply had no desire to search by manually typing each letter one at a time using finger swiping on the Siri remote. While at first it sounded like a gimmick, using Siri to check the weather, stock prices, or sports scores was quite compelling even though I could have gotten the same information on my iPhone or Apple Watch. The ability to simply press a button and talk casually was riveting. I found the error rate with Siri on the new Apple TV to be low with the only hiccups resulting from asking questions that will likely be supported in future versions.
App Store. This past May at a conference in Germany, Netflix CEO Reed Hastings declared the future of TV would revolve around apps. A few months later, Apple threw its support beyond the app model as well. After using the new Apple TV for a few minutes, it's clear Netflix and Apple are correct in getting behind the app model. Apple TV's primary purpose is to consume content. Without third party apps like Netflix, HBO, or Hulu (and active subscriptions), Apple TV's value proposition would decline dramatically.
An app's value is rather straightforward when it comes to consuming content on a television. Instead of one company pushing the same content to all viewers, an app makes it possible to have a very tailored and personal viewing experience, even within the same household. An app also makes it possible to search a wide variety of content depending on our current interests and mood.
When Apple introduced Apple TV this past September in San Francisco, much of the press focused on the device's App Store and how gaming will be revolutionized. An App Store for Apple TV was craved by core Apple users ever since 2008 when Apple launched the iOS App Store. While apps are likely the future of television, I remain a bit more contained in my enthusiasm for many of the apps currently being paraded around. While there may be a loyal group of users that will be attracted to gaming on Apple TV, I am skeptical gaming will be able to move beyond its niche focus. Instead, apps that are focused on helping the user consume content in a more personal way have an incredible amount of potential.
Saying No to an Apple-Branded Television
This past May, the WSJ reported that Apple had shelved its television plans in early 2014. While the exact details may forever be kept to a select few, Apple simply was not able to make the case for why an Apple-branded television deserved the green light. The WSJ article gave hope to long-time Apple television proponents by saying that the television project was never officially killed. Apple will have a hard time justifying selling its own television due to two reasons: TVs are impersonal devices meant purely for consumption, and the television's future in a mobile world is up in the air.
An Impersonal Consumption Device. While some may look at the new Apple TV as a device capable of turning our television into an iPhone, in reality the device's features reinforce the fact that television is inherently used for consumption. Such a scenario makes it extremely difficult for Apple to position a television screen as being able to produce the kind of premium experience users have come to know from Apple. Everything from the new voice user interface to the App Store is built to make it easy to find and consume content while sitting a few feet away from a large piece of glass. While Apple has previously sold devices like the iPod for consumption, the iPod contained a certain level of personal connection to the user - through how it was meant to be carried, touched, and even worn. We see that these personal ingredients are needed to produce premium experiences with Apple Watch, iPhone, iPad, and the Mac. The end result is that consumers are willing to value and appreciate such premium experiences. A television's inherently impersonal and immobile nature gives Apple less opportunities to make an Apple-branded television stand out from alternatives. If Apple positioned a television to be used for more than just consumption by adding cameras or sensors, the problem would be that we don't live in a vacuum and will likely have even more capable devices in the form of smartphones and tablets nearby that could handle such tasks.
Television's Questionable Future. Apple TV may very well represent television's future, but in an increasingly mobile world, the television screen will likely play a declining role, regardless of 4K or future technological trends. As a prime example of how a large television screen will likely remain a consumption screen with consumers, after using the new Apple TV with my television for a few minutes, I found myself increasingly looking down and interacting with my iPhone. I don't think this was by mistake. While I may be entertained for a few minutes by a few apps on Apple TV, its purpose is to display long-form content that I am not interested in viewing on my mobile devices. Over time, this dynamic may change as we rely even more on our iPhones and iPads to watch content. For a company that is willing to make very few big bets every few years, putting resources into a product like a television set with a future that is inherently opposite to themes found with mobile seems counterproductive for Apple. Meanwhile, content born out of mobile like short video clips found on Vine, Instagram, and YouTube feel off when viewed on a large TV screen. Instead, being able to consume such videos on our smartphones makes much more sense. Meanwhile, new products like the iPad Pro are designed with content consumption in mind with a superior speaker system and large screen. The end result is more people will consume video content on an iPad Pro as time goes on while momentum remains on the side of mobile.
Looking Beyond Dollars and Cents
Notice the lack of "revenue," "profit," or "margin" in the preceding paragraphs for why it doesn't make sense for Apple to sell its own branded television. This wasn't by accident, but rather those financial metrics are simply byproducts of Apple being able to sell a premium experience. Apple doesn't sell a product simply because it meets certain financial criteria. Instead, management evaluates if it can improve a product to the point where it possesses certain characteristics that lead to a premium experience. Metrics such as TV life cycles, low margins, or the fact that Apple would likely only be able to sell one unit to a household simply don't play a role in the fundamental case against an Apple television set.
Apple TV's Role
Instead of simply controlling the large piece of glass in our living room, Apple TV's more valuable role is to further position Apple as a content distributor. When looking specifically at video content, Apple's interest in creating a slimmed down bundle of broadcast and cable programming can help the company provide a full assortment of video content to its users. This range of video content would then be able to be viewed on the hundreds of millions of personal Apple devices being sold each year including iPhones, iPads, and Macs. In a way, the Apple TV is Apple's trojan horse to gain power in the quest to become an improved content distributor. This characteristic is much more interesting from an experience-building perspective than compared to the idea of selling a large piece of Apple glass. Apple was right to shelve plans to build its own Apple television.
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