Ever since the publication of Walter Isaacson’s biography on Steve Jobs where he cites Steve as saying that he and Apple had “cracked the code” on TV, there has been insane speculation about Apple’s purported forthcoming TV products and strategy. And appropriately so -- Apple’s rise as the dominant global consumer electronics powerhouse for internet platforms and devices ensures that whatever the company does, it will be transformative for consumers and the TV industry.
Much of the speculation has focused on whether a proper Apple Television monitor product would arrive, what size, shape and features it might present, and how it might integrate with Apple’s cloud services. Vitally, the speculation has also dovetailed with a belief that if and when Apple launches a TV (beyond the Apple TV puck offered today) that Apple will attempt to challenge the cable TV industry with a new subscription-based offering for mainstream TV content.
Will there be a new TV monitor product? What about an updated Apple TV Puck? What does this mean for cable TV?
Asked about this at last week’s All Things D conference, Tim Cook was noncommittal saying only that Apple TV is "an area of intense interest for us.” And that the company is “ going to keep pulling this string and see where it takes us,"
In my humble opinion, the entire debate over whether Apple ships an actual TV set and introduces some updated iTunes video package is a complete sideshow for a broader and bigger phenomenon and transformation for how we all use TV, and that this transformation is already being rolled out by Apple.
However, before getting to that, I want to first put to rest the near-term question of whether Apple will launch a directly competitive product to cable TV -- e.g. a multi-channel subscription TV product to the leading broadcast and cable content available today.
Apple’s Approach to Cable TV Content on their TV Platform
Apple will not anytime soon launch a competitive subscription video product to cable. There are deep structural and contract rights issues that limit their ability to do so, and Apple does not want to buy their way into premium content from top-tier broadcasters who are collectively making hundreds of billions of dollars worldwide from subscriber fees shared from Multi-Channel Video Programming Distributors (MVPDs -- e.g. Cable, Telco, and Sat TV).
Given this, I believe Apple will seek partnerships with the top cable companies for them to open up their APIs for their EPG, VOD libraries and Network DVR infrastructure so that Apple can offer a superior user experience on top of those services, in a carrier/operator independent manner, much as they did with the mobile telephony services of the leading telephony carriers in the world.
In such a model, you’d purchase and use an Apple TV device (more on what the devices will actually be below) and use it in concert with an existing subscription from a TV operator, and access the TV functionality as an App. Yes, cable TV will just be an app among what will be tens and then hundreds of thousands of apps on your Apple TV.
While this is likely the path Apple will pursue in the mid-term, I believe they are unlikely to get any of the very top-tier TV operators like Comcast and Time Warner to go for their proposal. At best we might see an Apple TV EPG App that interacts with linear broadcast streams using CableCard integration with your existing provider which they could more or less do without agreement from the cable operators, but given how much value the cable companies are putting into VOD and Network DVR features, it seems unlikely that Apple would be happy shipping such a limited feature set.
So, if Apple hasn’t “cracked the code” on disrupting how we purchase and consume subscription and advertising supported broadcast TV content, what is going to be so revolutionary about Apple’s new TV product?
Reconceptualizing TV as an Application Platform
To understand where I think Apple is headed, one really needs to step back and re-conceptualize how one thinks about TV. In my view, TV is the last screen to fall as a computing platform. What do I mean by this? That we should think of TV screens and monitors as the final frontier in Internet-based software applications, not as devices to watch and consume video content.
Properly conceived, a TV is a large high-definition audio/video rendering device that plays a role in displaying content and related data. While certainly the ideal device for consuming and using video-based content, it is also simply put the largest computer monitor in our lives, and one that very often presents in a social context -- the living room, the conference room, the dorm room, the classroom, the retail store floor and shop window. In short, these TV monitors are at the core of all of our major social and economic activities.
And in recognizing the broader role that these monitors play in our lives we can begin to re-conceptualize TVs as not just screens for video, but as a rich computing surface for viewing information, playing games, communicating, learning, shopping and so forth. In the past, when trying to use these screens for non-video applications, we would connect them to a PC or laptop (to present a shared piece of content that a group could discuss or interact on), or connect them to a game console for playing games.
In general, most attempts to evolve the capabilities of the TV monitor into richer computing platforms have failed. There are many reasons, far too many to discuss here, but in short the TV monitor as computing platform has failed because of poor execution on software, software user experience, and poor user interaction devices and paradigms.
The iPhone and iPad as Next-Generation TV Computers
It is precisely with this re-conceptualization of TV in mind that I believe Apple has “cracked the code” on TV. Specifically, Apple sees that TV monitors are just that -- high-quality audio/video rendering devices -- and that the real power lies in application platforms and user interaction devices that can be easily brought to bear on those monitors.
But rather that putting Apple software directly into the TV, they are bringing your existing Apple devices and applications to the TV set without requiring you to buy a new TV monitor. In short, the iPhone and iPad in your pocket or handbag is the next-generation TV set-top box, and it is both highly personal and highly social and capable of bringing hundreds of thousands and soon millions of rich interactive applications and experiences onto your TV set.
And this is where Apple AirPlay comes into the picture. Released with a significant upgrade as part of iOS 5 last year, and becoming a core part of OS X this summer, AirPlay allows a user to easily beam any content or application to an Apple TV device. The basic use case is that when your iPhone or iPad sees that an Apple TV is on your network, you can easily beam audio and video directly to the TV. This allows you to browse and discover any media on your Apple iOS device and experience and enjoy it on a TV, including even any videos that you encounter on the Web (assuming they properly support HTML5, HLS streaming and the players detect and surface AirPlay UI).
Already today, there are fantastic iOS Apps that take nice advantage of it -- Netflix, MLB At Bat, CNN, MSNBC and dozens of other mainstream video sources can be browsed and selected on an iPad and beamed to the TV set. It’s an effortless and enjoyable experience.
But AirPlay is not just for video, increasingly it is for ANY kind of application. In last year’s update to AirPlay, Apple introduced two new and inter-related concepts: AirPlay Mirroring and Dual Screen Apps. AirPlay Mirroring allows you to mirror your iPad (or iPhone) screen onto your TV monitor with ease (if you own an Apple TV, try the following -- double click the round home button on your iPhone or iPod and swipe the bottom apps menu to the right once or twice and you’ll see the Apple TV icon, and you can then mirror your device).
This is incredibly powerful. It essentially turns your iPad into a powerful TV Apps platform that can render any application on the TV while enabling the user to use their touch-based device to browse, select, navigate, etc. To fully take advantage of this capability, developers need to create “Dual Screen Apps” that are aware of AirPlay and of the TV screen and the local touch-based iOS screen. And it’s already happening. From MLB which allows you to use your iPad as a second-screen for HD baseball game broadcasts, to games that render on the TV while using your phone or tablet as a controller, to many of Apple’s own native apps like iPhoto and Keynote which present rich interactive interfaces on the iPad while rendering media onto the TV.
TV Apps are here and they’re all about building dual-screen iPad Apps that interact with AirPlay-enabled Apple TV devices.
All of this hangs together if Apple is successful with a broadly distributed device to connect to your TV monitor. Today, that is the Apple TV puck. Even now, it is a highly compelling product --- $99 for enabling your TV to become a general purpose app and content platform controlled and used from any iOS (and soon Mac OSX) device. I added one to every TV in my home, and now rarely use my Smart TV embedded OS or my cable TV set-top OS / interface. I’m playing games on my TV with my kids, watching movies, streaming live broadcast TV using authenticated TV Apps from companies like CNN and ESPN, and with dual-screen MLB it is hands down best way to watch baseball with an iPad App in hand.
While there are clearly bugs and user experience issues with how AirPlay is implemented today (and this is clearly recognized by Apple, who have more or less kept AirPlay features on the down-low), it holds incredible promise and, more importantly, I believe is at the center of Apple’s emerging TV strategy.
The Next Generation Apple TV Device(s)
This brings us full circle to the core question -- what will Apple’s next generation TV device products encompass and enable? If my analysis is correct, I believe that this will likely mean that the core focus for Apple will NOT be on their own TV monitor product, but on continuing to advance a device platform for extending iOS onto TV sets easily, while dipping their toe into the actual TV monitor business as well. What’s critical is that they be able to sell a massive volume of TV add-on devices to consumers who already own HD TV devices, because at the end of the day the core focus is on extending the iOS and iTunes ecosystem onto the TV, and the fastest way to accomplish this is with a commodity add-on peripheral.
At the core of Apple’s NG TV products will be new hardware and new software.
First, Apple will release a new Apple TV add-on product, though I expect that rather than using the current “puck” design it will instead be a thin black bar, perhaps 1 inch tall and 3 inches wide, that can easily mount to the top of almost any existing HD capable TV set. Like the existing Apple TV, it will have HDMI and power jacks on the back, but it will also include a high-def camera built into it’s face, as well as an embedded iOS environment that provides motion-sensing and speech processing.
Second, Apple will also release a TV monitor product as well with identical capabilities as the updated Apple TV add-on device, but in a design and form factor that presents the Apple brand effectively. Why would they do this when it is such an established market with such long replacement cycles? In short, because they can, and it will be gorgeous and include the latest innovations in display technology, and will sell at a premium price that ensures a reasonable gross margin for Apple.
Third, Apple will provide updates to iOS that include significantly enhanced and improved AirPlay functionality, and where AirPlay capabilities become a more front and center aspect of the iOS experience. Additionally, they will release new iOS APIs for dealing with 2nd screen device capabilities such as the new camera and microphone, motion detection and speech recognition. Developers will be encouraged to build iOS apps that are Apple TV ready, using dual-screen features and motion user interaction, among other things.
The Big Picture Isn’t Apple Cable TV, it’s the 500,000 TV Apps Already Here on iOS
Not to beat a dead horse here, but Apple will not, at least right now, re-invent the pricing and packaging and user experience of long-form cable and broadcast TV content, at least not much beyond the iTunes store. In fact, if anything, Apple will recognize that a deeper alliance with TV operators is inevitable (to build on their EPG, VOD and Network DVR APIs), and will push further into providing support for TV Everywhere authentication services in iOS, and evangelize broadcast brands to launch TV Apps for their networks and shows that take advantage of the NG Apple TV model described above. Further, they may seek alliances with the likes of Comcast to launch pure-play over the top (OTT) editions of products like XFinity as TV Apps.
But it won’t matter, because with Apple TV, cable content is just an App. What matters is that soon potentially tens of millions of HD capable monitors will become a screen for the hundreds of thousands of apps running on devices that are already in your hands.