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Summary:

Forbes has a long story on how Apple (NSDQ: AAPL) got its iTV player wrong, and what led to the flop. Pertinent in light of, among other thi…

Forbes has a long story on how Apple (NSDQ: AAPL) got its iTV player wrong, and what led to the flop. Pertinent in light of, among other things, Sling Media’s buyout by Echostar (NSDQ: DISH). Sling operates in a similar market. This explanation is good: “Revered for sleek and snazzy products, the company and its man-in-black patriarch made a string of dubious choices about what features to include. And what to leave out. Apple TV comes with a hard drive and a link to the TV set, same as TiVo (NSDQ: TIVO) (now in 4.3 million homes). Yet Jobs decided against offering the ability to record shows. Worse, Jobs chose to shut out millions of Web downloads on YouTube and elsewhere and confined Apple TV to handling only the content you could get through Apple’s own iTunes. This parochial and proprietary approach, in an increasingly open, Internet-infused world, had relegated the company’s Macintosh line to a narrow slice of sales. Yet it also had let the iPod dominate online music, which may be why Jobs believed he could pull off the same thing in video. Wrong.”

On the costs. Apple struggled. It wanted to keep the price low at $300, but that resulted in cheaping out on components. The first box had 40 GB drive to store fewer than 50 hours at standard-def, and an older, slower Intel (NSDQ: INTC) chip. Even then the box’s insides cost a total $237, says research firm Isuppli. That left a scant $62 in gross profit, or 20 percent, to be split by Apple and retailers (half Apple’s typical 37 percent gross margin). The stores went along, but when Apple TV faltered, they had even less incentive to push the new product, the story says.

Staci adds: So the comments — accusing us and Forbes of being unfairly negative — already are starting to pile up. For those of you quick to pull out the “hater” language and assume the worst, hope Rafat doesn’t mind my mentioning that the post was written on a Macbook Pro by someone who also owns an iPhone and multiple iPods.

On the sales figures, Apple needs to sell beyond its own retail chain in order for the Apple TV to be a real success. On a purely anecdotal basis, I’ve been tracking the sales at some non-Apple outlets and they haven’t been moving. In fact, I was surprised to see the same units sitting on a shelf in one high-traffic store for weeks. Part of the problem is that the non-Apple stores may not know how to sell the units, or, as Forbes notes, have little incentive.

The other issue is how narrow the niche is for Apple TV as currently configured. Open it up even a little and sales probably will pick up. When Apple enthusiasts don’t rush out in mass, it’s missing something.

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  1. Wow its so amazing when places can write a story but don't even understand what the product was for or the people it was targeted to. I love my AppleTV, and I know quite a few people who do as well. It is a way for you to get your movies, images, music and such from a central computer in the house to your home theater system without having to do much of anything beyond plugging it in. It did not need huge amounts of internal storage as it was in part designed to stream video content for your already existing Mac/PC in the house. Wow, amazing piece of lack luster research and writing in this story.

  2. Steven
    What you perceive it to be versus what the sales numbers say are two different things…I'll go with the sales numbers, rather the lack of it, which in Apple's case means not that great.

  3. Rafat,

    So what are the sales numbers? Right, you don't know. No one knows because they haven't and wont be released. Apple doesn't break those numbers down my friend. You're just a hater. I agree with Steven, I love my AppleTV. It does what I need it to do, and does it well.

  4. Well I was mostly referring to the original Forbes story on this, but the bottom line is comparing AppleTV to a Tivo or another video recording technologies is still missing the point. This was designed as a bridge device between Windows and MacOS systems and a persons home theater. I get iTunes season passes, I store and/or stream my own home movies, and DVDs that I have saved as h.264 video files. Our primary system in the house is used as a media server as well. So streaming video/pictures and music to our main home theater, or to my laptop while I enjoy the evening air outside, or while cooking I can watch something streamed to iTunes to my laptop. But the simple fact is AppleTV is a product to allow me to quickly and easily browser and view my digital content already stored somewhere on my home network. It was not advertised as a digital recorder, was not advertised as anything but what it is, a great product for people that are using iTunes already and want a great, seamless connection to their possibly 10's of thousands of dollars in home theater equipment. If there are AppleTV sales figures do they take into account the added sales of content from iTunes because of the increased usability? In a world where companies sell gaming systems at a loss at times to make up for it in actual content sales (video games) can we not assume that there are residual effects on other sales because of someone purchasing an AppleTV for their home? Look at the much talked about iPod "halo effect" on MacOS system sales (which is out performing the sales growth of other pc makers), and of course content sales…

    Thanks!

  5. I'm with Steven and Debbie. I love my AppleTV and so has anyone who has come to my house and seen it in action. I have a lot of iTune Store products and the AppleTV lets me watch it on my widescreen….and I can save money by buying the content without all the packaging (hmm, greener way to go too).

    AppleTV is the iPod for your HDTV….what's not to love?

  6. The main problem with AppleTV isn't the product, it's the market. The market for PC-to-TV media streamers is really an early adopter market right now, and that's reflected in the sales figures. Just as consumers were slow to buy DVRs when they first hit the market, uptake for dedicated media streamers is going to be slow at first. And just as the cable companies, rather than TiVO, came to dominate the DVR market, the PC-to-TV market may end up being controlled by someone other than Apple (though it won't be the cable cos; I'm betting on the TV-makers). In the meantime, AppleTV does what it sets out to do, and does it very well, at a reasonable price.

  7. Appe's gross margin in the two latest quarters was at an all time high, over 35 percent. The typical gross margin is nowhere near 37 percent, though, it's hovering between 28-30 percent. Apple's gross margin is the overall company average, the ratio of gross profit to sales revenue. That doesn't mean that every Apple product has the same gross margin, each product is above or below the company average.

  8. My family owns five Macs along with some iPods. My first reaction to AppleTV was "huh?" Not too sophisticated a response, but I couldn't make sense of it. After reading the pro AppleTV responses on this page, my response is "huh?" If apple starts a movie rental through iTunes, I'll upgrade that to "oh." That's still a long way from "WoW!" which is what is my usual reaction to Apple products.
    PS. Please stop the "Apple Hater" nonsense. Forbes' analysis is just common sense. Apple hasn't put out sales figures because they're dismal. If they had sold a million in the first six months, we would have heard about it.

  9. I was surprised when Apple announced they would be entering the Digital Media Adapter (DMA) market, but I'm not surprised to see that they are now struggling. DMAs have been around for years. When broadband, home networking and wi-fi were taking off in 2002/3, D-Link, Linksys, HP and others rushed to market with standalone devices that allowed consumers to stream their music, photos and videos from their PCs to their TVs and stereos. Market research firms breathlessly predicted sales into the 10s of millions of units anually by the end of the decade. While these devices provide a cool way to move media from the PC to the optimal environment for viewing and listening, complexity of setup and poor user interface made them difficult to use. But perhaps the biggest problem is the requirement for the consumer to purchase a completely new box to make this work. In it's current form, the DMA, including AppleTV, is a niche product that appeals mostly to media and technology buffs. The story may have been quite different had Apple chosen to make AppleTV more closely resemble a DVR as Forbes suggests, or better, forget the hardware and integrate it's software into an existing set top box.

  10. I think; for once, Microsoft has done a better job with Media Center, now on most Windows Vista systems sold. It's never really been fanfare’d about like most Apple products do; but they’ve got the option to record TV (analog and cable etc) etc, but also let third party providers provide rental services etc. It's actually remarkably 'open' compared with Apple's approach.

    I wouldn’t go so far as classifying the iTV a flop though – Jobs did say it was a "hobby". They’ve had enough on their minds with Intel transition and then the iPhone and of course the delayed release of the latest OS revision. As long as they have a foot hole into the '10ft' experience, they are learning and getting talked about.

    Apple won’t let go to something that's increasingly going to be important to their revenue steams (especially with video remerging as Music was in iTunes in the early days) That said; the iPod woofer thingy has gone so they ditch what doesn’t sell.

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