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Summary:

After finally admitting that the company did a poor job with the Apple TV, Steve Jobs in his Macworld keynote today unveiled a totally new interface with loads of functionality that should be enough for any Apple zealot to jump for joy. Of course, what Jobs […]

After finally admitting that the company did a poor job with the Apple TV, Steve Jobs in his Macworld keynote today unveiled a totally new interface with loads of functionality that should be enough for any Apple zealot to jump for joy. Of course, what Jobs didn’t mention during his “Delusions of Grandeur” speech was whether or not the Apple TV has some viability going forward. After all, how much faith do people really have in Apple to make its new offering a success when the product was relegated to the shadows and generally ignored over the past year?

If you ask me, they should have more faith than ever.

Let’s recap: The Apple TV was originally slated to sell 1 million units by the end of 2007, according to predictions made by analyst firm J&W Seligman and many others. But in reality, the device barely hit the 400,000 units sold-mark, staying on the shelves while more appealing Apple products continued to beat estimates. Why? Simple: Apple gave us no real reason to buy the Apple TV. If we couldn’t access iTunes from the device and YouTube integration was the only additional feature beyond what we could already do on a computer, why waste $299 just to have another set-top box laying around the house?

Obviously understanding this, Apple’s announcement today set the tone for the future of the Apple TV.

The newly updated Apple TV will allow you to download iTunes movie rentals, music, podcasts and video without the need for a computer. And with Flickr integration, you can even flip through your friends’ photo albums. As if that wasn’t enough, Apple upgraded the device’s UI to make it more user-friendly and dropped the price to $229. If you’re already an Apple TV owner, you’ll be happy to know that a free update will be released in two weeks that will give you the same functionality outlined above.

Why has Apple employed such a drastically different strategy? Well, the company has already invested millions in the device, so there’s little incentive to create an entirely different set-top box to accommodate iTunes movie rentals. Beyond that, the Apple TV is a convenient device that will allow Apple to create the end-to-end solution with rentals that it enjoy with music and iPods. After all, what other service has the number of users iTunes does and a full set-top box integration to boot? Netflix certainly doesn’t, and Movielink relies on Windows-based machines.

In the end, Apple may have talked a good game by claiming it wanted to create a more compelling Apple TV, but the truth behind its reinvention has everything to do with movie rentals. Apple smelled blood in the movie rental industry and realized that by offering movies in the same fashion it offers music and allowing people to enjoy the entertainment on an Apple product, it has successfully created an end-to-end solution that has yet to be mastered in this space.

Rest assured, the Apple TV was always an important piece in Apple’s puzzle and going forward, it could be the key to its future.

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  1. RIP Apple TV, Hello Apple TV – GigaOM Tuesday, January 15, 2008

    [...] a success when the product was relegated to the shadows and generally ignored over the past year? Read more over at NewTeeVee. Share/Send Sphere Print Previous [...]

  2. interesting to see how apple rentals vs netflix subscription plays out.

    while itunes certainly has a larger install base, netflix’s distributed distribution model, baking netflix into numerous TVs and set tops, is going to allow netflix to get better penetration than a singular box such as the apple tv is.

    seems like apple may get more new releases upfront, but do i want to spend $230 or $330 upfront to again pay $4 to watch a new release, when i can get that in DVD form from netflix the next day? With the higher end apple tv, i could have 20 months of netflix, not even counting the additional cost for the movie rentals. i wonder how many movies apple will offer. netflix has over 6000 today.

    it seems like netflix’s strategy is looking better at this point.

  3. Apple TV – så godt som død Wednesday, January 16, 2008

    [...] Blockbuster gikk ned da Mr. Jobs annonserte filmleie i iTunes. Og det finnes andre der ute som er mer positive enn meg. Men NetFlix og Blockbuster var ikke de enetse aksjene som gikk ned. Verdien til Steve Jobs sitt [...]

  4. I’d like to load up the Apple TV interface on my MacBook Pro and hook it up to my TV. Do you think Apple will allow us to do that? They could sell more movies and TV shows that way and it would be another way to allow people to watch video podcasts on TV.

  5. @buster,

    One thing to consider is that Apple does not have to cough up $$$ (definately revenue-splits, maybe even upfront payments) in all of the partnership deals that it will need to strike with lots of different manufacturers. That’s going to be costly over time.

    Also, the unlimited streaming is going to be a huge increase in their operating expenses, both from a bandwidth perspective and a licensing fee charge (remember they need to pay the studios for every viewing, even if someone just says “ah screw it, I don’t want to watch that” 10 minutes into it).

    In short, if Netflix follows this strategy, it’s going to hit the bottom line harder than Apple’s strategy since they own all of these devices. I’m sure they are going to have to increase prices after this initial PR splash.

    Also, if Subscriptions ultimately seems to be the better approach, then there’s no reason Apple can’t follow it. It’s just rejiggered software and license agreements with studios.

    Apple will definately own the living room. Too bad they didn’t have this ready for Christmas 2007. Seems like tight economic conditions are coming on these days.

  6. I like the ATV and bought one shortly after it was released. Without it I’d never see most of my photos and being able to browse my own movies is also great – discs suddenly seem totally outdated.
    The Apple TV is one of those things you’ll never miss unless you had one for a while, at which stage you don’t want to live without it. And for $229 it’s actually very good value too – I can’t wait for the software update.

  7. Personally, it would seem to me that the ATV is for the Apple faithful, and only for those on Apple computers.

    Let’s compare the ATV with something like an Xbox 360… photo sharing PC->TV? check. Music sharing PC->TV? check. Movie rentals, and in HD? check. Plays all the best games around? check for the X360, none for the ATV. TV streaming PC->TV? again, check for the X360, none for the ATV. When for just a few bucks more I can do a whole lot more, why would I buy an ATV? Granted if the ATV at some point does TV tuning, then that might sell a few more units, but ultimately it doesn’t look like the market is really looking for it!
    -bld

  8. This is what the Apple TV should have been at launch. Making it an iPod for your TV was probably not Apple’s idea. I’m sure they had to wait for neogitations with the big studios to complete.

    The new feature set and new price does make this an interesting opportunity for Apple to make big strides into the living room. While the Xbox has similar features, people over 30 probably don’t know about those features as they view the Xbox as purely a gaming device for kids and teens.

    HungryFlix.com loves the Apple TV and the potential that it holds for indie content providers to deliver their works directly to the family room. It was great to see Jobs highlight podcasts again, and play an HD podcast live.

    This segment is still young, but this is a great (first) second step by Apple.

  9. @Brien—not to get into an Apple vs the world debate but with most Apple products you are paying for the quality of design in both hardware and software.

    Now Apple products are not perfect and they do have issues and fail but I also know that the Xbox has had many issues. I haven’t seen the Xbox marketplace user interface but is it something that your mom could use?

    The Apple TV is small, totally quiet and the software is menu-driven-for-mom easy to navigate. Apple is going after more regular people here, not just techies or heavy gamers.

    With this release the Apple TV is not for just Apple users, it is for anyone with a flat panel TV.

    I understand that gaming is a huge market but it does annoy me when gamers don’t realize that there is a much larger market of people who never have and never will play video games and therefore will never purchase a console no matter what other features it may have.

  10. I just don’t see how this is a better end-to-end rental solution than the digital cable box I already have, didn’t pay $300 for, and still don’t use. My Blockbuster subscription is a better deal and I don’t mind waiting a day. Will this lure the people who don’t already have a digital cable box with VOD? Probably as successfully as VOD has been with luring people to digital cable, which even with little upfront cost to the customer has been less than remarkable.

    To me, the only advantage of iTunes rental is that you can transfer it to your iPod. But is this really useful? If Apple thinks they can charge $1 extra for HD rentals, that would seem to indicate that the demand is for watching high-quality rentals on the big screen. This is the exact opposite of staring at a 3″ screen for two hours watching a rented movie for the first and possibly only time, and still spending the full $4 to do it. Do people really want to do this?

    I can only think of one reason to start watching a rented movie and finishing it on an iPod: because something came up unexpectedly and I had to leave, and if I don’t watch it on my iPod then what’s left of my paltry 24 hours will expire and I’m out 4 bucks. Creating demand for something via the restrictions artificially imposed on it doesn’t seem like a sustainable model to me.

    Apple will “own the living room” as successfully as the digital cable box has, and for the same reasons. It is a closed system that limits my flexibility and tries to lock me into one provider. Why must I hack the Apple TV to play my own divx videos? I’m guessing because Apple assumes they are pirated, and if I have to spend the time and effort to convert them to one of their arbitrarily chosen supported formats, I will just buy it from them instead. It is the same mentality that has failed the media companies for years. In the end, this boils down to trading one restrictive system that assumes I’m a criminal for a different restrictive system that assumes I’m a criminal. This type of mentality won’t give one company a monopolistic ownership of the living room. Instead, it gives the average consumer incentive to become hackers, much like DRM has provided incentive for them to become pirates. Most consumers are willing to pay a fair price but expect a reasonable degree of flexibility with what they’ve legally paid for. Media companies don’t seem to get this, and they are paying for it dearly. The ATV/iTunes/iPod ecosystem just seems like a new take on the same old mindset.

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