Analyst Report: Apple’s Path to the Living Room


Speaking at the All Things Digital conference in May, Steve Jobs was asked whether and when Apple would articulate a strategy for the digital living room in response to Google’s recent announcement of the Google TV platform. Jobs’ response was incomplete but telling:

The problem with innovation in the TV industry is the go-to-market strategy. There’s a subsidized business model that gives everybody a set-top box for free or for $10/month — and that pretty much squashes any opportunity for innovation because nobody’s willing to buy a set-top box. [As a result] all you can do is add a box on, and that means a table full of remotes, cluster of boxes and bunch of different UIs.

The only answer, according to Jobs, is to “go back to square one and tear up the set-top box and redesign it from scratch.”

We agree Apple has a go-to-market problem with respect to the digital living room (although we’re skeptical the cheap set-top box, per se, is the problem), but we also believe an eventual push into the living room by Apple is both inevitable and necessary.

Inevitable because, given Apple’s media-driven strategy, the $53 billion residential video market would seem simply too large a prize to ignore. Necessary because, with a current revenue of $51 billion and a market cap already approaching $250 billion, Apple increasingly will need to pursue big prizes to move the needle on its share price.

We also believe Apple’s product and platform launches since the introduction of the iPod, then continuing with the iPhone and iPad, clearly point to a long-term strategy of conquering ever-larger screens with ever-richer media applications. The big-screen HDTV represents the apex of that strategy.

The question for Apple is how to get there.

Table of Contents

  1. Summary
  2. Disruptive Force
  3. Head in the Cloud
  4. A Path to the Living Room
  5. Key Conclusions
  6. About Paul Sweeting
  7. About GigaOM Pro
  8. Apple’s Challenge
  9. Device Strategy
  10. The App Store

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