Macopinion

Fixing AppleTV: Part 1: Is It Broken?

by Marc Zeedar macopinion@designwrite.com

There have been a lot of people writing about the "failure" of AppleTV lately. What I find odd is that this is about a product where we can only guesstimate sales numbers since Apple doesn't tell us. Current estimates are sales of 800,000 units in 2007, which seems a tad high to me, though it could actually be low. We just don't know since Apple doesn't tell us.

But do AppleTV sales even matter? Does it matter if Apple sold 500,000 or a 1,000,000? It does not and here is why.

AppleTV is profitable. Apple make not be making huge sums on each unit, but they are not losing money. So every sale is a bit of cash in Apple's piggybank.

Compare that to Microsoft's Xbox which loses billions of dollars a year. Microsoft sells the hardware at a loss in the hopes of gaining marketshare with gaming and eventually making a profit. Of course before that happens it's time for a new version of the hardware which must include expensive new technology and again be sold at a loss... requiring more years before that elusive profit is found. What a strategy! A never-ending money pit!

AppleTV is not a standalone platform. Unlike Xbox or Tivo, which are proprietary platforms, AppleTV is just a Macintosh and uses the same content technology as Macs. This means that for Xbox and Tivo, the number of users (units sold) is important, for marketshare means a larger proprietary market.

Apple, on the other hand, doesn't care where or how you play your iTunes Store content. You can do it on your computer, your iPod, or your AppleTV box. There's no competition between iPod and AppleTV or Mac and AppleTV. The iTunes Store existed before AppleTV and if Apple killed AppleTV next week the iTunes Store would continue to sell content unchanged. Apple makes money on both the hardware and the content, and since the two complement each other, sales of one encourage sales of the other.

It doesn't cost Apple much to sell or support AppleTV. Because AppleTV is built on existing Apple standards (Mac OS X, iTunes Store, etc.) it doesn't cost Apple much to support it. Apple has to maintain the iTunes Store anyway, and AppleTV runs a simplified version of Mac OS X which is probably not that difficult to maintain (simple is easier). The AppleTV interface is just FrontRow, part of Mac OS X, so its development is already paid for.

AppleTV is the future. The critics who argue that AppleTV is a failure are only comparing it to blockbuster products like iPhone. As long as AppleTV isn't losing Apple money, what's wrong with it?

AppleTV is the future. It provides a simple way to get digital content from the Internet to your big screen TV. It bypasses all the networks, avoids advertising, and allows you to control your viewing schedule. The traditional media networks are dead -- they just don't know it yet. In the future we'll look back and marvel that people used to sit around and wait for a TV show to start at a certain time or miss a show because they didn't happen to be home then.

So What's Wrong With AppleTV?
AppleTV is not perfect. I do not own one (though I am growing more and more tempted). But the flaw with AppleTV is not the hardware, the feature set, or the system, but the content: there just isn't enough content on the iTunes Store. Yet. This will change, but it's the studios who have to move forward, not Apple.

The studios are terrified of this new digital future. They're so afraid of piracy they are willing to hurt their own paying customers -- in effect encouraging those customers to pirate! Basically, those of us who want our content in digital format will get it: either over P2P networks or by ripping DVDs we rent from Netflix. We'd prefer to buy it on iTunes, but if it's not available there (NBC, this means you), we'll just steal it.

This is stupid and short-sighted by the studios, but not too surprising. They are run by dinosaurs who are too comfortable with their familiar way of doing business. They don't understand technology. It frightens them.

This means it will take a long time for the studios to come around. They must suffer pain, enough pain that the shareholders vote out the current management and install leaders who are willing to think differently. This process will take years, maybe decades. Yes, we'd all love it if they came around tomorrow, but that's just not going to happen. Apple had some big breaks on the music side, but the video side is not going to just hand Apple the keys to the kingdom. It will take time, but eventually it will happen. And since Apple seems to be the only tech company that understands content from the consumer's point of view (unlike Microsoft that does everything to aid the corporations and hurt the consumer), I predict that Apple will be at the heart of this digital revolution whenever it does happen. When it does, Apple is ready with AppleTV.

Next Time: Part 2: It's the Bandwidth, Stupid

macopinion@designwrite.com