Wow. ZDNet usually sides with Microsoft, as Slashdot points out. This is pretty interesting.
Wow (!) This is astonishing. The size of the drop in sales is humongous and reminiscent of when CDs got Napstered…
No, not my humble blog (nice though that would be!) We're talking revenues here, and according to this article from the Motlet Fool the iPad will soon generate more revenues than does all of Intel. Pretty cool and not at all surprising anymore.
I am blessed with two kids, twins as it happens. They each currently 'own' an iPad, handed down to them by my wife and me as we upgraded. Unfortunately, one is an OG iPad (the other an iPad 2), which is not able to update to iOS 6. It lacks a camera, there are several apps his sib uses on the iPad 2 which don't work on the 1, and it's also painfully slow at this point. Every time I pick it up to perform app updates on it, I want to throw it out the window and immediately order an iPad 4 (for me…) and give him my iPad 3.
But I haven't yet, mostly because I think the iPad 4 is a nice update from the 3 but not an overly compelling one. Today though, rumors are circulating about a 128GB model which got me thinking: is that enough for me to pull the trigger at this point? Maybe. I'd really prefer to wait for a fully refreshed model – rumors point to a mini-style form factor with thin side bezels and a lighter, thinner device overall. That would be a no brainer.
I just don't know how long I can hold out. The kids have become very attached to their iPads – probably too much so (there's a doctoral dissertation in here somewhere) – but it pains me to see the upset caused by crashing apps, incompatible apps, etc. And no I'm not just projecting! Trust me – the upset is very real. And it's getting worse the more they learn to hunt around the App Store for free games and such.
Another option – by far the cheapest one – is to get an iPad mini to replace the OG iPad as a sort of stop gap. Here again I'd prefer one with a retina display, but it seems like time is not on my side here. What to do…
Yes, I know – first world problems.
AAPL is getting crushed today after reporting revenues and earnings more or less in line with or at the generally lower end of expectations. iPad sales were specified, and were amazing (even if short of the rosier analyst calls). However, Tim Cook and Co. didn't specify the breakdown of sales between iPads and iPad minis.
Margins were also squeezed however. In many quarters the iPad mini cannibalizing the iPad is being blamed for this (along with continued iPhone 4/4S sales at the expense of iPhone 5's). Apple makes somewhat less on each mini than it does on each iPad.
Overall, as long as sales keep growing at a decent clip – which they are, unless you are among the most optimistic out there – that's a high class problem to have IMO. They continue to sell boatloads of iOS devices, further enhancing the iOS ecosystem. It's a virtuous cycle. And China has barely been tapped overall. I'm not saying the stock is or isn't fairly valued. But I'm not remotely worried about the company itself. And the iPad (including the mini) is an absolute mega-hit product.
I'm pretty firm in my belief that Apple will not release a television. However, I'm equally firm in my belief that Apple will get into the “television business” in a big way. The question is, how?
I think the answer is not only out there, but fairly clear: Apple's television push will come in the form of a materially enhanced version of the AppleTV. It will include content availability and features not currently available to the device.
Let's look at the AppleTV today. Currently, the TV content available on the AppleTV is limited to library content you can purchase or rent, and a little bit of live content available via apps. The library content consists both of shows long since aired, as well as shows just aired (or, in the case of select shows like Downton Abbey, prior to airing with the purchase of a season pass). The live content is currently limited to sports via apps for baseball, basketball, etc.
In order for Apple to transition the AppleTV from hobby to mainstay, they need to do two things: get all live content onto the box, and provide DVR functionality. In other words, they have to replace the cable company set top box. That's good news because even the best of these boxes are downright awful.
There are two primary ways Apple can get TV content onto the AppleTV from here. One is pretty easily dismissed, and that is to include a CableCard slot. For those who don't know, CableCard is a clumsy attempt by the FCC to force cable companies to open up their networks to alternative set top boxes. It allows access to cable content without the cable company set top box. For a while many TVs were sold with cablecard slots, and it is still used by TiVo for its DVRs.
However, in practice cablecard generates the kinds of consumer ordeals and confusion that Apple usually stays away from. Many cable companies require a truck roll to install the cards, they can be finicky, present issues when cable providers mix digital and analog stations, and, well, are generally just not a very simple solution for most households. If they were, they would have more than miniscule market penetration. Google cablecard problems if you don't believe me!
Fortunately we have already seen alternative – and better – ways of getting live content onto our screens: apps. The most common are individual network apps which function only if you otherwise subscribe to (ie pay for) that channel via your cable provider. This has the added benefit of not alienating the cable provider from the process and profits, and saves Apple from untold numbers of negotiations for individuals shows.
HBOgo is a prime example of this. You install it on your iPad, provide your cable subscription credentials, and voila – HBO on your iPad. In addition to a live stream, the app allows access to library content. One could easily envision a collection of these “channel apps” giving us all the live programming we want, in addition to library access to previously aired shows. And technically there is no reason they couldn't be installed on the AppleTV should Apple choose to allow it (and work out the details with cable providers…)
One challenge this solution poses is the lack of integration across channels. Though I do believe that Apple will attempt to provide direct navigation via Siri, sometimes you really just want to channel surf, or look through a consolidated guide. You can't do that if you have to switch from app to app every time you want to change the channel.
The solution here: Apple could provide a consolidated “meta app” which draws content and scheduling information from all your channel apps. As it turns out, cable companies are already making these apps. Cablevision, TWC and others already make iOS apps which provide a full interface to all live cable programming to which you subscribe. They only work in your home (ie on your cable company provided network) but a TV in your living room would fit this mold. Here again these apps could easily work on the AppleTV.
- Apple will open up the AppleTV to apps
- we will see a proliferation of specific channel apps
- Apple will release a “meta app” which pulls in content from your channel apps, and library, and integrates it all into a unified interface
- The meta app will co-exist with and compete with existing cable provider apps
The other feature Apple needs to provide is DVR functionality. I think the writing is on the will here as far as how Apple will address this. Apple – and everyone else these days – is all about the cloud. I think the in-built storage of the AppleTV will be increased somewhat to allow space for apps and a larger buffer to stream shows. But when you set up recordings they'll be stored in the cloud for streaming later on when you want to watch.
I think this functionality will be handled in the unified meta app itself so that Apple can provide and control its usually robust user experience. It's likely that individual channel apps may also offer their own channel-specific DVR type functionality, though in general my bet is that the meta app will be the primary.
Taken together, the solution I've outlined:
- Allows Apple to fully replace the cable company DVR
- Spares Apple from countless licensing deals
- Doesn't cut the cable company out of the picture – you still have to pay your monthly cable TV fee (which makes cable providers likely to play here)
- Provides Apple with the opportunity for subscription revenue (for DVR functionality and space for example) on top of AppleTV hardware revenues
- Relieves the cable providers from having to purchase, deploy, and maintain the awful STBs they currently use.
As for timeframe, I think this is something we will see in CY2013. Personally, I can't wait to chuck the Scientific Atlanta DVR that Cablevision rents to me for $15/mo or whatever it is. I'd happily pay that – or more – to Apple for a better solution. Maybe Apple turns around and gives the cable provider a cut of that. Either way, Apple takes over the television.
Apple has long inspired one of the largest and most rabid rumor cultures of any company on earth. Potential new products are speculated about at length, sometimes for years. Some eventually come to fruition as shipping products (iPhone, iPad) while others seemingly stay forever in the realm of question marks. For now at least, a television from Apple falls squarely into the latter category.
I do believe that Apple will get into the television business in a big way . The only question is how?
I do not believe Apple will sell a television. The global TV market is absolutely brutal. Commoditization is the order of the day, with 70″ LED HDTVs selling for as little as $1600 on the recent Black Friday and regularly available for under $2000. Think about that for a moment. It's difficult to imagine Apple playing in the low cost end of a pool like this. Margins are razor thin even if there is volume in the market overall.
Now, there are certainly high end models available from some manufacturers (the Sharp Elite line, Sony's HX line, Samsung's 8000 series, etc). However, at $5000 and up for the larger models these are no more than niche products. Collectively they sell in the tens of thousands of units (max) per year. Here again, it's difficult to imagine Apple getting into a space whose volume is so low.
Brutal competition has left the major players on shaky footing. Sharp is teetering on the edge, forced to sell assets and is said to have taken an investment from Apple. Regarding the latter, I think that has more to do with Sharp supplying displays to Apple for other products, not televisions. Samsung has fared better but it has a much broader array of products than does Sharp (eg phones, tablets, appliances, etc).
What about new technologies? At the recently ended CES, 4K “Ultra HD” sets were one of two bright prospects. These sets, with 8 megapixels (4x that in Full HD sets), may ultimately incite the next big TV upgrade cycle, so it's conceivable that were Apple to sell a TV they'd want to ride that wave. However, there is no 4K content currently available. And, these products will also be priced both stratospherically by Sony, Sharp, and Samsung, as well as at the commodity end by Vizio and Hisense. Tough to see much margin lasting very long in 4K.
Then there is OLED, a display technology superior to both LCD and plasma. That has an Apple feel to it. However, yield issues have kept these sets off the market. 55″ sets are finally close to shipping, but for $12000 (!) Even if Apple could commit to volume purchases such that they could sell the sets for half as much, it would still be a niche product, and that also assumes that the manufacturing issues are solved which is not a given.
Added all up, I simply do not see Apple selling a TV. As I said though, they will definitely make a big push into the TV business. Find out how in my next post.