Apple TV: Will it open up Hollywood and create a $11.4 billion market?

Apple TV: Will it open up Hollywood and create a $11.4 billion market?

Summary: With the Apple expecting to ship Apple TV in mid-March--also known as any day now--analysts are sizing up what it'll mean for the company. The consensus view: Apple TV is interesting, but it's no iPhone. ThinkEquity analyst Jonathan Hoopes begs to differ.

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TOPICS: Apple
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With the Apple expecting to ship Apple TV in mid-March--also known as any day now--analysts are sizing up what it'll mean for the company. The consensus view: Apple TV is interesting, but it's no iPhone.

ThinkEquity analyst Jonathan Hoopes begs to differ in a research note today. His take: Apple TV will be a big hit. Hoopes values the business opportunities facing Apple TV at $5.3 billion to $11.4 billion.

Wildly optimistic? Perhaps. Then again it wasn't like anyone saw the iPod coming either. 

Do we have a TV revolution on our hands? Let's look at Hoopes' Apple TV logic.

Hoopes: "The humble AppleTV has ceded the limelight to iPhone (see blog focus) and has been overshadowed by the buzz preceding the launch of Leopard. Yet, we believe the potential is huge for this small device. AppleTV is an ideal conduit for multiple services including DVR, paid-for content (e.g., VOD), gaming, or advertising. We identify and value these business opportunities at $5.3-$11.4 billion, with substantial upside potential."

In other words:

"AppleTV is not just another set-top box. Instead, 802.11n Wi-Fi wireless networking, an Ethernet port, and an Intel processor combine with a simple-to-use Apple Remote and what looks like a revved version of Apple's Front Row music, photo, and video sharing, streaming, and presentation engine to deliver a novel next-gen digital content experience."

My take: It's true that Apple TV has taken a backseat to the iPhone as far as buzz goes. That means the perception will be that Apple TV will be deemed a surprise success since few are expecting it. However, the services Hoopes mentions all have plenty of entrenched rivals. In the end, Apple TV is competing with cable boxes, which now offer many of the same features sans WiFi connectivity. As Jason O'Grady notes: What problem is Apple TV really solving?

Hoopes: The analyst argues that Apple TV could do to Hollywood what the iPod did to the recording industry.

"As a digital media content delivery vehicle positioned in users' living rooms, we think the AppleTV/iTunes combination could become as disruptive to legacy video purchase-and-consumption behavior as the iPod/iTunes combination has been to the traditional music business model," said Hoopes.

The analyst also adds that sales of movies, games and TV guide services would be very lucrative for Apple.

My Take:  Apple TV could be very disruptive and iTunes could be ported to the living room easily enough. The key will be ease of use. Apple TV's benchmark for ease of use isn't Windows. It's a set-top box. That's a different hurdle. Early adopters will be all over the Apple TV. But most traditional remote control users aren't going to tinker with anything that may delay immediate gratification. And given the number of video downloading services out there you could argue that Hollywood already gets digital distribution way more than the recording industry did.

Hoopes: Apple software is critical.

"We note that iTunes preceded the iPod by nine months. The iTunes/iPod combination benefited from the popularity of MP3. Similarly, with iTunes version 7 (released last September), Apple introduced support for movie downloads paving the way for a device to take advantage of demand for time-shifting DVR (digital video recorder), any-time VOD (video on demand), and place-shifting Sling technologies that are popular today-not to mention the momentum in high-definition flat panel TVs sales."

My take: If anyone can make software to make the Apple TV as seamless (and potentially better) than set-top boxes its Apple developers. But again there's a ton of competition. One thought: Wouldn't it make sense for Apple to buy Sling and/or Tivo?

Topic: Apple

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13 comments
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  • I seriously doubt Apple TV

    Windows Media Center runs rings around Apple TV. Plus Apple TV is mired in DRM: arguably the most repugnant technology consumers have had to endure. Remember, the overwhelming majority of content on iPods is unprotected. A lot of video content Apple TV is supposed to handle, by will be DRM?ed.
    P. Douglas
    • drm'd?

      and msft doesn't have their own? question; would you rather have your computer next to your tv or a little box(appletv)? me, I'd probably hook up my mac mini once I update to my next mac.

      gnu/linux...giving choice to the neX(11)t generation.
      Arm A. Geddon
      • one more thing...

        I already have a pc with a tv tuner card in my bedroom if I want to watch tv there.

        gnu/linux...giving choice to the neX(11)t generation.
        Arm A. Geddon
      • Re: drm'd

        [i]and msft doesn't have their own? [/i]

        In general, I doubt DRM'ed content is going to do well eventually on any system.

        [i]question; would you rather have your computer next to your tv or a little box(appletv)? [/i]

        There are Media Center extenders (that work in tandem with a Media Center PC) that do what Apple TV does.
        P. Douglas
      • A computer???

        Try an XBox...
        No_Ax_to_Grind
  • Apple TV

    what's not clear to me, is will this work like a DVR? And if so, a DVR that I can broadcast to any room of my house. The problem today is I need a DVR in every room where there is a TV. How can I predict what room I want to watch 30Rock from?

    And what if I start in one room and want to finish in another. Plus you have the small size.

    Most of you live with broadband everywhere. Not so for a lot of us. I've got a cabin...this thing seems pretty portable...
    chrisbaggott
    • No, it will not

      Right now the AppleTV has no DVR capabilities. It would be a much more attractive product if it did. Essentially, it's set up so you would buy movies from iTunes, then send them from your computer to your television.
      tic swayback
    • You would be much better using

      A windows PC and extenders as needed.
      No_Ax_to_Grind
  • DVR? VOD? Huh?

    AppleTV doesn't record anything, nor does it offer what you could honestly call
    video-on-demand (unless you have a really, REALLY fast internet connection). It
    also only plays a very limited set of video codecs, so you're basically stuck with
    iTunes content (unless you re-encode all of your own stuff). And, since it only
    plays stereo (no 5.1 surround sound), it's little better than an AirportExpress for
    audio stuff.

    Basically, this thing a really long way to go before it becomes a "killer app." A
    "solution in search of a problem." If this is all it does, I'm far better served by my
    iPod and $19 video/audio out cable (or splurge and get the same thing with a
    remote for $99 bucks).
    Scott Kitts
    • Bingo

      So many ways to do this so much cheaper than buying an AppleTV at this point. Run a line from your computer to your tv. Or better yet as you point out, a line from iPod.
      tic swayback
  • Middle Ground

    The potential to offer these features exists, but it is in the distance.

    Somewhere between the hype and features the product doesn't have must have some value. Afterall, Piper Jaffray tends to be correct in these types of areas and they really Love Apple.

    Lets suppose that if Apple doesn't do it with ITV and IPhone, Google will do it with YouTube and the Google phone.
    Ken Nakagama
  • no magic here

    "Then again it wasn't like anyone saw the iPod coming either."
    Excuse me? Well, I sure did, but I'm a nobody. However Creative was well in advance of Apple with the harddrive MP3 player.

    I put forth the (not well thought out) proposition that the iPod initially became popular because iTunes offered a legal way to download music. iPod required, of course. Then inevitiably, people decided that iTunes was a lame horse, but the iPod was a slick machine, coupled with the typical slick ad campaign. The iPod's success is as much a fluke as most insanely popular gadgets. They weren't innovators, just in the right place at the right time.
    shraven
    • WRONG THE IPOD IS A SIMPLE MP3 PLAYER

      Creative's early players were heavy & bulky i can't quite
      remember but i think they used 3.5 inch desktop drives
      in them.

      Also the ipod has the best interface & that's a fact, i
      often talk to my 18 y.o. Nephew who loves it & would'nt
      touch any of those cheap brands as he puts it.
      johnpall@...