Apple's future TV: Can Web-based apps replace "channels," kill cable?

Apple's future TV: Can Web-based apps replace "channels," kill cable?

Summary: Gene Munster's living room of the future is centered around a Web-connected, iTunes-powered Apple-branded TV - a 50-inch, high-def, wall-mounted iPhone, if you will. And the stuff you'll watch on this "TV set" won't come in via Comcast or DirecTV.

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Gene Munster's living room of the future is centered around a Web-connected, iTunes-powered Apple-branded TV - a 50-inch, high-def, wall-mounted iPhone, if you will. And the stuff you'll watch on this "TV set" won't come in via Comcast or DirecTV. It will all stream in from - or be archived through - iTunes.

That's the way Munster, a Piper Jaffray analyst, sees it. In a note to investors today, he offers his take on a deeper dive into the living room by Apple. The company, you see, will become both hardware, software and content provider in this new world of television - just as it has already become for today's world of digital music.

He believes it is "highly likely" that Apple will release a new Apple TV in the coming months that will include support for a monthly subscription for iTunes TV shows or TV recording features. He writes:

With the popularity of ad-based Internet TV (Hulu.com) and subscription models (Netflix's Watch Instantly), we believe a-la-carte (iTunes) video purchases have lost share against other video models in recent months. As such, we believe Apple is exploring a subscription-based offering for its TV content in iTunes.

I don't necessarily agree with that - but more on that in a bit. He went on to talk about the longer-term outlook and expectation of an Apple-designed, Web-connected TV with DVR and home media functionality built in. That could arrive as early as 2011, he wrote. From the report:

The device would push Apple further into the digital living room with interactive TV, music, movie and gaming features (with the iPhone or iPod Touch as a game controller). Such a device would command a premium among a competitive field of budget TVs; we believe Apple could differentiate itself with software that makes home entertainment simple and solves a pain point for consumers (complicated TV and component systems).

The TV market is a tough game and it's changing fast, not only in the way programming is offered but also in the hardware (TV sets) that are being manufactured. At last year's Intel Developer's Forum, Yahoo and Intel talked about Web-based widgets for Web-connected television sets - basically "apps" that deliver on-screen sports scores, weather updates and Flickr slideshows. Intel's technology outfits the screen itself to take on that role of PC.

Previous coverage: Analyst: 6.6 million AppleTV units in 2009; an Apple-connected TV on the horizon

Munster points out that Apple's five-year $500 million partnership with LG for LCD screens likely covers displays for Macs and portable devices, it could also include the larger LCD TV displays. On the software and content side, Munster is envisioning a scenario where iTunes - which already has TV content - becomes a subscription service that allows viewers to dump the cable guys and instead use iTunes to get episodes of certain shows - those offered up by Apple's partners.

Here's the thing: To get me to dump cable or satellite, Apple will have to up its game in offerings, including first-run and live-streaming broadcasts. To pull that off, Apple would have to go back to the negotiating table with the networks. That could be tough, seeing how Steve Jobs apparently has a rep for being a bit of an S.O.B. when it comes to negotiating in Hollywood. Consider all of the work that it's taken just to get the music side of the business this far.

Still, I like where Munster is going with this.

But, I say forget the idea of turning iTunes into a subscription service. I disagree that the demand for a-la-carte has lost its spark. There are some 65 million users of iTunes out there and I can't imagine they'll respond happily about the service being flipped on its head. Instead, Apple should take baby steps and work with the networks on subscriptions on TV apps that would offer unlimited access - including live streaming - to certain networks. It's no different than paying $13 extra per month for HBO or Showtime, really.

In a sense, this offers subscription pricing on a-la-carte programming by burying it within the app. Can't you see it?

Here's my vision: Apple offers a base subscription with 10 or 20 "core" network apps, those such as CBS, CNN, ESPN, Nickelodeon, Bravo and so on. After that, others are added to your TV set - not a set-top box - on a per-app, variable-pricing subscription basis - maybe 99 cents for Boomerang, $1.99 for the NFL Network but $5.99 for Showtime. There could potentially be all sorts of ways to slice it and dice it.

And the consumer couldn't be happier. If I only add a handful of channels, then I save money over my satellite bill. If I add a lot of them, I may pay more than I currently pay DirecTV - but now I get the networks (as opposed to "channels") that I really want; not those that are given to me in a package.

Hey, maybe Apple can talk Showtime into offering a $1.99/month "Dexter" app. I'd buy that.

For this to really work, though, the idea of wrapping it into iTunes and/or a TV set is the way to go. Apple TV hasn't become the must-have device the way the iPod and iPhone did and thinking that consumers will buy it now just so they can pay subscription fees isn't very realistic either. There are too many other options out there.

Earlier this year, I shook my head at a theory from Munster that games and apps would be one way for Apple TV to generate some growth. Sure, they're taking off on the iPhone - but many of those apps are designed for folks on-the-go. Apps for TV would have to be related to the TV viewing experience - and they really would need to work independent of a set-top box.

They would need to come built into the TV.

For some time now, Apple has put its AppleTV product on a back burner. Executives repeatedly called it a "hobby" but gave it little respect. Then, earlier this year, COO Tim Cook told analysts that the company would continue to invest in AppleTV because "we fundamentally believe there is something there for us in the future."

I've been an Apple TV owner for some time now and I have to say our only real use for it has been renting movies in HD (no Blu-Ray player in this house), playing some YouTube videos and the occasional living room presentation of a photo slide-show. Still, I have liked how well the system integrates with iTunes on computers around the house.

I have seen what Apple TV can do. I can only imagine how the company can stir up the future of TV if it is truly working on some form of Munster's vision.

Topics: Hardware, Apple, Browser, Mobility, Networking

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131 comments
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  • AppleTV only called a hobby after its dismal failure

    To be sure, Apple did [b]not[/b] call AppleTV a "hobby" when they released it. It was only after they released the dismal sales figures for this piece of garbage that they "apologized" by calling it a hobby.

    You know what Apple should do to spur sales of their "hobby"? They should pay bloggers to write about how fantastic it is and how it will be the wave of the future and how it will kill cable!

    Oh wait...
    NonZealot
    • Fixed it for you

      "They should pay [b]analysts[/b] to write about how fantastic it is "
      ejhonda
    • *snooze*

      You need to go out on a date far more than I ever will.
      HypnoToad72
      • Which is probably just as well.

        :)
        Sleeper Service
    • Must you bash everything Apple?

      I'm sorry but you sir are tiresome and ridiculous.

      With Apple TV you can rent/buy HD movies, buy music, watch
      Youtube, browse movie trailers, play your own videos, music, photos,
      etc, without ever turning on your computer. Oh and the remote has
      like 3 buttons, compared to the MediaCenter's...what...30+.

      Obviously too leading edge and ground breaking for you to
      comprehend it's importance in what is coming...just like your stance
      on iPhone...you don't get it. Man your comments are getting more
      pathetic by the day.

      CowLauncher
      • WOW

        Just like a PS3 and just about a 360
        The 'G-Man.'
        • I Agree...

          I own a PS3 and I do you use it more for media than I do for games
          and stream stuff from my Mac with the Nullriver Media Server. Where I
          like the Apple TV is how it well it integrates with iTunes and syncs all
          my devices with my content, like podcasts, iTunes U, music playlists
          and so on. And then there is Boxee which lets me access tons of 3rd
          party programing. Apple is building a multi-billion dollar CDN so we
          know there will be all kinds of content coming down the pipe.

          Thanks G-Man, these are the kinds of comments that spur real
          discussion. Not like this NZ spew that floods every Apple article. I
          don't go on the Microsoft articles and start bashing...I don't really care
          what MS is up to.
          CowLauncher
      • You must be new here. NonZealot is our resident Microsoft troll. [nt]

        [nt]
        olePigeon
        • That might be true, but . . .

          NZ bought a MacBook Pro

          But he says he only uses it for Windows.

          Sure, that's like saying you only read Playboy for the articles. :)
          Ken_z
      • Apple IS A FAILURE

        in every way. Apple products only sell because of HYPE and nothing else.
        Mectron
        • Bizarre post on NZealots thread. NZ says he owns a MACBOOK!

          you say
          "Apple IS A FAILURE
          in every way. Apple products only sell because of HYPE and nothing else."

          on a thread started by NonZealot, I suppose you want to support NZ BUT
          did you know NZ by his own admission owns a MBP?

          So you're actually saying that NZ is so dumb to be taken in by Apple?

          Davewrite
          • What on earth are you talking about?

            How many times do I have to go on record as saying that I think the hardware is good? Are you seriously that blinded by RDF that the second someone posts something that isn't 110% glowing about Apple, it immediately makes you blind to anything else that person ever says? Seriously dude, get a life, this is pathetic.

            For the final time (although with people like you out there, I'm not that hopeful): the hardware is very good. It isn't perfect but just because I've stated where it isn't perfect doesn't mean that overall, I'm not happy with what I got. The software (OS X) isn't bad, it just isn't as good as Windows, that's all. That's like saying that you are a good runner but you aren't as fast as Usain Bolt. That isn't an insult. So when I say that I don't boot into OS X any more it is only because I don't see why I should boot into a second rate OS just because it came with the machine.

            Now go ahead and get this post deleted so you can pretend it never happened.
            NonZealot
        • Yeah right

          "Apple is a failure in every way" - Mectron

          That's the single most ridiculous Apple-bashing comment I've ever read beneath a ZDNet article. Good job basing it on nothing. You really have your finger on the pulse of the tech world. I'm sure you heard it in a podcast you listened to on your Zune.
          hoffmancarl
      • Yes... bleeding edge.

        Yes, AppleTV represents the bleeding edge of home
        media devices. They are hardly alone. There are
        people doing similar things with DIY devices based
        on Linux, Windows or even MacOS. People pay a lot
        of money for their cable. A more ala-carte solution
        could easily lure away a lot of people.

        So the idea that a device like this is primed to kill
        cable is no really so far out.

        Although digital TV could also do a lot to put a stake
        in the heart of cable. Who needs an overpriced iTunes
        subscription for Heroes when the local broadcast channels now come in as clear as a bell? One of the ancient reasons to buy cable just became obsolete.
        outpastpluto
    • Content

      Like the content providers who own cable and satalite TV will let the content be run down the web instead of over their systems.

      Pipe Dream....
      The 'G-Man.'
      • Well who cares about the content providors?

        Well who cares about the content providors? It's ultimately the content makers that decide whether or not to allow they content to be distributed in a different way, and it seems they are okay with the internet considering their investment in hulu and what not.
        mathcreative
      • Forget that . . .

        In order for Apple to compete with DirecTV price-wise, they're gonna have to get the cost for all those "ala-carte" channels down to about $ 0.32 per channel.

        That's what I pay now for 200 channels after deducting the $10 charge for the 2nd and 3rd boxes in my house . . .

        JLHenry
        • No More Discovery Science or Nat Geo

          One major issue here is that a la carte pricing means that the less popular (but nevertheless excellent) channels like Discovery, National Geographic, etc. will not have enough subscribers to allow a low enough a la carte pricing. Right now, the big channels support the availability of these niche channels. There is a very real risk the niche channels go away if not enough people want them. And by definition ("niche") they don't have broad audiences.
          borlowitz
      • How do I say this?

        At the current moment you can indeed rent movies from the Playstation
        Store, at the same time that you can rent them on pay-per-view (or
        DirecTV's all day ticket). In fact the cost is also similar, so it is a choice
        the consumer is free to make. The only setback of the Playstation store is
        you have to download the movie before watching it. Some of these files
        are in excess of 5GB, and take some time to download. I rented a few
        movies and let them download overnight. If I were to do this during the
        day, I currently have the option to watch TV on another HDMI input. I
        could not see waiting to download a movie and disabling the ability to
        watch something else.
        Rick_K
        • That's funny...

          You honestly believe that Comcast is going to allow streaming of unlimited amounts of data while you cut them out of TV service? You do know that as soon as something like this comes about you'll have to deal with bandwidth caps and throttling and other things of that nature. If you honestly believe that won't happen... Wow. You're comparing renting a movie with completely replacing your cable TV provider. And they'll know full well what you're doing with bandwidth and it's fairly easy to digitally fingerprint content.
          LiquidLearner