Where Is My All-In-One Connected-HDTV, Apple?
Apple has long described its Apple TV business as “a hobby” and dismissed speculation that it is considering an Apple-branded television. Indeed, during a February appearance at the annual Goldman Sachs (GS) tech conference in San Francisco COO Tim Cook reiterated that stance: “We have no interest in the TV market,” he said.
In a note to clients today, Piper Jaffray analyst Gene Munster suggests that Apple (AAPL) reconsider its position on the television market. Home entertainment hardware is a $31.8 billion business, says Munster, and Apple could easily tap into it with a connected HDTV that offered immediate access to iTunes movies, TV shows, music and podcasts.
“Apple’s ability to deliver hardware, software and content that could replace an entire entertainment system with a single TV, puts Apple in a unique position for the emerging connected TV cycle,” Munster writes. “Apple already has several of the key ingredients for success in the connected TV market, many of which would differentiate Apple from current market players.”
Among those key ingredients:
- Partnerships with over 100 TV networks and studios that could help Apple offer an a-la-carte iTunes TV Pass for select TV content
- 74 million iPhones and iPod touches–and, soon, untold numbers of iPads–that could all be integrated into a portable TV ecosystem
- 125 million active iTunes users, their credit card information and purchase history
This seems like a solid base upon which to build a connected TV business, particularly one designed to replace an entire entertainment system. Combine it with a reasonably priced iTunes TV subscription plan and you’d have a compelling offering indeed. But as I’ve noted here before, TV hardware is a tough business and the cable companies are wary of any offering that might threaten existing subscription fees.
Still, Munster is optimistic.
“Yes, TV hardware is a challenging, low-margin business if you don’t change the rules of the game; but we see potential for Apple to offer best-in-class hardware, software and content and charge a premium,” he says. “The bottom line, 32.4 million HDTVs sold in the U.S. a year is a real market, and if history repeats itself, Apple would find a way to compete in a commoditized market with a premium priced product.”
Munster notes that “An Apple Television would address more than just the HDTV market, as it would likely include audio and video features that could replace the TV itself, a Blu-ray player, a cable set-top-box, possibly a gaming system, an audio receiver made to combine these inputs and play music, plus the installation of these devices.”
Given Munster’s confidence in an Apple gambit in the television market, how long will it be before we see one? Two to four years, says the analyst–about the time we see an a-la-carte iTunes TV Pass.