John Paczkowski

Recent Posts by John Paczkowski

Rumored $99 iTV Could Pave Way for $2,000 Apple-Connected Television

“The problem with innovation in the TV industry is the go-to-market strategy. The TV industry has a subsidized model that gives everyone a set-top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us…or ask Google (GOOG) in a few months.”

That was how Apple CEO Steve Jobs answered a question about Apple TV and the future of the television interface at D8. “The television industry fundamentally has a subsidized business model that gives everyone a set-top box, and that pretty much undermines innovation in the sector,” he said. “The only way this is going to change is if you start from scratch, tear up the box, redesign and get it to the consumer in a way that they want to buy it.”

And who better to do this than Apple (AAPL)? The company has arguably already done it for the personal computer, the portable music player and the cell phone. Why not the TV as well?

In a Monday note to clients, Piper Jaffray analyst Gene Munster suggests the company will do just that in the next two to four years, but only after it launches a new cloud-centric version of Apple TV.

“Apple has recently developed a data center in Maiden, N.C., that we believe could serve as the hub of a cloud-based service for iTunes video,” Munster wrote. “With Apple’s growing family of connected devices (iPhone, iPad, iPod touch, Apple TV and Macs) it only makes sense that Apple would deliver a cloud-based media service to leverage its competitive advantage in the space: devices. As part of this, we expect Apple to update the Apple TV product in the coming months with limited storage, a lower price, an app store and a focus on accessing content over the Internet.”

Munster believes this device, the rumored $99 iTV, will be a stepping stone toward an all-in-one connected television, something Apple could position as a replacement for the typical home entertainment system and for which it could charge a premium–$1,800 to $2,000.

That might seem like a daunting price at first, but keep in mind that paying it would allow you to replace an entire entertainment system with a single TV. Add to that an App Store that would enhance it with games and other apps, as well as an iTunes TV subscription offering, and you’ve got a pretty compelling device. Says Munster, “We believe an all-in-one Apple Television solution would provide an ease of use that many consumers are looking for. Apple could also bring its software expertise to the television market and provide for themselves an immediate advantage against its competition (primarily hardware makers). As connected TVs gain traction, we believe software will be a critical selling point, and Apple could offer best-in-class software on an Apple Television.”

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work