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Launch date remains unknown, but Apple is actively pursuing this new market

The persistent reoccurring rumor that Apple, Inc. (AAPL) will be making television sets has surfaced again.  The Wall Street Journal is offering up in a new report evidence of secret meetings inside of Apple planning the launch of the new television product.  The important take home message is that while the launch date appears to be uncertain, Apple is hard-targeting the product (courtesy of deep negotiations with TV content providers and its work on developing advanced user interfaces).

I. Apple Moves Towards Television With New UI, Licensing Work

We first heard about the possibility of the Apple LCD TV in an informal discussion with a former Apple Canada executive turned financial analyst.  He claimed to us that the project was already relatively advanced and would likely debut sometime in the 2011-2012 time frame.  

While that schedule now looks unlikely, numerous reports since have indicated that Apple is still chipping away at development.  

Currently Apple sells a set-top box that offers streaming media functionality, but lacks the ability to install and use third party apps, a capability which recently came to Google Inc.'s (GOOG) Android (Google TV) set-top boxes and integrated internet TVs.  Apple TV is relatively inexpensive retailing for a modest $99 USD.  While Apple announced 3 months after the device's launch that sales had hit 1 million units, it has since refused to comment on the device's sales.  Rumor has it that the device is sharing the sales difficulties of Logitech International S.A.'s (SIX:LOGN) Google TV set-top box.
The Wall Street Journal report cites private commentary at Apple's 2010 "Top 100" meeting for senior executives as cause for skepticism.  At that meeting an executive asked late Apple CEO Steve Jobs whether an Apple TV was in the works, and he responded that the profit margins were too low compared to mobile electronics and that people bought television sets too infrequently to make it worthwhile.

On the other hand, the report points to many signs since then that Apple may indeed be preparing to drop a shiny new television.

Steve Jobs challenged TV providers in a series of recent meetings, asking them how much of the world's video content they truly owned.  While the meetings were reportedly in the "exploratory" phase, the parties involved discussed the possibility of Apple becoming a licensed reseller of television content, similar to cable networks.  Such a subscription service could give Apple's next generation television product an edge over competitors like Google TV.

Google is reportedly in similar talks with content providers.

In his official licensed biography, Steve Jobs commented that after years of prototypes of smart TVs that connected to mobile devices like the iPad and iPhone that Apple had "finally cracked it".  In their most recent meetings with television content providers, this topic was raised as well, with Apple discussing a scheme in which a user could begin watching their show on their TV and then moves to another room and continue to watch it on their iPad or iPhone.

Mr. Jobs also indicated that the iPhone or iPad would be able to be used as an advanced remote control for the upcoming television.   Apple also appears to be working on other advanced interface technologies.  The WSJ report comments:

In the recent meetings with media companies, the Apple executives, including Senior Vice President Eddy Cue, have outlined new ways Apple's technology could recognize users across phones, tablets and TVs, people familiar with the talks said.

In at least one meeting, Apple described future television technology that would respond to users' voices and movements, one of the people said.

Such technologies have become mainstream in the video game console industry, thanks to pioneering innovators like Nintendo Comp., Ltd. (TYO:7974) and Microsoft Corp. (MSFT).  But the technologies have thus far only been applied minimally to actually working as a user interface to the television (Microsoft does offer Kinect control in certain select Xbox 360-accessible television programming).

II. Why an Apple Television Makes Sense in the Long Run, Financially

One reason why an Apple television product seems likely is that it would provide a new resource stream for Apple, should it exhaust its existing sales streams.  

While it's entirely possible that the iPhone and iPad could continue to thrive for decades to come, Apple's history suggests that while the company is adept -- perhaps the best -- at garnering an early sales and brand image lead, that its penchant for proprietary first-party products and core software has led to it being eventually marginalized.  

Already Apple's iPhone has fallen quite a bit behind Android in smartphone sales.  And while Android tablet sales have grown at a slower rate than expected, analysts generate are expecting them to pass iPad sales around 2015.

At this point Apple seems almost unassailable from a profitability standpoint, if not from a unit sales standpoint.  However, as other highly profitable smartphone makers like Canada's Research in Motion, Ltd. (TSE:RIM) have shown, it only takes a couple years of dropping sales to see your cash reserves and quarterly profits erode.

Steve Jobs w/ iPad
Apple's upcoming television product could be the first major new product to launch without Steve Jobs at the helm, since the late 1990s. [Image Source: AP]

Aside from business side of the equation, the launch of a "smart TV" product would be a landmark moment for Apple, as it would mark the company's first major new product introduced since the death of Steve Jobs.  Of course, by the sound of it, the finished product would draw heavily on the early prototype work of Mr. Jobs and Co., so even in his grave he could still remain Apple television's MVP.

Source: WSJ

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Apple has already floppd twice in TV
By troysavary on 12/20/2011 2:30:21 PM , Rating: 4
Both generations of Apple TV have gone no where, so what makes people think that a third go at it, whether as a set top box again, or as a screen, will do any better? Apple doesn't make panels. What are they going to add to the panels they source from Samsung or LG that will make people willing to pay the premium over just buying a Samsung or LG?

Besides, TVs are not very portable. How are iSheep going to carry it about so other hipsters can see them with it?

RE: Apple has already floppd twice in TV
By steven975 on 12/20/2011 3:53:35 PM , Rating: 2
If you see their site, they say Apple Engineers build everything.

I'm sure this will say the display was designed by Apple Engineers, too.

Color accuracy and good scaling have never been Apple benchmarks. Plenty will buy an Apple television set, though. It'll be made of "green" aluminum and glass, be energy-intensive to make, and non-recyclable because you can't take the thing apart.

RE: Apple has already floppd twice in TV
By simsony on 12/21/2011 8:13:15 AM , Rating: 2
You need to read between the lines of what "build" means.

When you buy flat packed furniture and assemble it, you are building it. But it isn't quite the same a making your own table. The know-how required is vastly different.

Apple has no semiconductor manufacturing specialists. An attempt at PA Semi was made for Soc work, but mostly failed. They are fabless. At best they can come up with the specs of the LCD screen they want. All the tech behind it come from the real semicon and R&D experts like Sharp, LG, Samsung, Sony, Philips, Toshiba etc..(and other non consumer brands)

Hell they didn't even have RF and antenna engineers until they screwed up.

I can assure you that even the A5 is not "built" by Apple. It is exclusive to Apple though. Vendors offer silk screening and exclusivity arrangements for appropriate fees. One clue for eg. is the type of ARM license a company purchases. Journos take note. You can come up with vastly better vetted rumours if you check these things. ;)

So if a TV does come, they will need to make a deal with one of the names above, offering guaranteed volumes for custom deals. Everything has a price. The risk obviously is that the product needs to be sold at a margin that covers these fees and appeals (and sells!) to a sufficient chunk of the market.

They may offer it on finance plans to get impulse buyers as they don't need the cash flow. But this is a "white good", you can sell a phone, ipod and ipad to each person, but a TV as well? The potential market is in households, not individuals. That means say about 3x the iPhone margin?

Or they go down the Kindle route, discounting it at a loss to gain market share. They have the cash for it.


By Cheesew1z69 on 12/21/2011 8:48:05 AM , Rating: 2
I can assure you that even the A5 is not "built" by Apple
Of course, it's built by Samsung.

RE: Apple has already floppd twice in TV
By TakinYourPoints on 12/20/2011 4:17:19 PM , Rating: 2
The second gen AppleTV has actually been very popular, the only set-top that has sold well in the last year.

The main thing holding it back functionally are feature sets, and that can easily be added via software update just like with Roku/XBox/PS3. It initially shipped with only Netflix and Youtube, now it has NBA, NHL, MLB, and some other channels. It isn't what I have on my 360 or PS3, but again that's easily fixed.

The other things that would help it are Siri and native apps. Airplay mirroring your apps from an iPhone or iPad is cool (ie - ), but give developers a chance to make native apps and something very cool could happen.

I do think a dedicated TV is a bad idea on every level. TVs have no profit margins, and unless it's a plasma I wouldn't be interested. As it stands I have a Pioneer Elite Kuro and I'm not replacing that, no way. An improved AppleTV with native apps, Siri, A5 or A6 processor, for $100, that's a totally different story and I may actually buy that.

RE: Apple has already floppd twice in TV
By tng on 12/20/2011 4:33:18 PM , Rating: 2
As it stands I have a Pioneer Elite Kuro and I'm not replacing that...
Have you seen the new Sharp Elite sets, they are almost there with those, but they are pricey.

I had read an article awhile back about Apple and Sharp in talks about screens and maybe joint manufacturing. Not sure if it was for TV or just for phone, pod or pad displays.

By TakinYourPoints on 12/20/2011 5:05:48 PM , Rating: 2
I haven't yet, but it would really have to be something to impress me. I much prefer plasma over LCD, but maybe these Elite LCDs overcome the issues I've had with them in the past.

The 2011 Panasonic VT and GT series plasmas are quite impressive btw, don't know if you've seen them

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