First world countries in North America, Europe and Asia have passed the tipping point when it comes to consumer acceptance and desire for Internet-delivered video entertainment. Web sites like YouTube, Hulu and the BBC’s iPlayer have attracted millions of viewers.
The only pending question is how those videos will be delivered to TV sets – separate boxes that connect the Internet to a TV set like Apple TV and Netflix’ Roku? Or, built in the TV set or Blu-ray player as Yahoo with its Widgets and Netflix are working with CE makers to do.
Certainly in the short term, separate set-top boxes will be the choice because there are almost no Internet-connected TV sets or Blu-ray players in use.
The recent rumor that Apple might bypass CE makers and launch its own line of “iTelevision” sets with Apple TV built in, further solidifies the long-term moved to embedded. Apple reportedly has a contract with South Korea’s LG to build displays that would be suitable for use in TV sets.
The launch of an Internet-connected TV that would play films and TV shows from iTunes could be the “product transition” that Apple CFO Peter Oppenheimer hinted at last year when he said, “We’ve got a future product transition that I can’t discuss with you today.” He said the development of the new product was reducing Apple’s gross profit margins.
Gene Munster, an analyst at investment bank Piper Jaffray, said “the only logical step for Apple” is to make TV sets as part of the company’s transition to being a dominant consumer electronics maker. (And wouldn’t Sony top executives emit multiple streams of steam if that were to happen. After all it was Apple that killed Sony’s Walkman cash cow.)
A TV set, or perhaps just a partnership to put a chipset or some widgets in a TV set, is the next logical step for Apple in its current position. Its current AppleTV hasn’t caught on like it hoped, but it has given Apple a lot of user data about what works, what doesn’t and what people are paying to watch. A TV set with an iTunes Store integration could move Apple into a dominant position in the pay-for movie rentals and purchases, and would provide a consistent source for content that didn’t depend on a pay-TV subscription or that service’s video-on-demand deals.
Munster said Apple has said it will only move into a new market in which it can solve a problem for consumers. “Apple’s fantastic ability to create exceptionally user-friendly products could revolutionize TVs just like the iPhone changed the mobile phone market,” Munster said. Apple, of course, isn’t talking.