All the talk this week about Apple TV has been highly entertaining. Will it/won’t it create a new genre for watching TV wirelessly? There are two problems with all the talk. Firstly most of it is about the wrong product and secondly much of it is about the wrong company.
People keep on pointing out to me that it is already relatively easy to generate a PC based video file that can play in the interlaced world of TV, and just as easy to make a wired S-Video connection to deliver it, so why get so excited about a wireless way of doing the same?
The truth is that the relatively intricate job of connecting PC held files to a TV using hard wires has not taken off. But already, with the Apple TV product less than one week old in terms of being delivered, there are already help sites for connection, and FAQs for multiple data connection types, and even hacks for replacing the paltry 40 GB hard drive, with a 500 GB monster.
And there are just as many suggestions about what Apple should do next with Apple TV, for instance could a software upgrade turn the device into a DVR? Well it would need a couple of tuners for that and it would make it more expensive?
Can it support even higher HD TV, not just 720p, and can it support multiple HD streams, not just one. Could iTunes just appear on the TV screen and could customers bypass the process of downloading internet content to a PC? Can the iTunes store then offer rentals, and not just download to own? Could the iTunes store be redesigned to be easy to work from a TV?
Could Apple TV support more video formats, not just generic H.264, perhaps a bundled video converter that recognizes DiVX and Flash 8 and Windows Media video formats and converts them on the fly? Can it be enhanced to give DVD burning? Blu-ray even?
Can the USB port on the side of the Apple TV be doubled up and allowed a copying connection to portable players? And can customers have more storage? more storage? and more Storage?
And the truth is that not all of this is going to be delivered under Apple’s current philosophy. For a start it hates other video formats and it won’t touch them, it already has a strategy for larger storage, through attachment to its new Airport Extreme and it already offers format conversion through its Mac based Quicktime Pro, and DVD burning on its PCs. Take those away and you may take away the need for a Mac. That’s not going to happen.
But all of these idea can be delivered, if other players come into this market and apply pressure on Apple to keep up, and in this market, unlike the iPod market, they will.
Sending TV over Wi-Fi is a notoriously tricky business. In short it just doesn’t work unless you offer some improvements to the basic wi-fi. Those improvements, for the most part, need to be in the way that the wireless signal avoids interference and in the way that it prioritizes a variety of data types.
But when you look inside the Apple TV product all that the various commentators have remarked on is the fact that it has a Fujitsu hard drive, a WLAN module, three Intel chips and an Nvidia graphics chip. No-one spent time looking at the specifics of the WLAN chip and it is only when these teardown specialists take a look at what’s in the new 802.11n Airport Extreme that they come up with an AR5416-AC1E Atheros chip. At that point most of the hardware junkies shrug their shoulders and say ‘it’s a WLAN, so what?’ and carry on speculating about the other chips.
But the Atheros chipset is impressive. The company says will intercept the imminent 802.11n standard, and that it includes its patent pending Signal-Sustain Technology operating in dual-concurrent 2.4GHz and 5GHz spectrum and featuring either a 2×2 or 2×3 or 3×3 MIMO smart antenna array. Products with this chipset are known to support a huge number of separate wireless channels and Atheros says its top of the range chip will deliver up to 600Mbps combined physical data rates across both types of channels and offers real world video throughput up to 180 Mbps.
Getting MIMO on a chip and working at wi-fi prices is what Atheros has been working towards and it is a straight fight between the chip based commodity Atheros technologies and the system based Ruckus Wireless technologies, which are being sold to offer much the same outcome for operators of IPTV systems throughout the world, using the slightly similar Ruckus beamforming approach, coupled with packet detection and resubmission.
In the end these two technologies are slightly different. One is an off the shelf chip just right to give companies like Apple an industry lead, while Ruckus is right for Telco closed systems that spray TV all over the home using wi-fi, but limited to the video offerings of the telco.
In effect they are two separate strategies to exploit very adjacent technologies, and you have to ask yourself are you the kind of person that will buy a couple of boxes from an Apple store and use them for what you like or do you want an engineer to come and install a few hundred dollars worth of technology in your home and have a working pay TV system for the next five to ten years?
On the one hand Ruckus has 90 Telcos signed up to sell its products, a kind of Blackberry style distribution model and Atheros makes chips for just about anyone and has ended up in the Apple Airport Extreme.
It’s certainly working for Atheros in that it has shipped over 100 million wireless Lan chipsets and in 2006, saw 65% revenue growth to $302 million. Already Atheros has made 20% of its revenues from its new generation 802.11n products in the last quarter. By comparison Ruckus Wireless has only shipped one million Ruckus BeamFlex equipped access points up to the end of 2006, so it can count itself way behind.
Clearly not very much of that Atheros revenue as yet has come from Apple, although we understand some Atheros chips were also used in the previous generation of Airport Extreme, which gadget web sites are all saying work pretty well with Apple TV as well.
But ‘so what,’ you might be heard saying. Portal Player was known to manufacture the guts of the iPod and yet along came Samsung, and took that contract away from Portal Player crashing its share price, and driving it into the arms of Nvidia, a deal which happened quietly last November for a net $161 million.
The difference here is that Apple owned all the designs of the iPod and all the intellectual property, where there was any. In the Airport Extreme most of the intellectual property behind the ability to stream TV around a home wirelessly is provided by the Atheros chip. Sure it could also still get acquired but not because it has been disappointed, only because it’s proved itself valuable and is now, for the first time in a volume product from a major consumer electronics major.
But if Apple wanted to use the same technology from someone else, it would have to be someone that bought a royalty yielding license from Atheros, or it would have to use a slightly different technology. And anyway it has no need, this early on in its life, to look around for alternative suppliers.
But Atheros is certainly big enough, with revenue of $300 million plus, and a valuation at over 4 times revenues plus cash in hand, at $1.4 billion, and holding cash of $186 million, to supply not just Apple, but every other potential Apple TV rival on the planet.
In our view the ability to shift video with quality of service protocols and zero drop out of voice over wi-fi signals, alongside image delivery, game data, and high quality audio, will create the next wi-fi war. The 802.11n standard is not enough of an innovation for a wi-fi chip maker and companies like Broadcom must immediately come after the Atheros MIMO lead as fast as it can, perhaps by bidding or the company, or by its usual method of entering the market and driving down the manufacturing cost.
So while Apple may get the public credit for ‘inventing’ this technology, all of the innovations that we discussed, DVR capability, bigger disks, multiple video formats, higher definition, DVD burning, direct store access, these will ALL come, if not necessarily from Apple, but from the fact that the time for this technology is now and there are multiple technology suppliers ready to address the underlying technical issues with commodity products.
Getting back to the actual Apple TV product, it allows synching with a PC or MAC to copy not just movies but also TV shows, music, photos and podcasts, and these are prioritized in that order. If you have more than 40 GB of movies on your PC then only the movies will get onto the Apple TV drive. It comes with an Apple Remote and connects to most widescreen TVs.
From iTunes alone Apple points out that you can have access to 400 movies, 350 TV shows, four million songs, 5,000 music videos, 100,000 podcasts, and 20,000 audiobooks. Think how much more content is out there on other internet sites?
The 40GB hard drive is said to store 50 hours of video, 9,000 songs, 25,000 photos or a combination of each. Apple TV connects using standard HDMI, or component video or with analog and optical audio ports.
It costs $299 in US stores and requires iTunes 7.1 or later running on a Mac with Mac OS X version 10.3.9 or later, or a Windows PC with Windows XP Home/Professional. It needs Airport Extreme or if you walk in front of the signal your video will stop while the buffer refills.
It’s worth noting that some Apple sites have noticed there are error messages built into the system talking about downloading games to the device, speculating that Apple TV will become a platform for casual gaming.
It makes a lot of sense given that at present its primary rivals are the major games consoles, the Microsoft Xbox 360 and the Sony PS3, which both can have high definition DVD players attached, and hard drives and which are both expected to offer video over an internet line. These are likely to offer video that is limited to their own stores, but the potential for generalized internet video is there as is the potential to tap existing video wi-fi technologies like those from Atheros.