Apple TV has proved to be the black sheep at Apple Inc. (NASDAQ: AAPL) as one of the few recent duds amid otherwise dynamic and successful multimedia devices. Since its release in 2007, Apple TV has been largely ignored even as digital and on-demand television has become the preferred TV viewing method. But now, as Google Inc. (NASDAQ: GOOG) prepares to forge ahead with its Google TV set-top box software this fall, Apple is working fast to strike back with its new and improved Apple television device, the iTV.
Details about Apple’s new iTV strategy started trickling out this past spring after the launch of the iPad. Acquisitions of streaming media businesses like Lala, advertising platforms like Quattro Wireless and the rumored rebranding of all Apple products under the iOS operating system banner hinted strongly that Apple was preparing a whole new strategy for their TV initiative. It wasn’t until the beginning of August that more concrete information about the new Apple TV emerged. Taiwanese outlet DigiTimes initially announced that the new Apple TV would output in 1080p, offer cloud-based storage and streaming video. The set-top box is also rumored to be powered by a custom version of AMD’s new Fusion processor that allows for both HD and 3D video output on a single processing unit.
It seemed unlikely that Apple would put so much emphasis on high tech performance rather than content with their new TV. This was born out by an extremely detailed report from Engadget that brought the new device, now called iTV, into better focus. That report, coupled with yesterday’s word from Bloomberg that Apple is in advance talks with content providers, gives us a clear idea of what Apple will most likely announce at their media event in San Francisco on September 7. Here’s what to expect:
TV shows will be offered as cheap rentals, not subscriptions: While TV shows will still be purchased through Apple’s iTunes store on the iTV, they will not be offered as subscriptions as previously suspected. It was rumored last year that Apple was attempting to convince content providers to sign on for $30 per month TV subscriptions but couldn’t settle on a final agreement. Bloomberg reported on Monday that Apple has now finalized agreements with News Corp. (NASDAQ: NWS) broadcaster Fox, Disney (NYSE: DIS) broadcaster ABC, and CBS Corp. (NYSE: CBS) to offer their programming as 48-hour, 99-cent rentals.
iTV set top box will be $99 thanks to cloud-based storage: Part of what killed the original Apple TV was its high asking price in excess of $200. The iTV will retail at $99 thanks to a modest hard drive. Cloud-based storage through a new iTunes service and streaming content will limit the need for onboard memory and bring the iTV’s price way down. Engadget‘s report also speculated that the box may only output in 720p rather than 1080p due to problems with the rumored A4 CPU.
Apple’s App Store will be available on the iTV: In what is becoming standard for all new machines from Apple Inc., the iTV will also be able to access the Apple App Store. While not confirmed, it’s expected that applications unique to the iTV will be made available on the store, in addition to the suite of apps from web services like Google that are available on other devices like the iPad, iPhone, and iPod Touch. It’s expected that Apple will also use iTV to further strengthen its videogame offerings, though there are no plans for control inputs specific to the iTV at this time.
With details on the iTV hardware in abundance, the big question is how iTV will function as an Internet-based service rather than a set top box. Google TV, software that will be included in Logitech (NASDAQ: LOGI) and Sony (NYSE: SNE) set-top boxes this fall, is falling under scrutiny from content providers because its power to search all video content available on cable and the internet will cannibalize television networks’ existing businesses. If iTV is going to be positioned as a service competitor to Google, it will be important for Apple to find a way to assuage its new television partners at News Corp and Disney’s fears.
It also remains to be seen how iTV’s streaming service will distinguish itself from others like Hulu and Netflix. Shareholders will hopefully know more after Apple’s media event on September 7.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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