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Apple TV History: From AAPL Hobby to $1 Billion-Plus Device

AAPL called the Apple TV a hobby for years, but it’s now big business

By Brad Moon, InvestorPlace Contributor

http://invstplc.com/1mTfl3s

For years, Apple (AAPL) referred to its Apple TV set top streaming box as a “hobby.” After all, with the volume of iPods, iPhones and then iPads the company was selling — not to mention a PC business that was defying industry trends by actually growing, along with its highly successful iTunes store — there were a lot more profitable business lines to focus on.

apple-tv-aaplHowever, after AAPL sold more than $1 billion worth of the $99 streaming boxes in 2013, Apple is singing a different tune, with CEO Tim Cook telling attendees of the company’s annual meeting: “It’s a little more difficult to call it a hobby these days.”

A new Apple TV is overdue, and AAPL is currently offering $25 gift cards with the purchase of the existing model, signaling that it may be trying to clear out stock.

There are also signs the company might be prepared to take the Apple TV to the next logical stage, enabling gaming to take advantage of a vast library of inexpensive iOS titles in a move that could be a living room death blow to struggling Nintendo (NTDOY).

Standing still isn’t an option if Apple wants to maintain momentum. There are rumors that Amazon (AMZN) is preparing to enter the market with its own set top streaming/gaming box, and Google (GOOG) is making waves with its Chromecast.

As we wait for official word on APPL’s next step in the living room, here’s a history of the AppleTV in gallery form, tracing the set top streaming box from its hobby origins to $1 billion-plus product.

Apple TV History: Generation One (2007-2010)

The 2007 MacWorld Expo is remembered by many people as the debut of the iPhone, however another AAPL product also made its official entrance during that same Steve Jobs keynote: the Apple TV.

apple-tv-aaplThe Apple TV had made an earlier preview appearance in 2006 under the “iTV” name, but AAPL was unable to secure that trademark. By the time the set top streaming box was official, it had morphed into the Apple TV.

While compact for the time, the first generation seems massive compared to newer versions. It basically looked like a flattened Mac Mini, complete with an internal hard drive (40GB and then 160GB) and running a modified version of OSX, Apple’s PC operating system. Apple also included a tiny remote.

This first Apple TV connected the iTunes Store and iTunes libraries on local PCs to buy, rent or stream video, music, display photos and could connect to YouTube.

The 40 GB version started at $299 on release. Sales figures are hard to come by (that “hobby” thing meant Apple didn’t disclose much), but analysts figured AAPL had sold around 500,000 in total as 2009 wrapped up — not a lot for nearly two years on the shelf.

I still have three of these first-gen Apple TV boxes in my house, and they continue to meet our video streaming needs, although I did glue the tiny remote to a large chunk of wood after my kids lost it for the millionth time down the couch cushions.

Apple TV History: Generation Two (2010-2012)

While APPL continued to improve the Apple TV experience through software upgrades and content deals for iTunes, the original Apple TVs were big and expensive. Not only that, but streaming video from the Internet on demand was becoming more technically viable and popular with consumers. Netflix (NFLX) was starting to show up on set top streaming players and connected TVs.

apple-tv-aaplApple responded with a huge overhaul of the Apple TV. The new box ditched the hard drive, going all in on streaming. Apple also switched the platform from OSX to an iOS variation, with a corresponding change in CPU from Intel (INTC) to an A4 ARM (ARMH) chip used in iPhones and iPads.

The wee remote remained, but it was clad in aluminum this round. AAPL included Netflix support, removing a key advantage competing set top streaming box makers offered. The device also supported Apple’s new AirPlay streaming from iOS devices.

The result was a new Apple TV that was a fraction of the size of the original and a fraction of the price: just $99. It sold out on launch, putting it on pace to sell 1 million units per quarter. In 2011, Apple sold 3 million of the new black boxes.

Apple TV History: Generation Three (2012 to date)

The third-generation Apple TV was released in 2012 and was largely a spec bump over the previous model. It kept the same appearance and moved to an A5 processor. The interface continued to improve (adopting more of an iOS look) and iCloud integration was pushed. The big change was support for 1080p content.

apple-tv-aaplReception was good for the new UI and the full HD support, and in May 2012, Tim Cook revealed that Apple had already sold 2.7 million in the year.

This version received another minor spec bump in 2013 (not significant enough to warrant being called a new generation) and remains AAPL’s current Apple TV offering. In 2014, the company finally gave Apple TV its own headline category section in the AAPL online store, signalling its increased importance.

The Apple TV is overdue for another overhaul, and with competition escalating — not to mention the potential for video games in the mix and AAPL calling the set top streaming box an important product line — expectations have been set high for the fourth-generation Apple TV — whenever it arrives.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/03/apple-tv-aapl/.

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