With Apple’s (AAPL) Sept. 9 event drawing closer, excitement is growing about an expected fourth-generation, game-playing Apple TV. However, according to a new report from 9to5Mac, Apple is planning to charge either $149 or $199 for the new device.
Considering the previous-generation Apple TV was priced at $99, and competing gaming-capable streamers Amazon (AMZN) Fire TV and Google (GOOG,GOOGL) Nexus Player are also priced at $99, is Apple making a critical error? Will the relatively high price point result in shoppers avoiding the new Apple TV during the crucial holiday shopping season?
If the reported price of the fourth-generation Apple TV is correct, it represents an interesting choice by Apple.
The new streamer is expected to gain gaming capability and its own App Store, as well as an improved controller with Siri voice integration. The problem is, those features are also supported in the competing boxes that zoomed past the Apple TV in popularity last year. The controller may offer motion control for Wii-like gaming, but the Roku 3 set-top streamer also offers this feature — and it’s not only popular (Roku leads the video streamer market in the U.S.), but it’s also priced at $100.
Coming in at $149 or $199, Apple would be trying to regain the momentum it lost to Roku, Google and Amazon, while also trying to charge a 50% to 100% premium.
That seems risky.
Quality Game Library Could Give AAPL an Edge
On the other hand, while the other platforms have game libraries, Apple has always led the pack when it comes to high-quality games that are optimized for specific form factors. It has developer and studio support to bring in “A-List” titles, and the versions released for the iPad aren’t just the iPhone version — they’ve been properly optimized to take advantage of a larger display and different control logistics.
Roku and Amazon don’t get the same support from developers, while Google has a massive catalog of games, but the big titles often get to Apple’s App Store first and developers don’t always spend the time to optimize versions for the different Android form factors.
Apple will be depending on those developers to showcase titles designed to take full advantage of the Apple TV as a gaming platform, making a more impressive debut than its competitors managed.
Given that a new Apple TV is likely to gain an A8 CPU — a chip that can push graphics that rival the Xbox 360 and PlayStation 3 — Apple could be choosing to position it as a cheaper alternative to the Microsoft (MSFT) Xbox One and Sony (SNE) PlayStation 4. At $149 or even $199, it’s a lot more affordable than these video game consoles.
If parents see splashy graphics, big-name games and the Apple logo on a compact device that plays 99-cent or $5 games instead of a $349 Xbox One with games at $50+ a pop, the new Apple TV could prove to be a holiday hit.
Then there are the Apple faithful.
Regardless of what the reception for the new Apple TV might be, AAPL can count on selling a bunch initially to fans who have been waiting several years for something better than the current hardware. After all, the company managed to convince many of these loyal customers to shell out $299 for the original Apple TV, and that version didn’t even offer 1080p support.
The Bottom Line
Leaving out the early adopter surge of Apple loyalists, whether the new Apple TV vaults Apple back to the top of the living room or turns out to be a flop will likely come down to how the company decides to position it and how successful their marketing efforts are.
As a video streamer that can also play video games — like the Fire TV, Roku 3 and Nexus Player — the Apple TV will face an uphill battle. But if AAPL can position its new device as a compact video game console with a large (and growing) library of inexpensive and high-quality games that also happens to be a state-of-the-art video streamer, then the company could regain much of the ground it has lost in the living room to Amazon and Google.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.