Finally, a New Apple TV: Can It Conquer the Living Room for AAPL?

On Sept. 9, Apple (AAPL) held a media event where it showed off the latest iPhones and a new iPad Pro. The company also unveiled one of the most overdue product updates in its lineup: a new Apple TV.

Finally, a New Apple TV: Can It Conquer the Living Room for AAPL?
Source: Apple

This little black box was a frustratingly obvious problem that AAPL seemed intent on ignoring. After helping to kick off the popularity of set-top streamers and coming to dominate that chunk of prime living room territory, Apple last updated its Apple TV hardware with the third-generation version in March of 2012.

In the years since then, competitors like Roku have relentlessly improved, while other tech giants have recognized the opportunity to become the conduit between consumers and increasingly popular streaming video services. First Google (GOOG, GOOGL) — with its Chromecast — then Amazon (AMZN) — with its Fire TV — arrived on the scene and soon eclipsed the Apple TV with features like voice command, universal search and gaming.

Apple has finally fired back with a new Apple TV that features more powerful hardware, a new touch-enabled remote (that doubles as a motion-tracking game controller), Siri voice control, a new operating system, universal search and its own app store.

New Apple TV Key Specs

  • 64-bit A8 processor
  • 32GB or 64GB built-in storage
  • Remote with Glass Touch surface, Bluetooth 4.0, IR, dual microphones for Siri, accelerometer and gyroscope, Lightning connector and rechargeable battery
  • HDMI, Ethernet and 802.11ac Wi-Fi with MIMO
  • Maximum video resolution 1080p @ 60 frames per second
  • 3.9 x 3.9 x 1.3-inches, weighs 15 ounces
  • Priced at $149 (32GB) and $199 (64GB)

TvOS and an App Store

The new Apple TV runs a version of iOS –the operating system that powers the iPhone, iPad and iPod Touch. In this case, it has been customized slightly and goes by the name of tvOS.

Combined with the much more powerful A8 processor (the previous version made do with an A5), this gives the fourth-generation Apple TV the ability to run apps on your TV.

Naturally, Apple is launching a new App Store to go along with the new hardware, and that means the new Apple TV is able to play games. The remote does double duty as a Nintendo (NTDOY) Wii-style motion controller, while third-party versions resembling traditional console controllers, complete with joysticks, buttons and a D-pad, are coming as well.

To be clear, the Apple TV won’t have the horsepower to take on the Microsoft (MSFT) Xbox One or Sony (SNE) PlayStation 4 — not even close. But AAPL has enjoyed an excellent relationship with game developers, the iOS App Store has many impressive titles and there’s little doubt that there will be soon be a library of tvOS titles that will appeal to a broad cross-section of gamers.

Making that gaming experience even more compelling, universal apps can be bought once and played across iOS devices and the Apple TV, with scores and progress carried over between platforms.

While the Apple TV will be able to play games, there will be other apps as well. For example, AAPL features an app for Airbnb — a service allowing people to list, find and rent lodging — for tvOS on its website.

Naturally, tvOS means a refreshed user interface as well, with a customizable home screen, cinematic screen savers and more detailed content info.

Siri, Universal Search and a New Remote

AAPL fired back at Amazon by incorporating Siri voice control in the new Apple TV and integrating universal search functionality. Instead of laboriously entering text one letter at a time to search the iTunes store (as current Apple TV owners have been doing for years), Siri will do the searching for you and, in addition to iTunes matches, will also return results from other app-based services such as Netflix (NFLX).

Siri isn’t just relegated to searching, either. The Apple TV will support asking Siri questions such as sports scores or what the weather is like.

The remote itself is still small but has gained the sensors needed to track motion (ideal for casual gaming) and a glass trackpad that enables touch navigation and swipes instead of constant button mashing.

The Old Apple TV Remains

Apple is keeping the previous generation Apple TV in its lineup as a $69 basic streamer to compete with low-cost options like the Chromecast. While it is likely to continue receiving occasional software updates, that third-generation box lacks the power to run tvOS so don’t expect it to ever gain Siri, App Store access or support for third party controllers.

To get those capabilities, you’ll need to upgrade to the new Apple TV.

Bottom line

There was no word about Apple’s planned streaming TV package, but if and when it arrives, the new Apple TV will ensure consumers aren’t forced to make the choice of buying outdated hardware to get it.With streaming TV subscriptions expected to grow by 70% by 2019 and set-top boxes increasingly being used to access that content on TVs, the living room has the potential to become a significant source of revenue for AAPL — considerably more than the “billion dollar business” Apple TV represented in 2013.

If it can successfully position the new Apple TV as an entertainment hub — a streamer, but also a music player, photo viewer and casual gaming console — Apple will be in a good position to reap the financial rewards of being a dominant player in the living room.

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

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