The magic adapter: Apple TV and the battle for the living room

Why conventional wisdom about Apple's failure to secure the living room is wrong.

Apple-TV.pngConventional wisdom is that Apple has not cracked the code to winning a spot in the living room. Maybe, but let me present a case that challenges such wisdom.

First, some backdrop. A friend of mine recently made a semi-serious statement that Apple will make more profit on its Smart Covers for iPad 2 — some project Smart Covers alone to be a $1 billion business — than the entire industry combined will make on their actual tablet product sales.

This got me thinking. Apple has essentially turned what is a mere “accessory” to their products into big business. Why couldn’t they apply that same philosophy to retrofitting the big-screen TV?

In homage to what “Intel Inside” meant during the PC era, I’ll dub such a concept “Apple Inside.” The premise is this: Apple already works with third-party hardware makers to support iPod and iPhone integration in cars, within docking stations, and other vertical device segments. Obviously, Apple also works with legions of software developers to see to it that great apps find their way onto iOS devices.

Why not combine the hardware and software constructs to let consumer electronics manufacturers harness Apple’s iOS-iTunes mojo? Putting a bow around this, what if Apple helped save Sony, Steve Jobs’ one-time aspirational business hero, by nesting an Apple TV inside of a real TV?

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Such a product strategy, which I will call “The Magic Adapter,” accomplishes the following for Apple:

  1. It gives Apple a hardware-software service adapter baked into millions of living room devices.
  2. It outflanks Google’s still-developing living room efforts with Google TV before Google finds its footing in this domain.
  3. It allows Apple to fortify its living room position without having to commit the dollars and Apple Retail floor space into what has historically been a low-margin, commodity business.
  4. It’s a lynchpin for an “iOS everywhere” play.

Apple traditionally doesn’t do OEM-type deals, but I’d argue that in this case the goal is to extend the iOS platform play. Apple’s core mantra is enabling, extending and accelerating the transition to Post-PC. At the iPad 2 announcement, Steve Jobs noted that more than 50% of Apple’s revenues now come from Post-PC devices — iPhone, iPod Touch, iPad and Apple TV — all of which are iOS-powered.

The current Apple TV product is, technically speaking, more of an adapter than a standalone solution. Think of it as a proxy service for bridging the last mile of run-time space between your big-screen TV, your media gateway (i.e., a Mac or PC) and your online experience. This truth is what led Apple to devolve the Apple TV from being a “mini” Mac Mini in its first generation to more of an iPod Touch without a built-in display in the second generation. Could the third generation be an embedded system?

If you connect the dots between a future Sony BRAVIA (or other big-screen display) to an embedded Magic Adapter to Apple’s AirPlay streaming service to iTunes/iOS, I think there’s a clear line to ubiquity in the living room.


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