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?

Web 2.0 Expo San Francisco 2011, being held March 28-31, will examine key pieces of the digital economy and the ways you can use important ideas for your own success.

Save 20% on registration with the code WEBSF11RAD

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.

Related:

tags: , , , ,
  • Billy

    While an “Apple inside” TV may extend the reach of iOS, I doubt Apple will do it.

    Apple’s guiding principle since the first iPod is that they MUST control the customers experience of the core product while third parties – content providers, app developers, accessory makers – can enrich the experience, in ways that Apple specify.

    This principle served Apple well and also them to establish a highly distinctive consumer brand. Going down an “Apple inside” strategy will dilute the brand, and undermine the desirability of Apple products and the margin that the consumers are willing to pay

  • http://imranali.name Imran Ali

    It may be even simpler than that. Apple’s $40 Digital AV Adapter (http://store.apple.com/us/product/MC953ZM/A?fnode=MTc0MjU4NjE) is essentially your magic adapter…bringing iOS to the bigTV :)

  • Pub

    Tv manufacturers could almost do it without apple’s involvement: just build in a slot that accepts an apple tv. The only issue is if they can get their remotes to control it.

  • http://GOTTVONMYPC.COM/58084/ Trace

    I think that if Apple got involved with the televsion set, then they might as well get involved with their own apple toliet. The greater the involvement in technology the lazier and the sloppier the product. Stick to what you know and are good at! But Perfect it in every way. Televsion is not their field of choice!

  • http://Http://www.unicornlabs.com Mark Sigal

    @trace, fair perspective, but how else does Apple crack the living room? Full blown Media Server? Set top box? Big screen iMac?

    My internal debate goes like this. There is no way that Apple cedes the living room to someone else when they have spent the past decade assembling the platform, products and ecosystem required to dominate the digital media and apps lifestyle in all environments.

    At the same time, there are the inklings of real competition in the boxees, google tvs and xboxes of the world.

    Plus, given the general lack of software competency of the tv makers, they would be all to happy to have apple drive their software story in the same way non-apple handset makers have been happy to have google drive their hardware story with android.

    And the company is all about margins and cash, which such a play would be ripe for. Finally, such an embrace and extend approach doesn’t preclude the company expanding it’s offering to a TV replacement device if and when the market dictates.

    Food for thought.

    Mark

  • Charlie Jones

    The problem with embedding an Apple TV within an actual TV is upgrading. The assumption is that Apple has bigger plans for the “puck”. If that’s the case, we may well see the Apple TV go on a yearly update cycle. People don’t swap out their sets that often, which would lead to Apple having a bunch of 2 and 3 y/o Apple TVs. Keeping it cheap and modular allows Apple to quickly improve the product.

  • rick

    But the current ATV allows for far more flexibility, doesn’t have the encumbrances of embedded solutions (technical or bureaucratic), lets them deploy to anyone who has an HDTV now vs only those people buying a new TV and doesn’t dilute the brand equity.

    As for competition, Boxee isn’t it. It’s nice, but they don’t have the reach or cachet to compete and $199 isn’t the casual purchase that $99 is. If they cut OEM deals, that might change, but given how slowly they’ve moved, I’m not holding my breath.. GTV has the wrong model – people generally don’t want phone/tablet apps on their TV. Only Roku remains as an easy, inexpensive and well done adapter. In fact, I bought a Roku last week over an ATV. Why? Well, content. If ATV goes fully open iOS so I can install, say, and Amazon Video app or an ESPN3 app, that would rock. But right now the Roku has more content that I want to view. In a year? Who knows?

  • http://ryan.grimm.name Ryan

    I believe that Apple has all of the integration it needs with the TV manufactures.

    Let’s say for a moment that Apple wanted to do this. They would be embedding their hardware and software inside of someone else’s hardware. Disaster. Apple is not in the business of being an OEM supplier and the day that they become one is the day they officially jump the shark.

    But even more importantly, why would they need to embed themselves into someone else’s hardware? Everything that they need to integrate themselves is available to them: HDMI. Currently the Apple TV is even smart enough to pause video playback when it loses signal (eg: switched input, TV turns off).

    Apple (and potentially others) have more power in the living room because the TV is pretty much a commodity. It’s an output device that sparks little passion in most people. What people are passionate about is the content. This is where Apple has a huge lead on everyone else: content delivery. It’s also the most likely way they will get a firm seat in the living room.

    They already have good abilities to get music, movies and photos onto your TV. The legions of iOS developers continue to get more access to pushing content to the Apple TV. But (hopefully) when the floodgates are opened and they can write apps specifically for the Apple TV is when the competition will no longer be able to keep up.

  • Bob

    Apple isn’t going to make any read headway until there is a real complete Apple IPTV, tube and all where they control all of the content that goes into the TV and your brain.

    Resistance is futile.

  • http://www.unicornlabs.com Mark Sigal

    Ironically, today Bloomberg reported that Apple is contemplating licensing AirPlay to TV set makers for device to TV video streaming support: http://bloom.bg/fPJUO0

    Check it out.

    Mark

  • http://www.relentlessfocus.tumblr.com Relentlessfocus

    Additionally, the precedent for this is AirPlay audio. Apple isn’t building anything, they’re only licensing a protocol and the hardware specs to handle it.

    The reason I like the idea of AirPlay built into tellies is that expands the number of people who are AirPlay reachable. This would encourage content owners like Turner, ABC/NBC/CBS Hulu et al, and sports (eg NBA and MLB) to create apps for iOS which stream video to iDevices via an in app subscription service and thus out to the tv via AirPlay.

    Of course it’s ultimately the same effect as everybody buying an AppleTV but they wouldn’t. But by getting Sony, Panasonic et al to embed an AppleTV in their tellie chassis the potential market is grown very quickly. At the point where the content owners see a market of such significant size that it looks lucrative, then finally we (hopefully) will see the elimination of the cable/satellite middleman. And this of course would benefit Apple’s bottom line and put them in a dominant position in the living room, a place they very much would like to be.