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Assessing the Smart TV Opportunity

There has been increasing chatter about a new TV being developed by Apple.

My opinion on the subject was summarized in the post called Tele Vision. I contend that a TV cannot be smart until the content it delivers becomes smart. The logical conclusion is that the value chain needs re-integration so that the component which is not good enough (the content) can be improved along the dimensions that users value. And it cannot be improved unless the direction it needs to go into is aligned with the direction of the disruptive innovator. I won’t repeat the theory here, but it suffices to say that whatever will change television will do so by re-defining the core product not just the tools we use to consume it.

But today I wanted to address another question: how do we value the opportunity? In a back-of-the-envelope manner, can we tell if this business is big enough to try to fix.

The answer depends a lot on the business model of the disruptive entrant. The entry could depend on software or advertising or hardware or distribution, and each would have a different valuation.

But for the sake of calibration, I want to start with a proxy. The basic question of how many “terminals” exist to the value networks. How many units of TVs are sold and how many could a new entrant convert to a new paradigm?

I prepared the following chart showing the world-wide TV market with a highlighted subset of so-called “smart TVs” (source TRi). The market is shown from 2010 actuals through 2014 estimates. To make it more interesting I also added similar data for two other markets. Mobile phones and PCs with their own sub-categories of smartphones and tablets as equivalent “high growth” opportunities.

When considering the opportunity, the Smart TV volumes are small relative to either tablets or smartphones. 2011 shipments are expected to be around 25 million Smart TVs, vs. 454 million smartphones and 51 million tablets. Looking forward, it seems that even by 2014,  smart TVs will be smaller volumes relative to either (projected) smartphones or tablets.

A reason for this is that the TV market is not that big. It barely reaches 280 million units in 2014. Having reached saturation, the rate of growth is never assumed to be greater than 5%. The growth in the Smart TV business is assumed to be much higher however, being at least 100% in 2012, though off a low base.

But the concept of what “smart” means in this forecast is troubling. Christina Bonnington at Wired highlights many of the failings of Smart TV.

“In most cases consumers are buying a television with Internet connectivity as insurance. In other words, they are buying them just in case they need it in the future,” says Van Baker, a vice-president at the research firm Gartner. “Less than half of Internet connected televisions actually get connected to the Internet so clearly consumers don’t yet see this capability as a must have feature.”

There is vast under-consumption even if the devices are being purchased. This looks eerily familiar to the smartphone market before they became usable by the vast majority through the transformative touch input method.

So this market seems to be ripe for some serious re-definition. It may not be large today because there is nothing worth buying. Absent any innovation the forecasts can only foresee more of the same. If there is a breakthrough which “cracks” this puzzle then we might indeed witness unforeseen opportunity.

  • http://gravitationalpull.net/wp/ ampressman

    If looked at on a total revenue or profit per unit basis, wouldn’t the TV opportunity appear more enticing? Simple unit volume seems, well, too simple.

    • http://www.asymco.com Horace Dediu

      That would be a good next step.

    • edleft

      Yes, this is a key point. So the TV market is not growing. So the # units in the TAM is 250M+. At a price point b/t $1000 and $2000 and 10% share, AAPL has an opportunity of $25B-$50B. The #s could justify entry, even if the blogosphere are doubting thomases b/c they/we cannot see the “revolutionary innovation,” even if refresh cycles are 5 years. Point is, it doesn’t have to be revolutionary to achieve significant shareholder value. What if AAPL applies insanely great design, device/function integration (wireless access point, LTE, DVR, universal remote, Siri remote, Slingbox, DVR, Apple TV, FaceTime, AirPlay/AirPrint media center, App Store eps games, App Store ala Bloomberg TV) — even w/out innovating on the content side? Sell 20M of these. Then go back to the traditional content providers with some leverage. iPod came before iTunes. iPhone came before iBooks/Newstand. A 2-phase strategy is certainly w/in the realm of possibility.

      • Anonymous

        I don’t think Steve jobs think in terms of these numbers. He saw tv as a huge influence in the world but controlled and fashioned by moronic controls, be it companies or hardware.

        So the solution is probably voice control with a karaoke like remote. They will sell a tv for new customers and sell the apple tv for those that don’t have it.

        The question here is how to get cable programming while dependent on cable providers for the data highway. They won’t take it lying down and theyll find ways to block you, either with agreements with content studios or more heavy handed methods such as data caps or packet shaping.

        This may be the perfect time to introduce simless devices. You already have agreements with verizon, sprint and AT&T. This isn’t about replacing your cable providers at all but replacing the need for landlines. The local cable companies and middlemen will fall away as the big 3 eat up all the profits and customers. Theres your go to market strategy.

      • Canucker

        Apple sees this problem. It has a very tenuous relationship with content partners (who are suspicious of everyone and have little non-selfish vision). It has very little sway over the cable companies. However, these are also the wireless providers in many cases, where Apple has significant sway. The question is whether Apple can leverage its mobile strategy (which is making reams of money for the wireless networks) into an immobile strategy – the TV system. Everyone is wary of everyone else except Apple, who is likely confident in its vision and willing to put a lot of money on the table. Unfortunately, this battle will be won or lost in the US and the rest of us will be spectators.

        P.S. How come TV programming has disappeared from Apple TV? Low demand or Apple (or the networks) playing hardball?

      • Rudolf Charel

        The European Commission, for one, is in the process of designing and implementing an EU wide system whereby contend providers will be obligated to offer all contend to all.
        They can ask for a price but cannot refuse supply. That may answer some of the questions relating to content for an eventual Apple TV.

        It Apple can stun the world with a TV as they did with their phone and tablet we have seen nothing yet.

      • Anonymous

        As with the iPod and the iPhone:
        first you get a massive audience
        then you start to twist a few arms.
        An Apple television can do everything existing high-end TVs do but also offer all manner of ‘joy and delight’ features that its TV competitors cannot match. This will create a large enough market resulting in a large enough audience to create a strong position from which to negotiate on content deals.
        Ultimately, everything comes to the one who holds the audience.
        Everything flows from the audience – demand, audience market share, content pricing and ad revenues.
        With gougers like content creators and aggs/distros, it all comes to money clout.

  • http://www.jeffkibuule.com Jeff Kibuule

    What makes me question such a device is that the display is the most expensive part of a TV, it’s the reason you buy it after all. As far as I know, there aren’t that many manufactueres of high quality HDTV displays, and these aren’t going to be obscure companies either. How is Apple suppose to convince an LG or a Samsung to give them parts cheaper than their own in-house designs? If not that, then the TV will most certainly be more expensive than the competiton. What added value would be gained from Apple “building” the TV that would not be possible in the existing AppleTV product?

    And certainly, it’s foolish to think that people would be buying lots of these like they do iPhones and iPads. While phones are replaced every two years and the iPad was a new product category, TVs last on average 5-7 years, and that’s assuming something broke so they feel incentivized to replace it. There’s not a lot of churn creating repeat customers year after year after year. Perhaps if they were playing for the long haul, they could eventually gain significant marketshare, but because Tim Cook has already said he wants to make products for everyone (and a $1500 HDTV doesn’t cut it), there must be another part of this strategy we are missing.

    • http://www.facebook.com/people/Maxwell-Corbin/8112559 Maxwell Corbin

      well, the most expensive components inside an iPad, by far, are the screen and the semiconductors, both of which are manufactured by samsung. But the real value to the consumer is in the software and services. I agree that the TV right now is probably the definition of a product whose value is in the components, but a truly disruptive product could change that.

    • Alan

      Addressing the question of what value is gained from building the whole TV compared to the existing AppleTV stb: 1) Control of the input source and picture scaling, 2) control of and design of the audio system, and 3) control of any sensors onboard (ambient light, audio / acoustical), and 4) control of sleep/wake/power management. All things that could be vastly improved over most systems.

    • Anonymous

      “How is Apple suppose to convince an LG or a Samsung to give them parts cheaper than their own in-house designs?”…

      I think the question’s gonna be, “How much will Apple pay to have an LG or Samsung build the TV including the ‘AppleTV’ inside the box?”

      All Apple needs is a top quality manufacture (big or small) who wants to produce Apple TVs at a fair price and volume guarantees.

      I think this will be seen as a great opportunity by TV set makers. They get to increase production and profits by a significant per cent AND they are (quietly) known as Apple’s exclusive quality partner.

      I believe the cost of the TV will be manageable and Apple will only ship it if it is INSANELY great. The ‘insanely’ part of their strategy seems to gave some heft and predictability and, if it is truly ‘insane’,…

      Apple TV will begin the transformation of another major industry!

      • Canucker

        Four letters: S.O.N.Y. Their TV business is cratering. They are desperate. They’ll build a high quality Apple TV and throw in a plant to do so.

      • Anonymous

        But Apple is not interested in competing with other TV makers. It would just ‘not compute’ for Apple. The others are already in a deadly race to the bottom, even the so-called ‘Smart’ TVs out there.
        Apple thinks differential and will be content – at least at the beginning – to serve a premium standard, value-added, truly Smart TV at a high-end price. They will make a lot of money and they will take their time moving downwards to grab greater market share.
        What may be interesting is to consider for now, is how many kinds of differentiating features Apple will offer to create healthy demand levels at the high-end of the market.

      • http://pulse.yahoo.com/_KEVQDCIMSOI6AFXXFFS5ZFFWBA PeterK

        Check.

        Apple will have a trusted maker build an Apple branded TV with agreements in place preventing the maker from copying.

        Apple won’t be in competition with any TV maker as the Apple TV will be a major reinvention of TV, just as iPhone wasn’t in competition with any existing cell when it was introduced.

  • Luis Alejandro Masanti

    I think you are right with the idea that the “content” must change.
    Maybe a clue is in this Patently Apple’s article:

    “Apple’s iCloud May use a Tagging Solution for iPhone, TV & Beyond”
    http://www.patentlyapple.com/patently-apple/2011/10/apples-icloud-may-use-a-tagging-solution-for-iphone-tv-beyond.html

    Please, keep digging in the “other” parts of the chain.

  • http://www.informationworkshop.org Mark Hernandez

    Horace, I’m glad that you’re firmly in the camp of helping us decouple ourselves from the trap of “conventional thinking.”

    Furthermore, I would like to remind us all, that when the music industry was disrupted, the iPods did not include the “reproduction” part of the system. While the music formats were high quality, we could still choose whether we wanted to listen to music with cheap or expensive earbuds, bluetooth headphones, or a connection to our $1500 audiophile system.

    I would hope it would be the same with television. It needs to be display-independent. Myself along with John Siracusa and so many others feel strongly that we will take the extra power consumption and choose the great pleasure of watching our video content on a superior high-end plasma display. I would be loathe to purchase the amazing Apple Television if it was inseparable from a single choice of LCD/LED display, and a limited range of sizes.

    Please don’t reply to my post with a discussion of the pros and cons and instead spend the time needed to understand the complex set of trade-offs at play in current display technologies, and consider whether there is a conceptual error in assuming the display would be included in the disruption of “television.”

    • Laurent Giroud

      You realize that you’re essentially saying that Apple will simply continue selling the current appleTV and that the only two things that will change are:
      – the appleTV embedded software (maybe Siri, better UI, access to new content, etc.)
      – the deals made with the content creators

      Seems hardly disruptive to me. There’s already some interesting content on the appleTV, granted not everything is there but that’s still interesting enough for many. Adding more content and provide new ways of searching/accessing it (Siri, Apps) isn’t going to bring that many more sales.

      • Anonymous

        Your point is well made but I veer towards what Mark Hernandes says. The difficulty for Apple with a separate box is something I alluded to earlier. Apple TV set a price point and expectations too. An unintended consequence in retrospect perhaps when looking at future pricing potential and worthwhile margins. Perhaps that is the reason Apple has always kept the Apple TV on a cripplingly limited specification – it allows room for much higher pricing if a far more powerful product is forthcoming, with must-have add-ons like Siri and the ability to run apps and full HD and more are included.

    • Anonymous

      I agree wholeheartedly, especially after attending a recent demo of the Bose TV which doesn’t cater for freedom in screen choice – but see my reply to Laurent Giroud below and earlier comments.
      Also, we mustn’t forget the new lines of superb HDTV projectors from Panasonic (AE7000U) and others.

  • http://kaizenity.blogspot.com/ FalKirk

    What many don’t understand is that any “solution” that involves a deal with the content carriers is a dead end because it is the content providers who need to be disrupted.

    Before iTunes, the record moguls controlled content distribution. Only when they started to feel enough pain, because consumers were getting their music content for free over the internet, did they agree to support iTunes. When that happened, everything flipped. Apple, not the content providers, sold directly to the consumer. (Steve Jobs’ “go to market strategy.) And Apple controlled the pricing (99 cents). And Apple dictated that songs be sold a la carte instead of being bundled as albums.

    Likewise, before the iPhone, the carriers were in control. They told phone manufacturers how many and what kind of phones they wanted. They also controlled the distribution of music, applications, etc. through their phones. It was a truly miserable experience. Only when AT&T started to feel enough pain because of their slow growth and the rapid growth of Verizon, did they sign on with the iPhone. After that, it was Apple who sold directly to the consumer and it was Apple who controlled the distribution of content to the consumer. What a difference that has made.

    The same can be said for the television market. Right now, the content providers are in control. Many have suggested that Apple buy Netflix or TiVo or Hulu. They’re missing the point. None of those solutions disrupt the content providers. Quite the opposite. All of those solutions DEPEND upon the content providers who may then dole out their content at their leisure and at their prices. Only when Apple can reverse the roles – when they can sell directly to the consumer, when they can control the pricing and the distribution of content – only then will Apple be in a position to sell directly to the consumer and control pricing and distribution just as they do with iTunes and the App store. When Apple is able to do this, they can revolutionize the television watching customer experience and re-invent the market just as they have done so many times before.

    How they can do that is beyond me. But Apple is a lot smarter than I am. And I surely hope that they have – as Steve Jobs put it – “cracked” the problem.

    • edleft

      Agree. Apple will have leverage to disrupt the content providers when they have sufficient user base (units sold) that did not require content disruption for their value _or_ the content providers feel sufficient pain. I am guessing that Apple figures out a way to provide enough value to sell 10s of millions of units with which they then approach content providers to negotiate. They will not redo the Netflix strategy which is on the path to bankruptcy.

      • James Lambeth

        I think the monopoly that the cable providers have in each market will make the disruption so difficult . In the music industry you did not have one big provider in each region they all competed in all regions so getting one to role over and play with apple was not that hard. It will be much more difficult with cable. But it is not the box that is the problem it is the content as FalKirk has noted in the past.

      • James Lambeth

        Having just said that I must admit that a lot of my young patients don’t pay for cable, they just buy content and use hulu etc. But when the cable cos. start to see people only buying internet services from them and not espn they will freak.

    • Anonymous

      I agree completely. I can envision a future in which Apple’s model is compelling enough for everyone to get on board. I can understand how iOS can create an instant audience for well produced content that may languish today due to poor promotion or time-slot competition. I can imagine a news “channel” that gives access to all types of content, both live and pre written/taped. The same could be true of sports. Networks wouldn’t feel compelled to fill 24 hrs of content just to avoid broadcasting static. However…

      I can’t begin to fathom how we get there. The unique issue about television is that the content is sold under regionally exclusive licenses. Different providers have privileged access to distribute different types of content. Many contracts cover specific forms of “digital” distribution. There are multiple types of physical media, streamed content, on-demand libraries, and live feeds – all with their own input methods and UI quirks. Finally, to further complicate things, the expiration dates of these agreements are tiered as well.

      The road to a newer, better model is filled thousands of actively moving detours, potholes, and wrong way signs. I don’t understand how Apple hopes to achieve the critical mass that will make AVERAGE users comfortable enough to abandon the existing model. They will need sports and live news. They will need some way of assuaging the dumb pipe owners who will necessarily be marginalized as operators.

      I guarantee that if they can somehow pull this off ($82 billion and counting might help), it will create a moat of unimaginable depth and breadth for iOS. Even if the iTV service itself is not directly a major bottom line contributor, it could make the iTunes/App Store/iCloud advantage look small. This product is somewhat of a holy grail, and people will buy devices to make it happen.

    • Anonymous

      When you liberate the supply model å la iTunes Store, demand rules, not supply. The quality of content should gradually improve as creators absorb the painful but necessary truth that few buyers will pay for dross.
      American consumers will finally be in greater control of the quality of content they are served by creators. The rest of the world already vote more assertively with their wallets …. and it works.

    • http://search.websonar.com:8080/ Duane Bemister

      Here is what they could do…

      The Apple iTV could be an app on the new iMacs. It will link to the video repository and allow the user to schedule a viewing queue. The videos will download in the background at 1080. The shows will be deleted seven days after they are viewed. You will have an opportunity to save them for one more week prior to deletion. You will be notified when your library queue requires updating. You can view the shows directly on the new iMacs high resolution screen or AirPlay them to the new gigabyte wifi hdtv connector. Both can be controlled with Apple’s one button remote. Price: Bundled with new iMac.

  • Anonymous

    I think the ‘smart TV’ is less about the TV and more about the consumer…. It is about ‘smart content’ indexed and spidered and searchable and deliverable on demand. DVRs and On Demand solutions are still quite point delivery based (have to be in the living room). The next wave of ‘entertainment’ will be to ‘your current’ device…. PC/Desktop/laptop, iPad/tablet/iPhone… and entertainment center with a TV at the hub.

    For the past 20 years, with PCI tuner cards, we’ve tried to make computers ‘read’ TV/cable delivery systems. Hard to do, and hard to get the end consumer to buy into it.

    An Apple Remote App and/or AirPlay pretty much moves the interface to personal device. Once the TV can be turned on by iP*, then it pretty much lowers the bar of integration intelligence to the average consumer.

    The next 5 years, it will be about changing the delivery method to be more like the appstore/Newstand… I’ll subscribe to ‘Colbert Report,’ I’ll ‘search’ for old Beverly Hillbillies shows, and I’ll get ‘alerts’ from my local TV news ‘channel’

    Internet TV is not about connecting your TV to the Internet… it’s about Connecting Content to the Internet, and monetizing delivery to the device I want to view it on… right now.

    Couple that with the disintermediation of the cable company… it becomes a ‘big dumb pipe’ as opposed to a 500 channels of crap to get the one HBO show and the 2 FB games a week I want to see (paying $3 for ‘new shows’ and 1.50 for ‘archives’ (probably 15 a week for me) + say $29.99 for 20mb/sec service looks pretty good compared to $150+ a month).

    For that pricing model, I’m all about future proofing my TV… right now… it’s AppleTV2 (and torrents). I’d be happy to buy Dexter on a per show basis, but it’s gotta be fresh, and advert free in the delivery (Hulu sucks). I just want _one_ delivery channel… like my TV (dial) is now.

  • http://twitter.com/tpdorsey Terrence Dorsey

    I think the TV ecosystem is more complicated and fragmented than this.

    Seen from the consumer side, you’ve got occasional capital expenditures. These are things like display + possibly audio, gaming consoles increasingly used for streaming and disk-based video, DVRs like Tivo, and now devices like Apple TV, Roku, Boxee and so on.

    Next you’ve got subscription access to content. Some come via traditional sources that have tied up content like cable and satellite providers, Tivo and Netflix. Newer sources include services like MLB.TV and cable-based sports packages, as well as Amazon Prime video streaming or Xbox live video services.

    Then you’ve got a la carte services like iTunes, Amazon video, direct purchase of DVDs. You might also consider the time and effort people are likely to expend seeking out and converting individual streaming shows (via TV networks for example) and P2P sources, both legal and illicit.

    If your smart content hypothesis is correct — and I think it is — these are the nexuses of money and control that need to be understood.

    TV displays do seem like the kind of low-margin, low-differentiation, highly fragmented market ripe for disruption by Apple. But because of the size of the average TV today, there are huge logistical, sales floor and service costs associated that I wouldn’t want to pick up when plenty of sellers already do an acceptable job.

    The problem in TV is not the devices themselves, but integration of devices and access to content. Instead, why not focus on the content and control – the software and cloud end – and instead treat the TV as just another device that can be addressed, along with Macs, iPhones and iPads? The solution is one easy-to-hook-up device that provides the best access to content.

    In other words, it’s a business problem to be solved at this point. Is Apple — or any company — in a position to crack this yet? Id’ say, given Netflix’s stumbles, not yet, but that Apple is best positioned to move first if cracks do start to show.

    • Davel

      I agree. It is about the model for consuming content.

      Apple does not generate content, they make tools to make content or consume content.

      In addition to creating an easy way to navigate content, Apple or anyone else needs to offer a way to find the content. The cable channels or broadcast offer this. They make or buy content and put it on the ‘schedule’. This offers a way for people to anticipate the next installment and then discuss.

      Besides navigation when do you distribute it? I think the social aspect is important. The current limitations of the infrastructure led to a weekly period that everyone is familiar with.

      In computerization of the management of content will the weekly model still work? I think twitter and Facebook have an advantage here as they already have an infrastructure that ppl are in turn with, but they don’t provide the content and navigation.

      If apple were to disrupt the distribution then they would have to take the advertising aspect of it too. iTunes does this for music and apps, but I don’t think it is robust enough for movies, television.

      I am curious what Jobs’s vision is because the more I think of it, the harder it becomes.

      • Anonymous

        If you pay for the content, why do you wish to endure ads?
        Are you suggesting that every song we buy is interrupted by an ad once a minute as you listen to it?
        Do we suffer the interruption of an ad when we are in the midst of a page-turner?
        Print publishers are whining about this point at the moment. Some expect you to pay the same price for an eDoc as you would pay for the print version and they still want to litter your purchase with ads.
        How far shall we go with this?
        How about buying a tv programme or movie and enjoying a stream of ads interrupted by a minute or three of paid content every half-hour?
        Yummy if you are an passive (doormat) variety of dweeb!

      • Anonymous

        btw, when I say ‘you’ in the final line below, I mean it in the general sense, which includes me too, of course.
        I was not referring to Davel.
        My apologies for the lack of clarity.

    • Anonymous

      The redundant factor in the viewing market is the aggregator/distributor. All that is needed between provider and consumer is a store selling content apps.

      Simple transactions.
      Pay once, watch whenever and as often as you want to.
      Pay once and save it permanently if you want to.
      No control freakery.
      No gouging prices.
      No paying for content you don’t want.
      Build your own packages – if you want series subscriptions at a keener price.
      No compulsion to buy the series if you want just specific episodes.
      All wheat, no chaff – well it’s your choice actually.
      The good content thrives and the dross rots on the vine.

      As with music, all we need are the providers (be they record companies, indies or, in the case of TV: the content creators) and the consumers. The iTunes’ app store could be the only access point. It will have no gatekeeper function at all. It will place no forced compulsions to purchase on the buyer aka you and me.

      I liked the idea when Apple applied it to music purchasing. It has the same appeal for tv and movies. It puts control back in the hands of the consumer – which is where it always should have been in the first place.
      Great opportunities for Horace.
      For you.
      For me too.
      Yikes! Me, the TV app.
      Imagine that ….. well maybe not on second thoughts.

  • http://www.hasport.com brianathasport

    The interface is the problem that can be solved; everything else is under the control of too many others. How many of you guys have multiple remotes in your living rooms that require a phone call from your wife when she wants to watch something. What would it be worth to simply sit down and tell your TV what to do and it does it.

    The interface is what made the Apple computer, iPhone and iPad the successes they were. It is still all about the user experience separating Apple’s products from the others. It’s what Apple does.

  • Ian Ollmann

    Horace, I just don’t agree that the content is the problem. When I think of my TV, I think of too many remote controls, poor content search ability with multiple content sources not all of which are searchable, terrible interface with too much switching between input devices (why should the user need to do that at all?) and weak device integration. In my mind, the problem is the AV hub. It desperately needs to be integrated. If I could get that, I’d chuck my stereo, blue ray player, and 2-year old TV.

    Once all content can compete on a level playing field in the same device, the plain old television service content can compete on its own merits and will be disrupted or not by things like games, video chat, artificial fish tanks, etc. based on the relative strengths of those offerings.

    • http://www.asymco.com Horace Dediu

      By integrating the rat’s nest that sits in most living rooms, the experience can indeed be improved and made more valuable. However the result won’t be disruptive. It will allow the industry to continue as it always has and the device part of it will remain a commodity.
      What I imagine as TV 2.0 is a larger iPad where the “content” is a set of apps. I imagine hundreds of thousands of entertainment apps which blend video and interaction and games in completely novel ways, using touch screens as remotes or voice as input. I imagine the creative power of developers, designers and artists blended in ways that can be easily monetized. I imagine a social dimension. I imagine a discovery engine that can reveal interesting material from a catalog of half a million “channels”. I even selfishly imagine offering what I do as a TV “app” produced as easily as a YouTube video but with interactive charts available for users to play with.
      As apps have emerged as a new medium, that medium can easily be improved to fit within the bigger screen in the living room.

      • Anonymous

        Sounds like Google TV, don’t you think? IMO, now, I don’t have cable subscription just AppleTV, Netflix and a few Network Apps, I would like to pay one fee and have everything digitally available and picked up where I left off on any of my devices no matter where I am. I don’t want DVD’s, nor BlueRay. They are too slow, and I don’t want a menu to work through to establish play movie.

        iOS mirroring and better wireless signal is my preferred choice than having thousands of apps on the TV. I want it to be dumb and let smarter devices control the display. I don’t want a computer mounted on my wall, I already have it in my hands (iPhone, iPad, Air, iTouch etc…).

      • Anonymous

        “What I imagine as TV 2.0 is a larger iPad where the “content” is a set of apps. I imagine hundreds of thousands of entertainment apps which blend video and interaction and games in completely novel ways, using touch screens as remotes or voice as input. I imagine the creative power of developers, designers and artists blended in ways that can be easily monetized. I imagine a social dimension. I imagine a discovery engine that can reveal interesting material from a catalog of half a million “channels”. I even selfishly imagine offering what I do as a TV “app” produced as easily as a YouTube video but with interactive charts available for users to play with. ”

        Some things to consider:

        1) The cablecos are beginning to offer iPad apps that allow you stream their shows, from the STB over WiFi to iPads.

        2) This, currently, is limited the WiFi network local to the STB site — no streaming to remote iPads.

        3) The individual iPad apps you suggest (almost by definition) will have a better user interface and user experience than the remotes and STB UI provided by the cablecos.

        4) However, there needs to be some common UI implementation standards, or somesuch. * Without these, the competing content apps, each with their unique UI, will become a confusing Tower of Babel (ala the various iPad Magazine apps). The overall user experience will, likely, be worse than the current, clumsy remote and STB.

        5) Some Internet services, Netflix for example allow streaming to an iPad and that, in turn can be streamed from the iPad to the TV connected via AppleTV. Of course, the AppleTV has a built in app that would appear to make the path through the iPad unnecessary… But, in our house with ATT u-verse, the path through the iPad provides capability not available on the u-verse STB:
        — the iPad volume control works… the u-verse remote won’t lower volume
        — once the iPad-to-HDTV streaming has started, the iPad can run other apps **

        ** Look up a movie on imdb, surf, email, etc…. this currently works for some streaming apps but not others.

        6) An alternativete to step 5 could be running the apps on the AppleTV itself — but the AppleTV lacks the storage to accommodate a vast number of apps. This could be resolved by WiFi crossloading the apps as needed from another device.

        7) In addition to the content itself, searchable/browsable content indexes and content metadata may be as useful as the content itself

        So, while the idea of content being hundreds of thousands of entertainment apps — there are downsides — nonstandard, confusing and redundant access, for example.

        * So, how to resolve this?

        I think the solution involves [at least] two technologies:

        1) The content/apps being able to expose a standard set of functions (including indexes and metadata) to a higher-level controller, so that controller can provide a common, powerful and consistent UI to the hundreds of thousands of disparate apps.

        2) The common controller, itself — used to aggregate the content, its exposed functions an provide an intuitive UI.

        I would like to place into nomination for the high office of Common Controller…. Siri!

        …yays, applause, whistle (US sign of approval), cheers, Standing O…

        you on iPad: “Siri: what new kids movies are available on netflix?”

        Siri: “I found the these listed by newest first…”

        you on iPad: manually scroll list appearing on iPad/TV Screen

        or

        you on iPad: “Siri: Down”
        you on iPad: “Siri: Down”
        you on iPad: “Siri: play toy story 3″

        Siri: begins playing Toy Story 3 on HDTV

        you on iPad: reduce volume with slider

        or

        you on iPad: “Siri: Volume Down”

        you on iPad: switch apps — HDTV play continues
        you on iPad: doing emails, etc.

        you on iPad: “Siri: What actor played the captain of the German ship in African Queen”

        Siri “Peter Bull played the part of Captain of the Louise” to you on your iPad — HDTV play continues

        you on iPad: “Siri: pause the TV, and play this music video I just received from Sheena”

        “I even selfishly imagine offering what I do as a TV “app” produced as easily as a YouTube video but with interactive charts available for users to play with. ”

        Horace at work:

        Horace: “Siri: you don’t need to respond — I will alert you if I need your attention”

        Horace: “Siri: Create a new Pages document with my asymco blog template:

        Horace: “Title Assessing the Smart TV Opportunity”

        Horace: “Author me Categories Theory”

        Horace: “paragraph There has been increasing chatter about a new TV being developed by Apple. paragraph paragraph”

        Horace: “My opinion on the subject was summarized in the post called ”

        Horace: “Siri: insert a link to my blog Tele Vision”

        Horace: “I contend that a TV cannot be smart until the content it delivers becomes smart. The logical conclusion is that the value chain needs re-integration so …

        Horace: “Siri: Include that Numbers chart named ‘Smart Volumes’ ”

        Horace: “Enlarge it 25%”

        Horace: “Siri: read it back to me”

        Siri: “…”

        Horace: “Siri: Make the link to tele vision a single word”

        Horace: “Post it to my blog site:

        or

        you on iPad or Mac: “Siri: Watch and learn how I adjust this FCP X movie clip, and call it ‘Old Time Movie effect’.”

        Siri: “OK, I’m watching…”

        you on iPad or Mac: performing various mouse, touch, and keyboard actions.

        you on iPad or Mac: “Siri: Done”

        Siri: “Got it! I saved it as ‘Old Time Movie effect’.”

        you on iPad or Mac: “Siri: make a copy of ‘Margo’s Wedding’ apply the ‘Old Time Movie effect’ and play it on the TV”

        Siri: “Here’s your new video”



      • Jamiehardt

        From the beginning of the silent film era, there was always a distribution layer, where agents would collect films from producers (er “content creators” we call them now) and then vend the content off to exhibitors (er “last miles” or “set top boxes” or “retail” we might call it now). The theaters needed these so they could offer enough variety in their product and not just show the same 5 movies. Originally the film exchanges were mutual organizations of regional theater chains, doing business will little small-proprietor production companies, but the exchanges themselves moved more and more into funding and producing their own content for their theaters. Mergers happened, the sector consolidated, and by the beginning of the sound era you had the classic, vertically integrated movie studio/distribution network/theater chain corporations of Hollywood’s first golden age. Television disrupted this, as did a certain supreme court decision that mandated that studios couldn’t own movie theaters, and couldn’t engage in certain practices that froze out independent production.

        What you’re proposing is that, essentially, the STB or smart TV manufacturer would become the distributor, brokering connections between living rooms and people offering content, in the place of, say, Time Warner Cable deciding what your channel lineup is, essentially coalescing the distributor with the exhibitor, and turning the viewer’s purchasing decision into a direct viewer-content creator transaction, unmediated. There would be some questions I’d have:

        1) How exactly would you monetize channels? Would you sell them like apps? With subscriptions? If a single content owner had a large library of material that was independently appealing, this could make sense, but you might end up in the situation where Starz and Crackle/Sony Pictures and Warner simply put up channels for their own libraries, giving people a huge, reliable lineup of varied content for a low price; this happens on Roku and other platforms now. This is awesome for the viewer, but there’s no disruption there — you’re not putting the viewer on the other side of Peter Jackson’s cash register, which I think should be the goal.

        2) Distributors that maintain large portfolios of content are able to use certain high-production cost, high-demand programming, like sports, to subsidize other lower demand content that’s necessary to appeal to other demographics. If there was an ESPN app, or take it further, a “Texas Rangers TV” app for $1.99, would people still be willing to pay $7.99 for the “Law and Order” app, even though that reflects the true differential in production costs? And would such a price disparity be healthy for the medium? Video games suffer a terrible stigma for allegedly skewing heavily male, mainly because games that appeal to males are more economical. There are definitely games for women and young children, and the elderly, and the otherwise un-gamed, but the perception absolutely hurts the reach of the entire medium and the quality of non-18-49 male games, which are often just good-enough-for-gospel compared to the core games of the videogame business.

        3) (2a?) Being able to provide the consumer a large selection of high-quality content that appeals to many different members of the household, for a low price, is a big deal, and if the way channels are sold requires you to have to spend $50 a month in order to get the kind of variety it would have cost $100 on cable, it’s not going to be a win. Deciding “I’m going to watch ‘Mythbusters’ now” or “I’m going to watch ‘Asymco’ now” are, with cable (assuming there was an Asymco channel), total impulse decisions and require no effort, once you’ve bought cable. If these different shows were paywalled behind an app, or required any sort of transaction, even for free, even for only the first time, it might cause a lot of people to lose the impulse.

        3) I don’t think there has yet been an instance of a wholly internet-discovered content creator becoming an successful, pays-its-own-way entertainment franchise. Nobody’s really demonstrated how to sell content comparable to a feature film or a TV show like “The Sopranos” through a search engine, without having to resort to millions of dollars in marketing. I’m very skeptical of social and I’m very skeptical of “customer-driven” content, where people pay up front for the kind of show they want to watch. Good content are like Apple products: smart people think it up, deep pockets make it the best there is, and then clever marketers go to the ends of the earth to show people how amazing it is.

      • Jamiehardt

        Flip $50 and $100 around in (3). As Willy Wonka said, “strike that, reverse it.”

      • Anonymous

        I agree and imagine that if Siri was the agent that searched for and lined up the apps it has learned to understand that you will likely be interested in (at least) knowing about, excluding things you have already viewed and leaves it to you to decide what you then choose to pursue from its results.
        I find that prospect marvellous. Better than a Google search for content because as you use such an agent, it presumably gets better at matching your true criteria on a given topic, rather than being inundated with the same 45 million matches that any other enquirer would also receive.

      • Anonymous

        ….. and if we are paying-per-view for the app, then no ads at all.
        Err, where do I sign up for this utopia?

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  • Eric D.

    What if it’s not just a TV, but an advanced video-conferencing tool? It could sport multiple cameras capable of tracking individuals as they move across the room. Directional mikes. Background sound suppression. Double the typical HD resolution.

    The most disruptive technology would involve placing cameras _behind_ the screen. This would effectively allow for direct eye contact, the key element missing from today’s teleconferencing setups. Being able to look someone directly in the eye from a remote location could save businesses and families a lot of air travel expenditure.

    This product would initially be aimed directly at enterprise and up-market consumers, who would pay the premium price for this new advantage.

    As far as stocking issues at Apple stores go, they would only need to display the two or three sizes they would be manufacturing. These would be on opposite walls, perhaps, to really sell the teleconferencing angle. The units would not need to be stocked on site, but delivered the same or next day from a local warehouse, and include installation and a quick personal set-up and tutoring session.

    Connectivity is now the main content. Once again, Apple would take an existing technology and finally make it user-friendly. Disruption would happen across several industries: the frozen TV model; travel; telecommunications.

    What would such a product be called? Since iWindow would involve a fight with Microsoft, my money is on the iVista.

    http://www.appleinsider.com/articles/09/01/08/apple_files_patent_for_camera_hidden_behind_display.html

    • Anonymous

      The camera thing isn’t suited to big screen TV for the domestic market, because the last thing you want to is to have somebody looking at a 40inch 1080p video feed of your face – unless you are a movie star.

      That’s much more of a tablet feature.

      • Stefan Popescu

        They won’t be looking at my face. They would be looking at me sitting on the couch.

      • Anonymous

        Most conversations wouldn’t be TV to TV – they’d be TV to iPad, or TV to phone – so now suddenly the TV has a HUGE picture of the iPad users head, and the iPad picture is mostly taken up with sofa.

        It’s not going to be pretty either way.

      • Ash

        Skype already has a product on TV. See http://www.skype.com/intl/en-us/get-skype/on-your-tv/

  • r.d

    In order to replace something you have to act like them.
    In this case you have to own either distribution or content
    which is what cable companies own their own channel and content.
    Just like Movie people also owned the theaters until US Government
    stop the monopoly practice. In this case media company are in
    bed with politicians via the election ads so Apple has zero chance
    of upsetting the apple cart. Plus ads is how corporations shape
    public anyway.

    • http://www.asymco.com Horace Dediu

      Television is a global industry but it varies dramatically in implementation details country to country. It’s a very local business. Don’t assume anything you know about the US industry applies anywhere else. Any solution Apple (or anyone else) implements must address this as a global business. The numbers I present are world-wide and the US is but a tiny fraction of the total.

      • Z Kariv

        So the solution is on country by country (or region by region) rather than global?
        I like your overall analisys

    • Anonymous

      Wrong imo.
      No one can legislate to prescribe viewer choice.
      Once you have experienced easy control over following only what interests you, no fixed broadcast schedule can mesmerise you. Choice is a killer of being forced to passively accept what you are given to watch, and when,
      You don’t have to replace the existing passive viewer model immediately. You co-exist with it but, by giving all users easy access to whatever excites their interest, at any time they want to see it, you encourage them to take a look, and then to sample your viewing model and gradually to immerse themselves in your unlimited and still growing oceans of extensions to their existing choices.
      Once they are in though, and they become savvy with your model’s m.o. and they experience and become accustomed to total control of their choices, alone and for themselves, well you can guess what happens to the traditional model in the ensuing years ……..
      Ah, but evolution can be a cruel thing when it cuts your legs out from under you.
      Evolution, thy name is choice – in everything to do with the ‘what’ and the ‘when’ of viewing.
      And I haven’t even touched upon apps or games or true social networking F2F.

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  • http://www.informationworkshop.org Mark Hernandez

    “Apps are the new channels” as both Horace speculates below and John Gruber says here…

    http://daringfireball.net/2011/10/apps_are_the_new_channels

    • Dick Applebaum

      I agree that apps maybe the new channels — but they aren’t the final manifestation, in my opinion.

      If the content owners/aggregators create an unique app for each of the hundreds of television channels – we will will have hundreds of apps with incompatible capabilities and user interfaces. This is similar to the situation we have with magazine apps today.

      What we really want is easy, on-demand access to the shows (the content) — not the channels. The channels are simply one artificial means of organizing the shows we want to watch.

      An app as a substitute for a channel is just a necessary intermediate step to uncouple the content from a delivery system that is outlived its usefulness.

      I want to know what sports are on tonight — not what apps do I have to use show me what sports are on tonight.

    • sfmitch

      I don’t think so.

      Apps are the new channels, seems like a GIANT step backward.

      Consumers are either going to have to pay big $$$ per app / channel or will have to sit through commercials. No thank you.

      A DVR with the ability to watch whatever you want, whenever you want (as long as you are OK with ‘what’s on TV’ is a much better proposition.

      • Rene

        Consumers have to pay for the content somehow. It will always be a choice between direct payment or advertising.

  • Laurent Giroud

    I’m not convinced at all that the main problem to crack is to make content smart.

    There are several key points to consider:

    1 – The market for an Apple TV set is currently small, for most people TV as it is is good enough, only for a minority of knowledgeable geeks is the current broadcasting system inadequate. Mainstream TV consumers probably aren’t ready to let go the “watch what’s on” consumption model without a transition, VOD adoption is increasing but it’s far from widespread (and it sucks if I believe my friends who have used it).
    People keep talking about support for legacy hardware (cable box, DVD/BlueRay players, etc.) but this would bring such a cloud of problems (no standardized controlling protocol, no content or media discovery API, need for many different types of connectors, etc.) that it’s obvious that Apple won’t even bother going for it. They will cut links with the past and the only connectivity they will likely offer will solely consist of Wifi, GB Ethernet and Thunderbolt. This alone will severely restrict their initial market to people who already have made the digital switch (and most likely with existing Apple products).

    2 – Whichever deals Apple manages to reach with content creators, Apple won’t be able to provide overnight everything that you can currently get by cable. See how little content there’s currently on iTunes and it’s obvious that this is only going to increase incrementally as it – slowly – becomes obvious to content creators that going through Apple is a better solution than negotiating deals with content distributors. Providing “smart content’ is going to be done slowly, incrementally, it won’t be an instant revolution.

    3 – It is not as hard to make the content “smarter” than it is to simply deliver it to the consumer: given the current US Internet landscape HD video streaming is out of the question for most US households (and anything less than HD video quality looks horrible on a big screen TV). So deals with content providers seem compulsory at least in the US.
    This is not the case in most of Europe and parts of Asia (notably Japan) though since high speed Internet lines which allow way more than HD streaming are largely available for very reasonable fees (you get 100Mbps via fiber or 28Mbps via ADSL for 30 euros per months in France) but history tells us that Apple prefers to experiment in the more uniform US market first then expand to the rest of the world and I doubt that this will change so having HD quality content reach customers might be a real problem.
    Only via a deal with content providers does it seem possible to get enough bandwidth to deliver Apple grade quality content.

    These initial constraints paint a situation which is actually very similar to the one with carriers in the Mobile world:
    the pipes were there, but the devices were atrociously expensive and sucked, their software offering was inexistent and voluntarily limited and they could not take advantage of the Internet in any satisfying way.

    Apple didn’t revolutionize smart phones by providing new content to the iPhone buyers, it just provided a better interface to make calls and handle contacts and to content that already existed on the Internet. Apps came only after a year long wait when it was obvious that device and users screamed to run richer software than the initial quite basic offering.

    Data plans existed before the iPhone but there was no point using them since all devices capable of taking advantage of them in a user friendly way simply didn’t exist.
    The iPhone was highly successful even though it offered nothing but basic features. There was no content that wasn’t available from a PC and that content wasn’t any smarter on the iPhone. (and I should add that YouTube video quality initially sucked, only web and iTunes content could be seriously said to be easily accessible)

    What made the iPhone smart was its touch UI and its unbridled access to the Internet through Safari and the YouTube and Maps bundled apps: the intelligence was in the interface, not in the content.

    Moreover the iPhone was available only on one operator network.
    And that was enough.

    So what’s so different from the TV situation?

    Couldn’t Apple just reach a deal with one big cable operator? Just as AT&T didn’t care about user experience Comcast doesn’t care about TV programming, it cares about the number of people who subscribe to its services. On demand TV will require more bandwidth than cable TV, there is just no way around that. That means bigger pipes and bigger data fees.

    Apple could very well approach cable operators and tell them “you don’t have to worry about spending money negotiating deals with content creators and stuff, we handle it for you, however, in exchange for a steady stream of consumers than we’ll send your way and to which you will sell pure really high speed Internet plans you will have to seriously invest in bandwidth”.
    Since these initial customers will be high income ones they won’t be rebuked by relatively high device prices and Internet fees and that will allow operators to invest appropriately in their network as AT&T, Verizon and Sprint likely had to in order to get the iPhone.
    Apple could even loan them the necessary money at super low rates to convince them and they already have some content (iTunes’s) that they can rent/sell, they only need the visibility of the success of the Apple TV set to convince more to join the journey.

    In this scenario there is no need for a content revolution, just like for the iPhone the only thing that changes is the interface between users and content which gets simplified and high income consumers gain a better TV, high speed internet without caps and throttling, then as this approach proves profitable and the initial infrastructure investments are amortized the device can slowly extend its reach to more mainstream consumers as more and more content becomes available, just like what happened for the iPhone.

    Apps as channels would come later when the market is wide and mature enough to convince content producers that they can add value through interactivity and/or parallel data streams in addition to the video content now that there exists a stable platform to develop these features on.

    In “Tele-vision” you said:
    “Television is more than the TV set or a set-top box, or any box. It’s more than channels or broadcasters or producers or aggregators or distributors. It’s all of these things; plus more. It’s a value network of great breadth and complexity. It’s a highly modularized industry with well-defined business model boundaries and inter-dependencies. I would argue that its very breadth is what has kept it rigid and immune from disruptive change.”

    But that was the case for music too, before iTunes.
    Was music distribution really way less complex than video content distribution is?

    My thesis is the marker of media markets maturity to go full digital is nothing else than the bandwidth necessary to convey *live/instant-on-demand* good enough quality content.
    Music producers switched to iTunes when it was obvious that Internet allowed the equivalent of almost instant broadcasting of any desirable music for almost no fee: you could download or stream anything you wanted so they had to make their content similarly as available.
    Video content creators are still relatively undamaged because it still takes a number of hours to download high quality content but that’s merely a side effect of US Internet speeds not keeping up with technical advances for lack of real competition in this area. When that happens, no matter what the complexity of the TV distribution system they will have to switch.

    My conviction is that only when Apple manages to find smart enough operators to understand that and convince them to switch to being (expensive) data providers will see an Apple TV set being produced.

    • Anonymous

      I think you started making an argument describing certain failure for an Apple smart TV and then spent the rest of your post presenting arguments that described potential for success,
      I disagree with your point 1) because hundreds of millions of ordinary people who were previously hooked on passively accepting and watching what they were served by broadcasters, and working to other people’s schedules, not the user’s tastes or timing preferences….have gone through enormous changes in their content-viewing habits. I say ‘content-viewing because members of the public who have become adept at finding what they want on the Web, now spend decreasing amounts of time passively watching or working around someone else’s broadcast schedule. This is an accelerating trend and the implications of it are enormous. I believe, and I know from many personal examples, that once people have experienced self-directed content search for themselves and enjoyed easy and repeatable success in doing so, that activity becomes increasingly compelling for them – mainly because they are in sole charge of what they choose to view. It is exciting and it is liberating. It comes at a time when the oceans of content out there for the surfing are growing beyond easy imagination. This is my own experience too and I am only part geek, on my mother’s side if you must know.
      And so, while I understand the points you make, and they are good ones; they reflect the rather static patterns of the past and they do not adequately allow for the remarkable speed of change that is happening in ‘viewing habits’. I mean even broadcasters are worried by the pace of change.
      When you give people easy ways to get to just the content they want, when they want it, you have a powerful motivator for change in viewing habits. Out with the passive consumption model and in with the liberating practice of viewing-by-choice.

      In the modern world, time is the most precious commodity for most of us. You can spend your time, but you cannot save it for another day. The rise in demand for ‘viewing by choice to your own schedule of convenience’ cannot be ignored as an agent of change in mass viewing habits. Giving the ordinary, non-geek, individual easy access to, and even easier control over, what they can view, and when, will turn the whole of the TV market on its head forever. It is already happening. As with music and publishing, the established incumbents are in a very vulnerable situation. Not one of them can create a general broadcast schedule for the new liberated viewing phenomenon. However, there may be an ‘app’ for that and it is for you to guess where that will come from ….. Siriously!

      • Laurent Giroud

        I have to say that my post is way more convoluted than I wish it were!

        I totally agree with you regarding the advantages of going from a streaming/always-on experience to an on demand one. However I mentioned the fact that most people weren’t ready for it solely to point out that this would restrict the initial market of an Apple TV set, I’m fairly convinced that many people would convert to another system if only the interface provided to access it was simple enough and content delivered varied equally (you can’t say that current offers are both simple and plentiful).

        My point was mainly that it’s not just what and how content will be delivered which will distinguish an Apple TV set from the pack, it was also about how the infrastructure (in a broad sense, including content deals) which will support it seems to me that it can likely be only be built step by step.

        Just as the iPhone reached an important but relatively low number of people initially and progressively convinced more and more people that the value it offered was worth its price and that of its data plan, Apple’s televisual offering might walk into select homes first, then enlarge its grasp of the global market through progressive and measured steps as the general public realizes that it’s not just an expensive TV set with an Internet access.

    • http://pulse.yahoo.com/_KEVQDCIMSOI6AFXXFFS5ZFFWBA PeterK

      “Whichever deals Apple manages to reach with content creators, Apple won’t be able to provide overnight everything that you can currently get by cable.”

      Darn right, but here’s the catch: Current cable has millions of ‘choices’, but they’re availability is mirage like. Sure, you can get that title, just wait and check the schedule and manage things very well, and if you’re sharp, you will succeed.

      Apple’s Siri driven (or similar) title availability will be real: “Want fries with that?”

      If Apple has it, you will get it quickly and easily.

  • Anonymous

    The key to Apple’s disruption is to find a way to offer content. And to offer it on an ad-free basis and on a free-choice programming basis.

    But, you say, no way the content providers would ever go for that. Besides, Apple would simply be in the same boat as Netflix. Beholding to the content providers.

    So here’s the deal. Let the content providers CONTINUE to provide content. Do it via iMarquee. (OK, the name needs work.) It works like Newsstand. It will work because the content providers will be making their OWN money on their OWN content! Why don’t they do this now? Because they don’t have an easy to use method to provide content and get paid for it. Hulu, et. al.? Nope.

    What Apple does is use iMarquee, a Newsstand-like model, to allow TV content providers to get direct and simple, Siri-based, access to customers. The content providers set the price. Apple takes a small slice.

    If you want to watch Dirty Jobs (pun intended), you subscribe to Dirty Jobs via iMarquee directly from the producers of Dirty Jobs.

    So why does this require an Apple television? They could do this with the existing AppleTV box. Well, because Apple designs it that way. Apple already has these types of limits. If you want iBooks, you get them via iOS. OSX does not have a solution. Same thing here. If you want to use a subscription model for TV content, you need to buy an Apple Television to get access to iMarquee.

    The only fly in this ointment is how to compensate the ISPs for the bandwidth and the lost cable revenue. But if the content providers realize they can directly monetize their property to the viewers themselves, they may be able to provide leverage here.

  • Michael Corrado

    What if the idea is to revive Disney’s Moviebeam – a set-top box that presented about 10 new movies a week, which were downloaded at a trickle using public broadcasting spectrum – but to do it with telecom spectrum, overnight when there is a lot of excess capacity. If a TV viewer subscribes to certain shows, they could be downloaded in advance, then unlocked after an embargo. To the viewer, it would be indistinguishable from downloading on the spot. Steve Jobs’ estate is still the largest shareholder in Disney, so those iTV patents (numerous) are accessible to Apple, which has all the know-how to build such a device. Just a thought (speculating on what “cracked” could mean). The telecoms could get extra income from all that idle capacity, as could broadband suppliers, with their idle cycles.

  • John

    I think the smart TV is a solution in search of a problem. You say half the people never connect the TV to the internet. Makes sense to me. You almost can’t buy a large TV without Internet connectivity.

    • Anonymous

      To be fair you could have said that about internet connected phones before the first true smartphones took off. Featurephones had WAP and email and it seemed pointless because it was so clunky

    • sfmitch

      I agree.

      My idea of a perfect TV is a monitor (my current TV’s tuner will most likely never be used, I have no plans to connect it to the internet) with minimal features other than great picture, attractive design, numerous inputs and discrete Infrared codes so I can easily integrate it into my AV setup.

      I don’t see Apple getting into the HDTV market, ever.

      The idea of a Siri enable HDTV is horrible. The idea of controlling my TV via voice isn’t the least bit appealing.

      Give me a beautiful, but dumb, monitor along with a DVR, Blu-Ray player and surround sound system and I’m a happy man.

    • Anonymous

      The thing is that, in the family context, aka the mass market for TV, the television is the modern equivalent of the social focal point, like the fireplace used to be with people gathered around it – as it was before the advent of central heating. Indeed there is a visual joke in England of having a running display of a roaring fire on the TV screen.
      So, imo, the TV setting as the main and regular gathering place for family members nowadays, makes it an ideal platform for many shared activities including simply watching TV yes, but also using PIP to view other content such as surfing, monitoring domestic/security systems; playing games together, talking to others using Skype. This provides a means of allowing others to participate in what would otherwise be solitary activities.
      I’m intrigued by the possibilities of other features that we never imagined we might want until Apple show us what is possible.
      As for Siri as a means of controlling TV use, I see great potential there and it does not imply that there cannot be a traditional remote, or better, an iDevice, for those of us who prefer to issue out commands by pressing buttons. Siri offers great potential for easing the task of finding and scheduling content that interests individual family members, or all the family in common.
      Although Apple could apply its magic (joy and delight perhaps) to any TV set via a discrete box of tricks, I don’t see that earning them the kind of money they like to make from an important product sector. The AppleTV was priced so very low that there would be significant resistance to paying a lot for an Apple Smart TV STB. Plus SJ has said that people do not want yet another STB. It is far more compelling to come in with a choice of screens and perhaps a projector with all the necessary circuitry built in and not a cable in sight.
      I believe there is ample room for Apple to introduce a TV that is very profitable for them. As before, they can begin by serving the high-end market including the fans, the discerning buyers and early adopters. Once market awareness has been established, they can then grow down into the middle and mass markets through the usual mechanism of aspirational buying – of people recognising the new best of breed and wanting to own it. Families spend a lot of time with their televisions. I think it is clear that if such an Apple TV set became the (increasingly needed) domestic hub for all compatible computers and iDevices; then many, if not most, existing Apple product owners would want to own the resultant solution.
      Lean-back computing and surfing is gaining popularity nowadays.
      Apple has worried long and hard about this ‘hobby’ – more so than with any other potential new offering. It has invested much time and thought and money in this area. I believe that they have stuck with the idea because they know there is great potential there and recognise that the market has great potential for fundamental change in viewing habits. They also know that it is too important a market to forego or ignore. The TV as entertainment/internet/ gaming/social networking/VOD/ hub and access point for all manner of general and user-defined content display for individual or shared use is an evolution of home entertainment just waiting to happen.
      Watching TV has become a (learned to be) passive activity. People begin to understand the potential for going far beyond just accepting what they are served by broadcasters and designing their own viewing schedules to create the best of both worlds. Siri would make that all too easy to do.
      If any organisation can make us want a truly smart TV, lean-back viewing model accessing all kinds of entertainment and other content in the near future, Apple certainly can.

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  • berult

    As a willful consumer of content, you’re either on your own …indulging, or being assisted through a comprehensive searching process. Done effortlessly, or so it should be …both spontaneous alternate action relative to one another. Neither mode constrains the expression of the other.

    “I know what I want and I want it now, …and I’m talking to you now…!”

    “I know what I want. Or do I, …and I’m talking to myself now…!?”

    Global media content ought to harbor and service these two querying moods within its disseminating infrastructure; the former speeded up through platform-centric personal history processing. Add some sprinkling of, platform-centric still, market dust to the former and you get a duty free sampling of cultural alter egos, …’group-mind’ grinding and polishing of consuming ethos.

    A platform has to provide full ‘user-biased’ support to content consuming whims, including the networking dimensions inferred in freely expressing them; a sort of idiosyncratic empowerment through meta-language mediation. The visual UI is but an appendage to the core procurement, the fruitful bondage of one’s unbridled thrill to one’s strong …but pliable Will.

    Access to any creative content must therefore be responsive to inner voice command. The integrity of the platform search-and-create apparatus is the goose that spreads its golden eggs around …far beyond the platform’s confine.

    Integrity …systemic integrity is a creativity and wealth multiplier for it’s in its very nature to prune the bearer’s quotient.

    • Anonymous

      err.
      Abs oh rutely my old chap!
      Gung ho and all that.
      But don’t forget the sidereal time bi-directional twitch-ponder.
      None of it will work otherwise, don’t you know.
      I’m jus’ articulating…..

  • Aloysius Soh

    Horace – this is a fantastic post (as was your prior post on “Tele-vision”), thank you for sharing your thinking with us all.

    Hi all – think there are some really strong comments and thinking (I work in the TV industry in distribution, so of course am challenged to think through many of these issues you’re touching on).

  • Canucker

    Apple’s tried and tested approach is to generate an innocuous alternative that doesn’t directly challenge the incumbent technology (rather it works with it). Then, as momentum builds, it introduces more significant changes and customers begin to adopt them, while still purchasing the conventional products. At some point, the customer wonders why they are still paying for the old way of doing things and drops or reduces that consumption. A tipping point may then be reached where the new way becomes not only the better way but the preferred way. Disruption occurs and the last people to get it are the legacy providers. Take a bow RIM, CDs, boxed software, GPS devices…..

    • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

      Bingo! I have been reading through the comments, looking for this, hoping I wouldn’t have to write it myself (I’m lazy). For this to work, Apple has to be welcomed by the incumbents, perhaps even as a sort of savior of their businesses. The momentum you describe has already been building; there is an avant garde whose behavior has already changed.

      One thing I would like to note: Many commenters have said that the new content would have to be stripped of advertising for this model to work. I don’t see how that would be possible without alienating the incumbents. Indeed, this has been the mahor stumbling block of Google’s effort: It is clear to the incumbents that Google wants to replace their advertising with its own. Rather than any benefits accruing to the incumbents, the benefits would all flow to Google.

      I haven’t seen advertising stripped from magazines on Newsstand, btw. I’m really not sure why others think this would happen with TV type content. Maybe it’s just wishful thinking. I actually thin we might see an increase in advertising. In app purchases, anyone?

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  • Pat

    Horace

    I think your choice of smart TV is somewhat arbitrary. I would think my non smart TV connected to an Apple TV STB becomes a smart device candidate during its replacement cycle. I think anyone buying a LCD Or Plasma TV would be included which brings the market size in the range of 250M per year.

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  • Tim F.

    I would think an AppleTV would be more comparable to iTunes for Windows (greatly expanded market for iPods). The AppleTV will greatly increase the attractiveness and utility of other iOS devices. Apple’s strategy already requires that they look past the artificial market categories of PC, tablet, phone, TV, etc… They should be focused on multiplying the utility of any one of these devices when used in concert.

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  • Christian Nøkleby

    Smart TVs, as in connected TVs with widgets, apps, mediaplayer functionality etc., is a dead end! The reason is because most of us allready have a powerful, capable & connected device within an arms length -even when we are sitting in front of the TV. Why would we need to replicate the smartness of our phones or pads and cram it into yet another device? How many devices do we need to have capable of doing the same things?

    What we need are smarter protocols for interconnection between our personal devices and the big screen display medium (AKA the TV), so that we can search up content on our touchscreens and by an easy swipe mirror or redirect the mediastream to the TV for sharing.

    The TV screen is and should be no more than a screen. A “dumb” big screen viewing medium. The preferred medium for interaction will be the personal device. The big screen is for the moments you want to share and/or lean back…

    I believe in a modular future, where we have fewer “smart” devices, but where the interaction between your personal (smart) device and all peripheral equipment is a lot smoother.

    • Anonymous

      The cost of adding smartness to a TV is always going to be considerably less than the price of an additional smartphone or tablet, because the SoC isn’t that big a proportion of the Bill of materials. Even if your household has a tablet, it’s inconvenient to tie it up powering the TV when somebody else wants to be using it for gaming or some different purposes. Families exist, and most of them won’t have one iDevice per person for the foreseeable future.

      It occurs to me that everything that you’re saying about the TV was said about phones. Phones it was said, should just be phones and should communicate with other devices such as cameras or PDAs over bluetooth, and people should be little walking networks of interconnected devices.

      Besides, even in your hypothetical dumb but connected TV future, your TV needs to be able to handle screen mirroring with pads and smartphones. Which means it needs to be able to decode a 1080p compressed video signal. Which means it needs to be smart.

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  • Anonymous

    You have touched on something important here Horace.
    It will be useful if you return to this point fttt.

    Chandra C

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  • Anonymous

    I think there would be a market for a smart TV if it helped people live their lives better–if it helped them understand things better or if it had a beefed-up Siri that did a huge variety of tasks for them. Or maybe if it offered consumer-created entertainment like YouTube but with much better quality video/audio.

    If this TV had an engine that found interactive web sites that could help us learn new things, I think it would sell. For example, VisualThesaurus for kids (links are below) or Stemsight Scout for researchers, which shows relationships of genes in stem-cells. Or if the TV found web sites with special interest forums for health care, etc. I know we can use Google, but it takes too much time to find the good ones.

    Siri has a lot of potential because it hooks into existing web services (the API web) so the developers don’t have to do all the programming themselves. They have hooked into OpenTable for restaurant reservations and Google/Bing for search. And there is a large ecosystem of services (APIs) that they can potentially use — there are over 4000 APIs listed on ProgrammableWeb [3]. There are some for job search, real estate, financial, medical, etc. In an interview with Siri’s founders, Dag Kittlaus and Adam Cheyer, last spring, they said they’re adding new services to Siri every month. And in the future, they want to invite other developers to participate with them [4]. If/when that happens, Siri’s capabilities would increase tremendously.

    As for consumer-created entertainment, there are/were 8 million bands on YouTube [5]. I think the bands would buy a TV and Apple’s development tools for making HD video with stereo. And if each of them had at least 2 fans that would also buy one, that would come to 24 million and would be a fair start for the smart market.

    1. VisualThesaurus: http://www.visualthesaurus.com
    2. Stemsight Scout: http://www.stemsight.org/stemscout.html
    3. ProgrammableWeb. API Dashboard. http://www.programmableweb.com/apis
    4. Robert Scobel. Interview with Siri’s founders Dag Kittlaus and Adam Cheyer. A new personal assistant on your mobile phone. Bulding43. February 5, 2010. http://www.youtube.com/watch?v=ts4yr3qti9w
    5. Roger McNamee, Elevation Partners Director and Co-Founder. Chapter 15: Money in the Music Industry. June 28, 2011. http://fora.tv/2011/06/28/Elevation_Partners_Director_and_Co-Founder_Roger_McNamee

  • Payam Noruzi

    This is also what Steve Jobs mentioned about the possibilities of having “smart tv”
    http://allthingsd.com/20100601/d8-video-steve-jobs-on-why-apple-tv-is-a-hobby/

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  • Jeff

    Horace,

    I wonder if Apple introduced a TV, given that it was disruptive, if the market-size analysis holds true. Might it be like iPod or iPad in that the presence of their product is what creates the market and expands the size of it?

    Surely, a bunch of Apple loyalists who are not so infatuated with smart-TV’s now would reconsider if it was part of their iCloud hub suite. That being said, cracking the content issue may take many years, especially without Jobs at the helm to drive the process and cajole the necessary industry leaders to align with his vision.

    I am really curious what Steve meant when he quoted to the biographer about smart TV…”I finally cracked it”

    Jeff

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  • anonymous

    out of curiousity, what do folks think of “gesture recognition” (a la microsoft kinect) as part of the TV viewing / engaging experience?  do you think that people will view it as a valuable add on and a more user-friendly way to search?  as a way to open, zoom and skim through photos and other rich media content?  or will they see it as a gimmick?

  • frankcapra03

    Why are you judging/sizing the SmartTv by current shipment metrics? Those shipment metrics could/would surge if there was a truly innovative product released that Apple is capable to realease, say that drives massive global demand and shipments surge and Apple captures say 35% of that new surge level. There are billions of tvs in place that are up for grabs to convert to a new smart system. What if Apple was able to get 50 million tv sales per year? It would still take 20 years to reach 1 billion unit sales, and ummmm 50 million units per year at an average price of $1500 would spur $75 Billion in sales / profits. Do that for just 10 years you are talking $750 Billion in new sales that dont exist for Apple today, that money would carry the company into a completely new paradigm we could never even grasp.

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