Categories

Hiding in plain sight

Guessing the next Apple product has become the parlor game of choice for a whole generation of technology journalists and analysts. The premise of the game is that given a track record of breakthrough products, there is always another one just around the corner. Being the one to predict this next breakthrough product creates credibility and demonstrates the domain knowledge of the predictor. If the prediction fails to materialize there is consolation in dismissing the actual announced product as disappointing, unsophisticated or, worst of all, uninteresting.

Most often, these guesses are as much a reflection of the analyst as they are an analysis of the company. Too many predictions are designed to impress or demonstrate the imagination or knowledge of the predictor. They typically anticipate a giant leap of functionality, power or market re-structuring. They envision revolution not evolution; a cutting of the Gordian knot not a polishing of ugly rocks.

Yet nearly all of Apple’s launches have been sustaining improvements in existing products, technologies or platforms. To name just a few:

  • The iPad is an evolution of the iPod touch
  • The iPod touch is an evolution of the iPhone
  • The iPhone uses OS X and Objective C from the Mac
  • OS X came from NeXT
  • The app store market model came out of the iTunes store
  • The iTunes store came from iTunes which came first to the Mac as a media sync tool for the iPod
  • etc.

John Gruber explained the process last spring as it relates to many of Apple’s launches. Although the iPhone did introduce a new user input method and experience that takes consumption in a new direction, its building blocks were there for all to see for many years. The iPhone is a natural evolution of the computer with a handy little “Phone” app.

Likewise, the iPod came seemingly out of nowhere but by watching the original launch you see it as part of a “media hub” strategy that envisions the Mac as a personal server. The very products which ended up disrupting the Mac/PC began as extensions of their victims.

You can trace the DNA of almost all of Apple’s products to previous products. If Apple did not have these foundations, the slow-motion revolutions would not have happened. Rather than a deliberate big bang, Apple’s disruptions are the result of a discovery process. A test, iterate and improve loop. This is why they seem obvious after the launch but also why they seem to be such an anti-climax.

Therefore, the challenge of predicting Apple’s next product should be tackled not only through an act of imagination but by carefully projecting the current products and understanding where they can evolve.

So it is that I approach the question of Apple’s TV disruption. My working assumption about the next Apple TV is that it already exists. It’s none other than the existing Apple TV, improved.

Here are the clues or hints I noted:

  • It uses iOS and the hardware from the devices that run it. It originally ran a PC architecture and shared a kernel with Macs.
  • It has been integrated with iTunes media stores (with the notable exception of the iTunes app store)
  • It has begun to introduce channels other than downloads (ESPN, Wall Street Journal) thus establishing its own distribution for traditional content
  • It is a global product, depending only on the Internet protocols and independent of the balkanized cable standards
  • Through AirPlay it is integrated with Macs and Apple devices.
  • Through display mirroring, iOS devices can use the TV as an external monitor and can even change their own behavior when doing so

This last point is intriguing. I have not seen discussion of this feature, but if using an iPad 2 or iPhone 4S with iOS 5 and an Apple TV with the latest software updates it’s possible to have an iOS device become a controller for TV-based game experiences. Developers are already using the API. When using a pinball game with screen mirroring, the device becomes a controller while the action takes place on the big screen. Switching display mirroring off bring the action and control back onto the small screen. There are still problems with lag and the processors are over-taxed on high frame rates, but the APIs are already there for developers. (I could also mention the potential of new a Bluetooth standard for better wireless response).

What these signals point to is Apple defining the TV as an iOS portfolio product. This means integration with iTunes, including an app store. This, in turn, means unleashing developer/creative talent through new monetization opportunities. This means new user experiences in discovery. This means FaceTime-like communication through the TV. This means many other things but mostly it means that the TV will be a platform product.

The only challenge is a (currently lacking) smooth interface. Perhaps that’s where voice comes into the picture. But whether that is built-in at the next rev of the product or not is not the story. The story is going to be the sustaining improvement in the original Apple TV. A wonderfully asymmetric product begging to be ignored. A product that because of its apparent lack of success, effectively hides all its secrets in plain sight.

  • http://twitter.com/ecclespaul Paul Eccles

    Very interesting. The A5 is a powerful CPU/GPU for gaming, and could potentially disrupt the current consoles.

  • Anonymous

    You’re analysis about how to judge Apple’s products is spot on.

    But I don’t think you’re telling us anything we don’t already know about what Apple TV might look like unless there’s another piece of information you haven’t shared or unless there is a piece of information totally missing from your equation. For instance, what if Apple really does make a 55″ display that incorporates hardware to run the software you have described here? 

    How does that change your equation? How would that change the equation for developers of such a product? What kind of a future would that be?

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

      I believe there will be multiple implementations, both as external boxes and as an integrated screen. There might be some licensing of the chipset as well, but that’s less likely.

      • Anonymous

        Multiple implementations could be interesting, especially if the same experience could be delivered from either a set top box or from an actual Apple television set itself.

        I wished I had that extra bit of intuition to be able to see the future and ruminate about what kind of content delivery/entertainment experience will be like.

  • Anonymous

    I’m pleased you wrote this up because I’ve been thinking along the same the lines and I rarely think as clearly as you. The one thing I’d add is that AirPlay is not only a link between iOS devices, the tellie and a Mac but also with home hifi either as part of a home theatre installation for watching movie and tv content or for audio sent to a separate hifi. The focus on TV is probably misleading, as you point out, Apple wan’t to be the centre of digital home entertainment in all its myriad forms. Which brings another Apple device into play, if your hifi doesn’t have built in AirPlay, you buy an Airport Express to link it to your Apple entertainment network.

  • Rick Mueller

    Horace,

    While the evolution of IPTV presents truly fascinating and intriguing opportunities, why would you want to limit yourself to only the segment of that universe that might be served by iOS?

    • Alan

      Maybe the same reason many people limited themselves to audio files bought from iTunes.

    • Anonymous

      Because that portion will work well, easily, and consistently.  Apple is likely betting that they can get a critical mass of users/viewers, then negotiate with the content owners to bulk up the catalog.  As long as the content owners don’t do exclusive deals with aTV competitors, they have better resources than anyone else.  If the company sees a way to monetize significant volume of “television” content, Apple will pay whatever costs necessary to realize the vision.

      • http://twitter.com/jdsweet J Sweet

        Agreed.  I see AAPL as being very patient here.  AAPL (of last decade) has only shown any willingness to compromise ideals in exchange for speed when a credible competitor is on course to obtain enough critical mass (i.e. aka “critical momentum” to take exclusive control of a platform in which AAPL needs to be a key player to provide great end-to-end experiences.  The living room/TV is certainly one area where that’s the case.

        But they’ve gotten their foot in the door in the living room w/ the Apple TV 2, and no one else (e.g. Google TV) yet has critical momentum, so I think they’ll be patient and hold out for the ideal Apple vision, i.e. Apple – not balkanized cable operators – dictate living room experience.  Long-term that means Apple building up enough critical mass to turn around and force cable operators – or more likely, the studios afraid of pissing off the cable operators – to see that neglecting Apple’s living room distribution channel has become the bigger risk.

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

      Don’t know, but if people do, it might be for the same reason developers would want to limit themselves to iOS.

    • Anonymous

      Because it is easy, the price is affordable, and in the case of iTunes (if that is the model) the catalogue is wide enough to include more than enough to keep me amused.

  • OpenMinde

    If one takes the screen size as a measurement stick, Apple products go like this: big (Mac), no  screen (iPod), small (iPhone, iPod touch), medium (iPad), and big again (Apple TV/Mirror).  And  all of them become more and more tightly integrated.  One depends on another, all locked in with excellent user experience. As more customers get pulled in to the Apple-centric experience, Apple grows its business relatively slow, but firm, like a junkyard grinding machine, chewing up its competitor. 

    • http://www.noisetech-software.com/Home.html Steven Noyes

      I have been saying all along.  Apple is neither a software nor a hardware company.  They are a Systems company.

  • http://twitter.com/outcoxed Bill Cox

    This is what I’ve been saying too. The only thing you didn’t address is cost. 

    AppleTV2 was a product demonstration of an incredibly inexpensive box that generated no heat, used no power, and took up almost no space. You could integrate that into a television set and barely budge the price, but you get this vast amount of content. And you no longer need a cable as input to the TV.

    Imagine a TV with no inputs at all, just a power cord and 802.11N wireless. If you integrate AppleTV and a TV together, it becomes a viable device.

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

    When I read this I laughed out loud and hit the table with my hand in delight!  This is one of your most brilliant pieces Horace, and there have been too many to count.

    When someone writes something and you wish you had thought of it first (on a topic you have thought about and commented on a lot) and then wish you had turned as many wonderful phrases found within it, well, you know it’s good!

    I’m directing all future discussions of the rumored Apple-branded television to this post.

    I’m also figuring that Apple will not only release a beautiful television with Apple TV functionality built in, but I expect and hope that it will also come in the form of an external box (like it does now) because unless Apple has developed a new display technology, I’m not downgrading to an LED/LCD from my amazing high end plasma, just like Apple allows us to play music on our $3000 7.1 sound systems if we wish.

    As with any product, there are tradeoffs, and there will likely eventually be a family of products that hit key points along the tradeoff spectrum.   An integrated television makes the interaction supremely simple (e.g. powering it on for one) but another member of the product line may afford us some flexibility with our choices of display technologies, sound systems, and legacy devices (e.g. Blu-ray/DVD players, game consoles, TiVo ,etc) at the expense of the smoothness of interaction.  We’ll see.  It’s the waiting that’s the worst. :-)

  • Pingback: Monday links: learning to code | Abnormal Returns()

  • http://www.facebook.com/people/Koen-van-Hees/1301049198 Koen van Hees

    and everybody trying to talka to da telley in bloody ingilish? That should be fun. At long last TV becomes a family activity again. “Quick, get the camera. Dad wants to see sports again! And I’ve hidden his teeth!!!!”

  • Anonymous

    I would agree with all of this with the exception of what product is being upgraded/evolved.

    I see the trend for ‘interface’ to evolve from

    from lots of remotes/controllers for TV, theatre, media

    to the iPad/iPhone.

    Thus the key component here is not the aTV2, but the iPad ‘Remote’ app.
    – Siri enabled
    – Integrated into the OTA digital feeds (enter your location and local channels ‘just show up’)
    – ‘deals’ with cable companies to drive to their cable channels and VOD services

    All on one interface, supporting either an aTV2/3 or a AppleTV(embedded aTV3?).

    That’s the consumer ‘one button’ mouse everyone wants.

    • Anonymous

      Add to this that the most interesting part about the iPhone being a remote control for the television/entire home entertainment set is that iPhone is a product that uses love and carry with them wherever they go, so your “remote” would always be with you. In addition, with the Find My iPhone app, if you did happen to misplace your iPhone in your home, you can have the iPhone blink and make noise until it was found.

      I think the killer app in the scenario is the real-world “find” feature for the remote control which somehow always seems to go missing. Additionally, because Apple is big on user interface, the UI of the remote would be streamlined and would be truly universal as you would be able to control the various pieces. (True, Apple doesn’t sell amplifiers, but maybe that’s the secret: having an API that hardware manufactures can implement that would allow the Remote app to be extendable for the various pieces of high-end equipment.)

      Because the solution isn’t hardware based but rather account based, you would have access to your content on as many devices as you owned. For instance, you would be able to take an iPad into the bedroom while the family watched something in the living room. Think of this in terms of how people will put two or three TVs with DVRs/cable boxes in separate rooms in their homes. But now, you don’t have to run the wire. All you need is a wireless router and an iTunes account.

      • Anonymous

        I say it here, it comes out there.

  • Anonymous

    What are your thoughts on Schmit’s comments about Google TV vis-si-vis LeWeb? Do you think that Schmit was trying to get Google’s name attached to the concept to be “first to market” or do you think it was a bluff trying to call Apple’s hand before Apple was ready to play their cards?

    • Walt French

      Purely as speculation, I read Schmidts’ comments as announcing that Google had signed licensing agreements with many TV manufacturers, that would allow them to embed Android in their sets. Probably comes with some sort of reference design on having Android be the top-level interface, with an app to display content, maybe with pip for other apps, and a customized Android skin.

      That would be a logical extension of their existing Logitech-built product, and the key OS, all along the lines that Horace is describing here for Apple. It might be the opportunity to fork Android into the Open Handset Alliance version and an Open Display Alliance. Perhaps “open” wouldn’t be so valuable for displays, allowing Google a better opportunity to monetize Android by charging the set-makers a per-set license fee.

      • Anonymous

        If that were to happen, then Google ads deployment has to be implicit as a given. We would then approach a viewing world in which there is layer upon layer of advertising.
        For me at least, that is the best reason on Earth never to buy a Google TV.
        I guess I am spoiled, having grown up with BBC TV in the UK which is, wait for it, totally ad-free.
        Bliss, thy name is BBC.

  • Anonymous

    Is the AppleTV box even necessary, Horace? 
    A normal TV set equipped with AirPlay capability, or a Bluetooth variant as announced today by Apple to developers, would be all that is needed. I used to use an Airport Express to stream audio from my iPod Touch to my Hi-Fi. I am buying an AV amp from Pioneer that has AirPlay capability built-in.
    An AirPlay-capable TV would make that extra link in the chain unnecessary and likely reduce the latency problem too.

    And what of the rumours of a full-blown, premium-priced Apple TV set? 

    • Canucker

      This could be Apples strategy in TV’s. Make available a dev kit for “Made for AirPlay” like “Made for iPod” and watch the penetration of the market catch on like wildfire. All of the TV makers would implement this.

    • http://cribmac.com The Digital Pimp

      Maybe the way to think of it is:

      – An Apple TV 3 for people who don’t want to upgrade their TVs
      – Existing iMac models with an ATV UX layer to replace Front Row (the current models are big enough for kitchens, offices, kids rooms)

       I don’t think Apple is stupid enough to enter the big-screen business; it’s just so dang low-margin to bother. A premium price is the kiss of death (ask Sony how their GoogleTV-enabled models are selling.)

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

      I believe the separate box is necessary because there are many HDTVs that are already in people’s homes and they tend to stay in use for a decade. I also think it makes sense to have a full size TV from Apple as an option.

      • MatthewGunson

        But the funny thing is…

        All these allusions to Jobs’ quote in the Isaacson book about “figuring it out” overlook the fact that the solution is already in market.

        It seemed to me that many writers and pundits thought this quote alluded to a new, not yet revealed solution, but iPad/iPodtouch as an intermediary of the TV and iTunes Store is the answer. At the moment there is $100 box to buy to make it all work, and in the future, as mentioned upthread, that may not be necessary.

      • Anonymous

        Ha! Of couse.
        As a long-time MAc user, I easily forget legacy issues.
        In this market (TV), they are a key issue, agreed.

  • Anonymous

    “(I could also mention the potential of new a Bluetooth standard for better wireless response).”

    What do you mean by this? The new stuff in Bluetooth is very low power communication. The slightly less new stuff involves using Bluetooth for device discovery and as the programming model, but transporting high bandwidth data over Wifi. I am unaware of anything in the spec beyond two innovations. 
    I could imagine some low-level wifi dicking around — eg switching off the need for level-2 ACKs for video packets — but that would (I think) go outside anything the spec contemplates, which means bespoke silicon (or changing the spec — but we would presumably be aware if there were plans to add such a mode to the spec). And I don’t know enough about the actual numbers in a real-world situation to know whether it’s worth all the hassle that would involve. 

    Latency has been a problem for Airplay since its very earliest days, when you could stream audio to an Airport Express. It was horribly laggy back then, and Apple never did anything to fix it. 
    (Have they fixed it now? With the very latest Airport Express and iTunes, when you change volume or hit pause, does the audio change immediately or after half a second?)

    It may be that  lag is simply inherent to the task that is being performed, and that the answer is that the games that want to do well in this space will have to be written like internet enabled games, with explicit coding that is latency aware and plays various tricks to deal with it.

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

      This is only as an aside, but it’s possible that the _control_ function can be carried over BT while using WiFi for streaming the video.

      • Walt French

        Indeed, that’s pretty much the architecture of high-speed BT, as (little as) I understand it. But that’s a pretty minor point in enhancing the experience. 

        I believe the existing lag is quite tolerable for Apple TV’s current use patterns, by buffering to preserve highest quality. A more interactive arrangement would sacrifice quality in noisy environments in exchange for less latency. Straightforward, if not exactly simple, engineering.

  • Canucker

    One reason for product introductions or revisions into new categories is the window of opportunity that requires components meet a certain performance and for supporting products and services to become available. The sweet spot is difficult to predict in terms of timing (and price) but companies do have a stronger sense of predicting when the parameters will be in Place 18-24 months ahead of a possible launch. This is a complex dances when there are interdependencies between devices. Owning the whole widget is a clear advantage in this respect.

  • http://twitter.com/jdsweet J Sweet

    Wow.   Your assertion of “depending only on the Internet protocols and independent of the balkanized cable standards” with the rationale “It is a global product” really lit up a lightbulb for me.  I’m not saying they *couldn’t* overcome that balkanization in some brilliant way, but I believe your insistence that whatever solution it is *has* to be a global product is a great testing criteria.

    Of course the current product is a “global” product by virtue of not really having much of interest to offer the global marketplace, but nonetheless, it’s interesting that even in this early/hobby stage, that the hardware being sold meets your “global product” criteria before it’s even met the generally presumed Apple criteria of “compellingness”

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

      Apple ships more apps than songs today. Part of the reason is that apps are available in all countries where iPhones are available while songs are only available in countries where they were able to negotiate distribution rights. Movies and TV shows are restricted almost entirely to the US and a few western european countries (and US customers have no access to TV shows from other countries.)
      By following the app logic and eschewing the byzantine content model built around cable and broadcast rights, Apple can create an even larger ecosystem that creates a gravity field for talent.
      The goal for Apple should not be to gain content from the current value networks but to gain “developers” of that content to produce for their network.

      • Anonymous

        I don’t think Apple will be able to break” the  byzantine content model built around cable and broadcast rights”. SB spent years trying to do this but was largely unsuccessful because the vested interests in the status quo are too strong amongst cable carriers and content creators, movie and TV program makers. If Apple can get them to agree to sell their products on iOS, this will be huge boost for Apple

        I am sceptical about the success of an Apple TV because TVs are a low margin, commodity business and without the rich content SB was trying to achieve there is no real reason for buyers to pay a premium price for an Apple TV. 

        I think Apple would be better to continue with the Apple TV set top box, which for $99 gives almost the same user experience as would an Apple TV costing thousands of dollars. 

        The Apple set top box has gained around 32% market share and offers the possibility of total intuitive integration with the other iOS devices and access to the internet and Apples digital media content. 30% of  Apple set top box users pay for TV and movies compared to 20% percent of users of other devices. With time and with the growing number of iOS devices, now around 280 million (and growing at around 100 million a year), TV program and movie  makers may gradually relent and make their products increasingly available on iOS.

        As an investor it does not concern me at all that Apple may not be able to make TVs a viable additional profit centre. Apple has huge headroom to grow its 2 most profitable iOS devices, the iPhone and iPad, which have years of high growth ahead. The Mac can also continue to grow market share for years to come. 

      • http://twitter.com/jdsweet J Sweet

        I agree this has the virtue of allowing not only the studios to directly produce apps serving their own content (retaining for them a degree of control that must help them feel more comfortable doing so), but also attracting 3rd party solutions – e.g. Hulu, Netflix, Crackle – who those studios may be more comfortable ceding control to (than Apple).  Heck, even the cable operators – who in certain countries may have enough power/foresight to have obtained online distribution rights as well.

      • Rj

        Indeed.

        In the current system, production houses (that actually develop each TV show) are funded by the TV networks.  Recently Netflix has commissioned a couple of shows, embracing and extending the TV Network model.

        Of course, there’s no need for this to be the only business model; it’s just about access to capital and distribution.  If profitable distribution is available on iTunes, or Netflix, or YouTube, then it’s likely capital is sufficiently agile to support content flowing into that distribution platform.

        This leaves no reason at all that a show couldn’t be developed in the same way that Apps are developed, with investors speculating that the show is appealing enough that it will find an audience.  Webisodes and YouTube have shown that there are fine stories that can be told effectively with low budgets, so it is even likely that smaller shows could be bootstrapped on the strength of an overdraft and a little sweat.

        It’s also likely that the form will become more fluid, since there could be more freedom from the current requirements of current scheduling or advertising.

      • http://franksting.net.au/ Gavin

        I look forward to how the Advertisers and Marketers try to work their content into these visions of the future and if the traditional broadcast networks are able to respond. Without content, they lose their audience, without the audience these channels will quickly lose the advertising revenue which keeps them afloat.

  • http://twitter.com/alberthartman Albert Hartman

    The Apple TV product could truly be disruptive – mostly because of ineptitude of the incumbents. Consider: for how long have people been complaining about the 100 button remote controls for each of their multiple connected AV products (DVD/BD videodisc player, TV screen, settop subscription box, audio amps, game player). No rocket science needed here, just a single competent simple interface designed into a single controller (WOZ tried but failed). Beyond a high quality, large flatscreen LCD there’s been no innovation in TV at all for decades. Think of the disruption potential of a winning system: the home AV divisions of all of Panasonic, Samsung, LG, Sony, NEC, Hitachi, Fujitsu, Magnavox, JVC, Toshiba, Mitsubishi, Sharp, Vizio, etc.

    It always amazes me how someone can walk in and take an entire market because they go after a simple thing that people have been complaining about for years. (late video rental return fees, slow boot up times, unreliable/slow package delivery, etc.)

  • http://twitter.com/Carniphage Carniphage

    Horace, the problem is that the described product …  an easy to use TV with lots of internet content … Isn’t a sufficiently compelling product over existing televisions. 

    Finding content in a mass of apps is as much a step backwards as a pile of remote controls. And the majority of people want the premium content they currently pay for. 

    The problem with TV today is that the device itself is the point of integration for all these various content streams. Free to air content, meets cable, meets satellite, meets DVD, meets internet content library all within a set of HMDI connectors at the back of the set.  This is a mess.

    The way to solve this is to leverage another Apple ability.

    Amalgamate these services at a data centre – and deliver a single stream to each AppleTV. Sell the AppleTV platform to content vendors as a cheaper alternative to expensive cable, satellite infrastructure.

    Customers get the same content, but with no dishes, easier contracts and a revolutionary  interface.

    The combination of a high quality device, with a the televisual equivalent of OnLive would be genuinely revolutionary.

    C.

    • Kizedek

      I think you may be forgetting that the creativity of developers expands to fill any gap or perceived void… “Curation”, for example, has become a big thing. I am amazed by Apps like FlipBoard that constantly show me new content in easy to manage bites, content that I would never have looked for or found on my own. I couldn’t have imagined these apps a year or two ago.

      • http://twitter.com/Carniphage Carniphage

        I’d respectfully say that people don’t want to search through apps on their TV. It simply isn’t how people use television.  They use it to lazily browse content and pause at content that amuses them.

        The current interface gets in the way. The clunky set top box technology gets in the way.
         Television would be improved by creating the simplest possible surface – linking TV content to viewer. Imagine a video-wall menu image with a hundred channels playing in real time.  Each image is a live preview of the services that you subscribe to – or content that you have already recorded.  Each thumbnail is big enough to see what is happening.  With just a glance you can see the show you want. A couple of gestures and you are watching the show. Another gesture and it starts playing from when the show started.
        Such an ideal interface is impossible to implement within the TV itself. It’s not technically possible.  But a TV data centre could do this – and then compile the image stream and send it to the client.  This client does not have to be a 50″ TV – it could be an iPad.The data-centre infrastructure combined with the clients would be a new TV platform.   Apple could sell access to the platform to existing content providers (for a modest 30% revenue share)
        C.

  • http://cribmac.com The Digital Pimp

    only if the bill of materials cost to do so is trial, or Apple subsidizes. They just got burned by Google, mind you…

  • Anonymous

    “If Apple did not have these foundations, the slow-motion revolutions would not have happened.”

    Exactly. These foundations allowed Apple’s new inventions to either quickly establish an ecosystem (app store for the second gen iPhone, for example) or to integrate into an already existing ecosystem–touch wheel iPod peripherals mostly worked with the first iPHones, and the iPad could use almost all iPhone apps even if they weren’t “optimized.

    Apple learned this lesson from the Mac–it had no ecosystem to ride. All of Apple’s previous success with the Apple II became irrelevant with the Mac. Apple had no retail network, apps, or peripherals which the Mac could ride.

  • http://wmilliken.livejournal.com/ Walter Milliken

    I think Steven Noyes’ short reply about Apple being a systems company is exactly right, and I think things go well beyond what Horace is envisioning for Apple TV.

    My view of all this is that Apple is actually deconstructing the PC (and other things) into a bunch of simple, semi-specialized smart modules connected by a network-based “bus” running over mostly-standard IP protocols that have been adapted to create standard interfaces for each module.

    First, they remoted the audio subsystem (Airport Express), and the backup system (Airport/Time Capsule/Time Machine). Now they’ve remoted the graphics unit (Apple TV) and possibly the screen (hypothetical Apple TV monitor). Similarly, they’ve disconnected the CPU/UI devices (iPhone, iPod Touch, iPad) and supported multiple versions sharing the same remote peripherals. One of the most necessary components of this is a cacheing/content-movement design which uses iCloud to make sure content is present on any device that needs to play/manipulate it.  iCloud is more a rendezvous point than a standard cloud-hoted service.

    Note — very importantly — that this is totally different from Google and Amazon’s cloud-based strategy, which is just a re-hash of “thin client” computing from the 1980s and 1990s. (And the roots of that go back to early timesharing systems in the 1960s, actually.)

    Unlike the thin-client model/cloud model, Apple’s approach is a decentralized model where many of the components can function semi-autonomously, but interact with each other to add functionality and flexibility.

    While cloud models tend to include massive redundancy of their centralized core functions, they are still subject to the whims of network connectivity, and to a lesser extent, server load (and server economics — more users per server is good for the cloud provider, but potentially bad for the user).  Looked at in another way, Apple’s approach emphasizes end-user experience and control, with the cloud alternatives putting the end-user experience at the whim of the communications and cloud service providers, with little control over their own data or device performance.

    There is also another great advantage to Apple’s approach — it uses much less network bandwidth, in general, than streaming cloud-based approaches to data storage.  It does this at the expense of increasing the amount of storage (and possibly computing power) required in the end-user client device — but exactly this same tradeoff occurred during the “thin-client” days in the 1980s and 90s, and the user experience/control factors won out. (Admittedly, some of that outcome was also due to the business accounting practices related to large capital expenses like large central computers vs. large numbers of low-priced devices which had a different accounting impact.)

    So I see Apple’s approach to lie in breaking up the existing devices (computers, TVs, stereos) into more bite-sized functional blocks (not all of which Apple will make), and integrate them into a very flexible ensemble platform based on Apple’s software, network protocols, and cloud-based data-management services.

    This also solves the cable balkanization problem — additional content-providing boxes can use the network APIs Apple is developing, much as they currently use HDMI cables.  Since Apple has apparently convinced the media providers that their precious data is safely protected end-to-end over the local network, and won’t trivially wind up on BitTorrent sites, a lot of the heavy lifting has been done already.

    I also think it’s noteworthy to examine which services Apple *dropped* in the move from MobileMe to iCloud: iDisk and iWeb — both “classical” cloud-hosted functions.  What stayed and got enhanced are data-management and connectivity functions: mail, data and document synchronization across multiple platforms.  A “content everywhere” model instead of a “content in the cloud” model.

    Siri is about the only new service that I can think of that follows a more classical cloud-computing model, and I think that may have a lot to do with its need to interact with Internet-based data sources, and possibly to leverage a large number of users to train speech recognition on.  It may also aggregating failed requests from a large number of people to inform the development of additional service interfaces.

    I do expect Apple will eventually migrate some Siri functionality into the home devices, rather than keeping it in the cloud, to make it less subject to the vagaries of network connectivity — this is one of the main drawbacks I’ve found in using it.

    • unhinged

      So OpenDoc is reborn in hardware form?

      • OpenMinde

        Exactly.

      • Addicted

        Except OpenDoc allowed 3rd party vendors to build the interacting modules themselves. Outside accessories, the Apple ecosystem does not allow this. This may change with the rumors of Apple greatly expanding AirPlay capabilities.

  • mysterio

    Horace, I love your work, but this post was disappointing.  Lacked content and unique insight. The Apple TV improvements you call for in the last two paragraphs are obvious and are much-anticipated by anyone with a passing interest in Apple.
    “It is a global product, depending only on the Internet protocols and independent of the balkanized cable standards”-No, Apple TV is subject to the balkanized content licensing schemes of the content owners.”What these signals point to is Apple defining the TV as an iOS portfolio product.”-A better signal is that Apple puts AppleTV in their “iPod” section of their online store.Nearly all technology products can be seen as an extension or reconfiguration of prior products.  This is not a fact only applicable to Apple.  That Apple used parts of Mac OS in building the iPhone doesn’t mean that the phone was “hiding in plain sight.”

    • jawbroken

      Most of the iPods don’t run iOS.

    • Addicted

      The iPhone, outside the touchscreen interface, was kinda hiding in plain sight. It was clear Apple was going to develop a phone. Most don’t remember anymore, but the iPhone wasn’t apple’s first foray in phones. Credit for that goes to the Motorola Rokr. The only real question for the iPhone was whether it would run OS X or the iPod OS. The choice to pick OS X was surprising (albeit brilliant in hindsight) and indeed led to the departure of key executives.

      Fact is that Apple’s intention for making mobile devices handheld computers was signaled by the increasing features of the iPod. They added PIM features, games, and many sharing features.

    • Kizedek

      First, I think, from the context, that the final phrase “hiding in plain sight” is specifically about any upcoming TV product, since the article is primarily about that, and the Apple TV already exists in plain sight. Regarding the iPod and iPhone, Horace simply says the “building blocks were there for years”, or “you can trace their DNA back to previous products”.

      As far as balkanisation of media agreements goes, though, I think the picture is getting clearer all the time, and the time might indeed be right for Apple to make a breakthrough.

      Up until now, Apple has indeed had to negotiate with each content owner separately for each country. A lot of the problem has had to do with the owners’ own previous arrangements with local cable and broadcasting providers. The local providers see Apple as competition and have negotiated for first airing rights, etc. I have seen Movies disappear from the iTunes Store because local cable companies or networks were going to air the movie.

      Now, however, following the advents of the iPhone and iPad we see things converging more and more and getting more and more “confused”: Is an iPad a tablet or a PC?; Is an iPhone a phone or a computer?; Is a phone carrier a force of nature or merely a dumb pipe?, etc.). The next logical question is this: is an Apple TV a TV or a computer?

      If it’s not a TV, the local cable providers and broadcasters are going to have less and less that they can really complain about. Programming and media will be increasingly delivered as Apps, and not as “channels”.

      Already, the BBC has spoken of delivering its UK limited iPlayer App internationally with a subscription (I thought that was supped to be this year, but I can’t find it). A content owner like the BBC should be able to deliver their App themselves to any App Store they wish directly, without worrying about what is delivered locally by cable or broadcast. After all, what has an iPhone or iPod or iPad got to do with a “TV” other than the fact that it can connect to a large screen or “TV” via AirPlay?

      • mysterio

        The content situation is going to get worse, not better. While there were some issues with local distribution rights that have begun to be ironed out, the larger issue is one of market structure. The content owners have a monopoly on their content and will always seek to maximize profit from their content. They understand the value that content brings to a platform and they also understand that it is not in their best interest to have only one platform for distribution. This was the media world’s primary lesson from the iTunes era of music: don’t let one company win or else you’ll never make money again.

        The issues around media rights are not legal or technical, and therefore temporary (this seems to me the main point of your argument). They’re structural, and therefore permanent – until the structure changes. Calling channels “apps” does not change the structure of the media industry.

        If Horace has any thoughts on how Apple might restructure the media industry (something YouTube and Netflix and Amazon have been trying to do for many years) I’d love to get his insights.

      • Kizedek

        I don’t think it is as difficult as you make out, and I think it is already changing. It only takes one or two companies to make a go of it to get the ball rolling. The news and print industry have been dragging their feet, but we are seeing one or two move their magazines and papers to the iPad.

        I think the BBC is a good example. They have not made a lot of their content internationally available because they couldn’t monetize it… They get tv license fees from UK residents. Yes, they get fees from networks all over the world like PBS that air one or two shows. But I think they are really interested in going direct to individual subscribers. Would they rather deal with all the networks around the world, or find 200 million subscribers overnight?

        All it really takes is for Apple to get one more piece of the puzzle in place. And since we don’t know the big picture that Apple is working from, nor which pieces it already holds in its hands, it’s hard to say what really is an issue or obstacle, or not… Your focus on the perceived issues and obstacles are precisely why others haven’t done it in the past, but Apple constantly surprises; and then everything is always so obvious in retrospect.

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

        Parallel value networks emerge all the time. It’s not something that is mysterious but something that takes a long time. I wrote about it in the context of publishing here: http://www.asymco.com/2010/11/08/citizen-publisher/
        The movie industry “disrupted” theater by taking all the money first then the talent followed. Every new medium has worked the same way. You can’t expect to tear down something as rigid as an industry. The answer is to just go away and start another one.

      • mysterio

        I agree. That’s what Amazon, YouTube, and Netflix are doing by financing and producing their own content.  Apple hasn’t done that, so they’re not actively “solving” the balkanization problem of media rights – they’re simply providing access to others’ content. They’re occupying the same position in the value network/chain regardless of the structure.  From Apple’s perspective, is YouTube meaningfully different from Warner Brothers?

        Apple TV can be successful (regardless of whether it’s a STB or a standalone TV) without restructuring the business.  My point is that simply calling channels “apps” and having a global device footprint doesn’t solve the formidable content problems in the industry.

        With iTunes, it was really on the Beatles that held out (for ~10 years!).  With video, it will be HBO, the NFL, Pixar, or whoever else decides their content is worth more through traditional means. Some will sign and then pull their “app” later (e.g., Stars/Netflix).  I would love to see anyone – especially Apple – solve this problem, but it frankly seems intractable.

        As you point out, it may take a very long time for new production to eclipse the value of library content, and for the “old media” players to be eclipsed by “new media” players.

      • MatthewGunson

        You are underestimating the powers of disruption. I think the latest 5×5 nailed this issue pretty square. The entertainment business is RIPE for disruption. Horace’s response about parallel value networks pretty much answered your concerns.

        Look at it this way…

        How many people get to be in movies and TV? Very few. How many WANT to? How many disrupt their lives, careers, families to chase dreams in Hollywood that are never realized? There is a massive oversupply of capable talent in the entertainment industry. It would not be hard at all for a handfull of talented Film/Acting students to create a very watchable and entertaining piece of film or television. They could ultimately distribute their content at a minimal cost directly to consumers via iTunes or App Store. This content would be good enough, and cheap and serve the overserved audiences who are tired of paying $75-$150 a month for the 400 cable channels of which they regularly watch 5 or 6 or those–like me– who choose internet over cable on a limited budget.

        I honestly do not believe that Apple is that concerned with content. They’ll get enough of the big studio content, and there will be enough of these grassroot-bootstrap-startup production companies to provide content to the overserved and non-consumers. Eventually the content producers will be forced to follow into the Apple/iOS “Walled Garden” because their value network will become disrupted.  

        Apple already has good leverage with 120 Million iTunes subscribers (last I checked in April of 2011). That’s more than 5 times the subscriber base of Netflix and is more than comcast, dish and netflix combined.

        The content will happen because TV and Film are currently operrating under unsustainable and antiquated business models.

      • Anonymous

        I think you are missing a key differentiator between “apps” and “channels.”  Through the agency model, Apple will allow anyone to put any content on the store at any price.  The market will decide whether the subscription cost is bearable.  This is highly disruptive to Cable companies, which survive on content bundles.  

        When Horace points to the beauty of global IPTV vs. balkanized cable standards, a la carte programming is a big piece of the pie.  For example, HBO Go exists today in the US as an on-demand app for HBO content.  It is exclusively available to existing HBO subscribers.  But what is to stop HBO from allowing direct subscriptions through the app, rather than through cable providers?  The cable companies cannot collectively bargain to prevent this action; it would be an obvious antitrust violation.  The only thing preventing HBO from making the switch is the risk of losing revenue from cable companies.  If in a year or two, most new TVs have Google TV or Apple TV built in (or attached through STBs), HBO could cut out the middle man overnight.  They would need only to offer retail subscriptions and let the chips fall where they may.  In theory, HBO could even discount the direct sales at the expense of the Comcasts of the world.

        My point is, Apple does not need to open a studio, or create anything on their own.  They need only to sell enough aTV units so that the content will follow.  It’s a chicken and egg problem, but the end game is clear.  HBO is only one example.  There is nothing stopping ESPN from doing the same, including all of its regional broadcasts or team-specific apps (imagine paying an extra $4/month to see all of your out of town team’s games on a dedicated “channel”, directly from your couch).  Local news broadcasts could easily be live streamed or made available for delayed viewing.  The iCloud model would allow for streaming to “TV” screens and the stream/download option on portable devices.  

  • pk d ecville

    Horace,

    Isn’t the Apple TV ripe for the intro of the quad powered A6? 

    The A6 will bring tons of gaming, much better Siri voice recognition/AI, and also (probably) kinnect like powers of ‘seeing’ where people are spatially and their gestures.

    All connected to the iOS playful walled garden.

    Your comment?

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

      Yes, it’s another piece of the puzzle falling in place. I might add that it’s a piece that has been on Apple’s roadmap for years and years. The company has been anticipating most of these hardware advances for at least five years.

  • Anonymous

    The “app store for TV” will be the disruptor here. One can imagine an explosion of talent into this space. In Digital Signage, an area I am familiar with, the potential sweeping changes are very exciting to envisage, many of the entrenched have no idea what is coming. 

  • Claude Hénault

    The problem with Apple’s TV2 as the solution is that the device is not in charge of the TV, and this runs counter to Apple’s philosophy of being responsible for the entire user experience. The box is an add-on to the TV. It has to be vice-versa. So, as a basic minimum, the add-on box that moves Apple out of the “hobby” category (TV3?) has to be what turns on the TV, and governs all of its operations, acting as a single all-function remote that is totally transparent to the user’s commands: likely via voice through an iPod Touch. A simple way of achieving this control connectivity to existing sets might be on IR generator optical cable running from the TV3 to cover the existing IR receiver. There may be more elegant solutions, but making the TV an adjunct to the Apple TV, rather than the current opposite, is an essential hardware precondition.
    After that the sky is the limit

    • http://jmmxtech.wordpress.com/ jmmx

      You have a good point there Claude, but I think there are counter arguments.

      Let us suppose there was to be an iTV – total Big Screen devices. They would have to sell them at quite a premium to keep their typical markup. But this creates a problem.

      >> Why spend $2000 for an iTV when you can spend $600 for a very nice big screen plus another $100-200 for an Apple TV (ATV) (set-top) and for less than half you have the same thing? In other words, the ATV will cannibalize the iTV.

      The only solution is to kill the ATV. BUT! then you have too small a user base to support the ecosystem. 

      UH-oh – a catch-22!
      (IMHO)

      • Claude Hénault

        JMMX, I think the answer to your conundrum is Apple’s Thunderbolt display, which I suspect will be the initial Apple TV when it is combined with the next generation Apple set top box, the TV3, which will of course offer a Thunderbolt connector with HDMI adapter.

        The idea here is that the TV3 will offer to existing HDMI-capable TV sets additional features such as a no-lag app capability (and consequent access to an Apple TV App Store) as well as capacity to handle 1080p video.

        But, more importantly, the TV3 with thunderbolt daisy-chained add-ons will be able to convert Apple’s thunderbolt-equipped devices (Mac computers and stand-alone displays) into flexible and Internet-capable TVs. The 27″ thunderbolt displays currently on the market already have most of the stuff needed to be TVs. GPU acceleration and a powerful speaker system including sub-woofer are already there. The TV3 can offer the option of a daisy-chained tuner, and bang your monitor is ready for cable or over-the-air TV. What you have is a future-proofed TV (add 3D when you want it, for example, with access to iTunes products and the Internet. And Apple can quickly off

      • Claude Hénault

        (ran out of space so continuing my response)

        And Apple can quickly offer thunderbolt monitors in a variety of sizes from small to mammoth. Under this scenario, there is no catch 22. In addition, Apple gets to use a number of products that were hidden in plain sight, Horace.

  • Anonymous

    Hey Horace,

    I’m back to add another thought to your mix. Did you see M G Siegler’s column More Vague Hints Of Clues About That Rumored Apple Television. I was surprised that he didn’t link to your column here.

    Regardless, the reason I’m here point Siegler’s column is this line:

    They’re [media companies producing content for television] throttling innovation so as not to disturb their current cash cows.

    and immediately I was taken back to Clayton Christensen’s talk that you linked to awhile back. If Siegler is to be believed, media companies are skating to where the money is instead of where the money will be. Meanwhile, Apple will release an integrated product that “isn’t good enough” which will be an integrated solution that solves the problem of content on television. 

    Apple is going to disrupt television in a big way and we already have the script: The Innovator’s Dilemma and The Innovator’s Solution

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

      That’s what I am sensing too.

  • Pingback: Tell me again. Why we think Apple will make a TV set? | Stock Market – US Stock Market News, Videos, Charts()

  • Pingback: Software, Hardware, and Flatpack Furniture | huwmart.in()

  • Pingback: Brand Express  » Tell me again. Why do we think Apple will make a TV set?()

  • Pingback: Why do we think Apple will make a TV set? « What's Hot in Singapo()

  • Pingback: Interview with Bruno Ferrari of Exame magazine Brazil | asymco()

  • Pingback: 苹果真的会制造电视机吗? - Yours苹果网((IPHONE4 IPAD2 MAcBOOK ios IPOD ITOUCH 苹果公司 乔布斯)()

  • Pingback: Why do we think Apple will make a TV set? « GuruSpot: Gadget()

  • Pingback: What did Tim Cook really say about Apple’s TV project? « GuruSpot: Gadget()

  • Pingback: Putting the brakes on the Apple TV rumor train - Latest Technology - News & Articles()