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Analyst opinion: Can Apple TV get the digital living room off the ground?

By - Source: Tom's Hardware | B 0 comment

This week Apple TV launched. This product arguably has more potential than the iPhone because, unlike the cell phone market, penetration of third party set top boxes is comparatively low, while the cell phone market is saturated with products. The Apple TV’s shortcomings, which go to the depth and breadth of initial programming, may actually speak to Apple’s historic strengths. The question to be resolved is whether the model that built the iPod will work for the living room. Right now the answer is a definitive "maybe".

The competitive landscape

There are a number of companies in the hunt for the digital home. Many are rather large and well penetrated in the CE space. Let’s have a look. Sony : If there was ever a company that should own this new segment it would be Sony. Very strong in the CE space and well penetrated with a set top box offering currently used for gaming : But the PS3, unfortunately, didn’t meet expectations for this use and was late. Many now believe that Sony is currently out of the running while the company rethinks its strategy.

Microsoft : This is old turf for Microsoft, they have set top boxes, had Web TV, the Xbox 360 already does much of what Apple TV does, and Media Center does more. They even have a media server in test, which potentially solves the storage problem that results from next-gen media, giving Microsoft the most comprehensive solution. But it is also the most complex and difficult to use in its entirety (although the Xbox 360 alone is one of the easiest in the segment). Even though Microsoft has the most convincing HD content right now, the library of available programming is very limited and the solution appears both in conflict with itself (Media Center/Xbox) and with Microsoft’s partners.

Intel : Like Microsoft, Intel has come forward with a technology solution. Intel’s approach lies on top of Microsoft’s, at least for now, and corrects a number of the complexity problems making the result much easier to configure and use. Viiv, Intel’s name for this initiative, has seen some hiccups in marketing and isn’t really understood by consumers who haven’t been particularly interested in buying into the entertainment center space. It is also somewhat exclusionary and content appears only slightly improved over what Microsoft offers. The idea is tempting unfortunately execution isn’t complete and consumers can’t seem to figure out what the value behind Viiv is, most can’t seem to figure out what it is either. This will change shortly, however, as Intel recently put some of their best people on this problem.

AMD : On the other side, AMD’s Live effort has been gaining traction lately, even with less financial backing than Intel’s Viiv. AMD’s recent Ready and Active TV Technology effort is the first to really integrate Internet TV with over-the-air PVR capability. This probably is closer to the future of this class of set top box but partners have yet to bring products to market. So, hands-on testing is limited. The overall offering goes well beyond what Apple TV is initially offering, but the marketing will be a fraction of what Apple fields and AMD will have to rely on partners to design and market products. And, we should not forget that this segment remains light when it comes to the marketing capability that is required to push a product into success.

Cisco : Cisco is slated to launch their big push into this segment around September of 2007. Cisco will have the advantage of seeing the other offerings before it finalizes its own. As a result, the company should be able to create a compelling competitive offering. Cisco is expected to have similar content to AMD and is rumored to be building a DVD player into its offering, enabling the replacement and integration of an existing piece of CE hardware (making installation potentially vastly simpler). If rumors are true, this offering could be the best in class ; however, Cisco has not proven itself capable of running against Apple-level marketing yet and Apple TV could improve by the time this product actually hits the market.

Apple TV : Possibly good enough

Apple has created an offering that appears to match or exceed the leaders in ease of use and it both connects to a PC and will allow for the download of programming from the web, though, in many cases you’ll need to download that content from the PC which serves as intermediary. Currently it is with the PC where the limitation is initially the most pronounced but also where it likely will be improved the most over time.

In effect, it is a remote terminal to iTunes and anything you can get into iTunes on your PC you should be able to see on Apple TV. Currently iTunes lacks subscription for either music or video and as Apple itself has recently pointed out, even for music, a relatively small number of people want to buy music one song at a time and, with less than 5% of the Video iPods actually being used for video, we can conclude that buying TV programming one show at a time probably won’t work either. However, a lot of networks are starting to allow you to get access to some programming for free and if you can get that programming into iTunes, you should be able to easily watch it on Apple TV. The 40 GB drive, for a device that appears positioned for HD content seems light and probably will be more of a large buffer in normal use because of the size of the related video files.

Overall Apple TV fits within Apple’s traditional model of not doing everything at first but doing a few things well by ensuring a good user experience, providing an attractive product, and marketing the result in a compelling way. However, to me, content is too light to buy yet and I’d wait until the content selection was better before I’d buy this product.

Recommendation : Wait until October

My recommendation is to wait until you see Cisco’s offering and then make your choice. Apple TV will likely have improved by then, the AMD based products will have hit market, Intel’s vastly improved Viiv offering should be on the market as well, and even Microsoft should have improved their solution. This will give you the best choice of stronger products and you only have to wait a few months before your choice, which may or may not be the same, gets a lot more interesting.

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