Watch Steve Jobs response on the problem with TV. It's "balkanized", he says due to the fact that there are contractual and technical challenges to creating a superior TV experience, internationally. It's kind of curious that he's so bearish on TV whereas he was so bullish on music, when Apple essentially created a standard for digital music distribution and gave everyone a way to legally buy music one song at a time. Pretty much all music is on iTunes and you can consume music in just about any way you want. But that surely is not the case with TV or Movies right now.
So why can't TV be treated the same way? I think it can. And what I think Apple has to do is not simple, but obvious: Apple must partner, like it did with iPhone and AT&T for mobile. Apple must partner with a telco provider that provides broadband to a large part of the US. And then it must continue partnering with other telco providers around the world, providing a strong hardware+content distribution platform.
Because the large incumbent telcos have at least 2 lines of business -- TV and broadband. They sit on both sides of the fence. If you will, a modern ILEC (incumbent telco) is the equivalent of the record label in the music industry. They sell you cable TV, subsidize the set top boxes and also sell you broadband as a hedge against their cable/satellite revenue. The telco basically has a stranglehold on the delivery of TV to your home.
People have tried to liberate themselves of the telco for many years and folks like myself have finally done it for the most part: except one very important telco-provided connection: broadband Internet.
The thing is that when you "cut the cord" you cannot cut Internet, especially ultra hispeed 20+ Mbps Internet. When your Internet connection is reliable and fast, you get used to be able to do just about anything online. Streaming video is no brainer. You don't cut the cord really, you just take all your other cords and tie them to your ethernet and wifi connection, so to speak.
We've installed an OTA HD antenna, got An AppleTV jailbroken with Firecore's atv Flash and installed a NAS that does an amazing job of storing and streaming our digital content (music, photos and video). This solution set is as close as you can get to a replacement for anything the cable/satelitte TV guys give you. And the math looks like his:
- AppleTV - $100
- NAS - $500 (including 2x 1TB hard drives for redundancy)
- OTA HD - $100 antenna + installation ($350-500)
- Fast Internet - $80/month
For roughly a $1000 home improvement fee and about $80-100 per month in broadband you get the future of TV right now.
- Live local TV stations (sports, news, local shows).
- Netflix streaming
- iTunes rentals
- Access content on the NAS to stream to your TV an archive of videos, music and pictures
So, what should Apple do?
Partner with a national telco that provides broadband to a large swath of the US and make a new AppleTV that comes with a broadband Internet connection. Ensure that owners of that box have access to their local media ala Firecore/NAS approach (make it omnivorous, as others have stated). Continue partnering with telcos who do broadband really, really well. And partner on the content side to ensure all live and prerecorded media is available. Then make all movies rentable or buyable through iTunes as they have already started to do through the existing PPV options available through the telcos.
Once you do this, you essentially have your set top box that can be more than $100 (it could be close to $1000 from the math above). You need local storage done well with a NAS style solution. This is where Apple can make money like the always do -- on he hardware. And then the data plan for your home entertainment is like the phone plan for mobile. The telco wins as well, just like AT&T did. And the telco COULD subsidize the AppleTV solution just like they do with iPhones. Or not, it will depend on the customer possibly, but if the telco went all in they could get lots of new hi-speed broadband customers, fast.
The solution for Apple is morphing the iPhone technology (iOS) with the iTunes partnering (deals with distributors) for solving the TV dilemma. Apple will continue making hardware that is profitable and continue doing deals with telcos that provide the content as long telcos get more and more broadband customers.
I expect Apple will enter this field in 2012 in a big way. And I am not sure why they have to make a TV other than to show clean integration of the experience. Hopefully there will be a solution to retrofit existing TVs. I don't see why not.
The go to market strategy is right there, Apple. This is your way to avoid "jumping the shark" and pulling into yet another arena that you haven't been yet to continue to diversify the product lineup. It may take a few years just like it did with iTunes (5 years or so), but it is imminent and completely possible. I await eagerly.