We will not talk about the current Apple TV, which Apple have said numerous times, is a hobby, we’ll talk about the numerously rumoured Apple TV set (or whatever its final form would be). Let’s start by saying that is quite possible that such a device is already designed and built, the problem is there’s no content for it, and there lies the big issue.
In the 50s there was this novel invention called TV, however there wasn’t a lot of programming (content) available for it. If there’s no programming, how can manufacturers sell the TV devices? (classic chicken and egg dilemma), well they also went and made the programming themselves. And so, RCA (a former electronics giant) made NBC, and Westinghouse made CBS. Later, the programming-content business (software) became bigger than the manufacturing of it (hardware). Sounds familiar?
Fast forward 50 years to the introduction of the iPod. Since its inceptions, it was going to have an store. Up until that moment, other companies have failed -for many reasons- to figure it out the digital distribution of music. Apple (Steve Jobs) was able to convince record companies that the key to it was selling songs, one song at a time. Apple made then iTMS (iTunes Music Store), with the whole purpose of improving the convince of the iPod, as it was the only one allowed to connect to the store. iTMS (software) was not made to make money, it was made to boost iPod sales (hardware). The math was simple, record companies keep around 70% of the song price, Apple took the rest for covering operations, as record companies were not going to put a dime in the whole thing, everything was being covered by Apple.
At the time of this agreement (early 2000s), Apple was a computer company barely making profits, if any at all. As a matter of fact, the company was just getting out os a nasty situation in which it almost went bankrupt, much like the fate RCA had. It avoided it. the iPod was an experiment to create new revenues aside and around their computer business. On the record companies side, they were in trouble and were forced to experiment or disappear. Still, this was an experiment, and Apple is (at that time) an small company, if things go wrong, well so be it.
The experiment was a huge success, Apple sold hundreds of millions of iPods, iTMS catapulted the extinction of the physical record stores, becoming one of the few ways to obtain music legally, all over the world. The tables turned, now Apple was the main distributor of music (not intended), and now record companies had to comply with whatever requirements or proposal Apple had, as there were no other big massive music distributors left. The record companies lost control of their business, but at least they are still around to tell the tale.
Due to the iPod’s success, now Apple was quite healthy financially. It was still a relatively small company, but successful nonetheless. They still sold computers, but the iPod became their main source of income.
In all this situation, it was obvious that people were carrying around all the time with them two main devices: an iPod and their cell phones. So it was a no brainer to try to put a cell phone within the iPod. However, the cell phone business was absolutely controlled by the operators, entering that business meant dancing to their tune. Again, Apple (Steve Jobs) used his incredible negotiations skills to convince Cingular (now AT&T) that they would have exclusivity with this new phone device, as long as they (AT&T) allowed them (Apple) to control the device, which meant Cingular wouldn’t have any say on how it was going to be and distributed. Cingular accepted the challenge, the experiment and agreed with Apple those conditions. Still, this was an experiment, and Apple is (at that time) an small company with no phone or telco experience, if things go wrong, well so be it.
The experiment was a huge success, Apple sold hundreds of millions of iPhones. The iPhone catapulted data network consumption and became *THE* smartphone to have, the tables turned, if any operator wanted to sell it, it had to comply with Apple requirements, not the other way around.
With the iPad (hardware), Apple tried to do the same thing but with books publishers (software-content). However, this time there was a big established digital company around: Amazon. So, in order to offer something “better” than Amazon, Apple offered the agency business model, publishers complied. Still, this was an experiment, and Apple is a
small very successful company, how can things go wrong?
This time the experiment ended up nasty, with the US government finding Apple guilty of monopoly practices on their iBooks store. Some publishers settled before the trial, some didn’t.
See the pattern?
Each time Apple introduces a “revolutionary” new device, the revolution is not in the technology (far from it, Apple products are generally not cutting edge technologically speaking, they’re elegantly designed thoug). The revolution is in finding a new distribution, or business model, or both combined, on which Apple controls it. With this control, on which only Apple products have access to it, it reaches an insane amount of sales of this new product, generating a snow ball effect. Because it’s new way of doing business, this is the reason is successful (or not), and the reason established parties have not tried to experiment.
There is a raising star in all this, it’s called Netflix, and they have shown streaming movies is what people want. The thing is, content producers (Hollywood) is not too keen to this way of doing business (for whatever reason). Netflix has shown the way, but as it has happened, if Netflix continues to grow it will become the iTMS of the TV-Movie business. Contrary to the record business, the TV-Movie business is still healthy one, so content producers are in no hurry to plea or agree with some external source, they might try it on their own.
Ironically, Apple’s success is their biggest disadvantage. In order for the new Apple TV to be successful, it has to offer a new way to consume or acquire TV/Movies content. It’s not the device itself, is the new experience. And here is where content producers are entrenched. At the size Apple is today, is quite possibly that the Apple TV could become a success, at the cost of loosing control over their (content producers) business, which they’re not interested in losing -at the moment-, so the thing is stalled. Or even worst, the experiment could go the way the book publishers had!
That’s why we have seen some many rumours of it, the device might be ready, but the content producers are simply not interested of giving the keys of the kingdom to Apple, at least not yet.
There are solutions around it
Given the unfriendly relationship between Netflix and Hollywood, Netflix decided (very successfully) to produce their own content, like RCA and Westinghouse did during their era. Apple could do the same, or they can even buy Disney! After all they have the cash! And it wouldn’t even hurt them financially at all. But … part of the enormous success of Apple is focus, and they have repeatedly said they’re focused on making “great” products. Hence, going into the content business its not at their chore, as it was not books, music nor telephone.
If Apple really wants for the Apple TV to see the light of day, maybe it has to become a content producer (in whatever way possible), if not the next Apple TV will continue to be a hobby.