Before he died, Steve Jobs said he "cracked" the code for building a super-simple smart TV. But the challenge of conquering the living room may be Apple's trickiest to date. If Apple is to succeed, it will demand more than great design and affordable execution. It requires a tectonic shift in the TV industry, akin to the earthshaking Apple did to the cellphone world.
A few months ago, I wrote what a bad idea this is for Apple. I cited plenty of reasons, from intractable cable giants to the depressing economics of TV hardware. Yet bad idea or not, Jobs appears to have left his company with a pretty clear mandate to attempt it:
"I’d like to create an integrated television set that is completely easy to use," Jobs told his biographer, Walter Isaacson. "It would be seamlessly synced with all of your devices and with iCloud ... It will have the simplest user interface you could imagine. I finally cracked it.”
So let's talk about the narrow path Apple needs to walk to make this more of an iPhone-style success, and less of an Apple TV 1.0 failure.
Content, content and more content
If a product is popular, content owners want to be on it, provided they can make money. The traditional models still net Hollywood large sums, but film and TV execs have shown interest in distributing across the Internet, if the money's good.
Netflix is a textbook example of both sides of this: As it got popular, Netflix was capable of making impressive deals for more content, but the amount it had to pay for any content kept getting bigger, and now Netflix is losing content. Apple knows how to make money, and major Hollywood entities do strive to work with Apple. But it's not clear how Apple can go from piecemeal a la carte video on demand to full-blown "TV" without some heavy-duty deal-with-the-devil partnerships.
The true vision of a smart TV, shared not just by Jobs but by his competitors, is one in which you simply have all of the shows you want to see available, on demand, for a reasonable fee. From Google's perspective, on Google TV, the linchpin is search. The first step there is cataloguing every instance where a show is available, on any service. For Apple, it's less about aggregating, and more about preserving brands in its own service, or highlighting them in third-party apps. iOS 5's newsstand not only sells subscriptions to individual magazines and newspapers, but it also shoves some of the media apps you already have in there. A newsstand approach to TV may be nice if you already know you want shows from NBC and Fox, but if you're trying to discover content, the experience could be frustrating.
Disruption is necessary
The reason that any upheaval in video is tricky is that the kings of distribution, companies like Comcast and Time Warner Cable, don't exactly want Apple to shake up all of their business models. Apple was able to exert muscle in the wireless business because competition is high, and it presented carriers with a growth opportunity. Carriers may have surrendered some of their own identities — they can't put their logo on iPhones, or pre-install their own software. But they're not complaining because of the extreme growth in smartphone and data plan sales.
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The film and TV industry isn't exactly in this situation. While the Internet does represent a new way to reach paying customers, it is more of a trade-off. After all, cable companies deliver video and the Internet to your house. If they were to sell you just the Internet, plus some kind of premium video package, they would end up delivering more or less what they deliver now, for the same price, just with slightly different options.
That's why even Comcast and the like have explored ways to expand video opportunities to paying customers. If you're already paying a huge monthly bill, and you get "free" access to HBO and more on your iPad, you may in fact be tempted to ditch your Netflix or Hulu premium accounts.
In other words, it's more about defensive plays, rather than big growth moves. Apple has to be more than just a facilitator of self-serving apps here, as nice as those apps are. And in order to do that, feathers must be ruffled.
Apple's whole deal is simplifying user experience, but assuming current cable providers would be in on an Apple TV, Apple would need to work with them on CableCard. In their current form, the little cards decode one or two streams of live TV, so that a device like a TiVo can record them to a hard drive.
The dream, put forth by relatively powerless consumer electronics companies for years now, is to offer users a two-way card, so that device makers could handle video-on-demand and other higher level cable offerings. In essence, you'd get everything you pay your enormous cable bill for, but it would come "skinned" with a nicer user interface like, say, one crafted by Apple inside an Apple-branded TV.
Searching for profits
Apple doesn't just build good phones and computers, it actually makes a profit on the phones and computers it sells. This is pretty hard to do, and margins for its competitors are slim. So the question is, how would Apple apply its hardware know-how to making a profit in TVs? Assuming they pay up front for a huge amount of production capacity, and charge a high-yet-reasonable price, they still need to convince you to upgrade your TV every couple of years. It helps that TVs themselves are cheaper, and it also helps that a smart TV would be software-upgradeable, and could evolve even without replacement. But presumably, Apple would need to sell more than one of these per household per decade to make a buck.
So while I tried to take the optimistic side this time around, you can see all of the tricky negotiations and development work Apple has to sort out, on top of making something so damn pretty you pay a 20 percent premium over any other smart TV. And without Steve Jobs both guiding the vision and hustling the deals, the above to-do list may prove to be daunting.
More on Apple from msnbc.com:
- The case against an Apple TV set
- Challenges of an Apple without Jobs
- Steve Jobs may have been working until day before death
- Apple posts video of Jobs memorial on Apple.com