The Potential

The reason the AppleTV holds such a special place in my heart is because of its potential. In the land of the cloud, Apple is a media giant. It’s the de facto standard in electronic music distribution and a major supplier of movie, TV show and podcast content. They’ve also got a foot in Audiobooks and a major educational presence in iTunes University. So why hasn’t the AppleTV caught fire the way all of their other devices have?

The Problems

In a nutshell, the AppleTV is primarily a way to enjoy content you buy or to view content once (or however many times within a 24-hour window) that you rent from iTunes. Secondarily, it’s a device that allows you to view video content you got somewhere else. The difference? Apple only allows you to play video encoded in MPEG-4 or H.264 – so re-rip it (the content), hack it (the device -with the excellent ATV Flash or similar tool) or suck it. Ownership is the major distinction between Apple’s offering and subscription services like Netflix, which allows streaming from any browser, iPod Touch, iPhone or iPad (WiFi or 3G). Although content available for streaming is much thinner that Apple’s library, the entry-level streaming accounts priced at $9/month are very attractive option for consumers wanting to supplement – or eliminate – cable. You’d think that paying once and owning content would be superior to streaming content and paying in perpetuity, and you’d be right if the studios and networks weren’t still dicking around with the definition of “own”.

With the exception of music, Apple’s media presence is unleveraged because studios and networks are still making money with their current models.  In what probably cost Steve his liver, Jobs dragged the album-peddling studio dum-dums kicking and screaming to a distribution model that saved their businesses from piracy. With the successful access to content and its subsequent freeing from DRM, the success of Apple’s iPod was assured. Now we have another army of dum-dums: the studios and networks, which have different problems with a common theme. People want their movies and TV shows regardless of what device they reside on. They don’t want the movies they bought for $16.99 to come with a coupon to download the digital version of what they already own for $1.99, and have that copy cement-shoed by DRM. They don’t want to be locked into a timeslot to view their TV Shows, slogging through horrible program options and hours of commercials on the good stuff. The problem is that content providers are still making money with a model that doesn’t give a shit about what people want. So studios continue to layer copyright protection and people continue to flock to torrent sites to get their media.  Apple has been aggressively lobbying media outlets – particularly networks – to loosen their restriction on their content, but the it has been very slow going. Apple has made some progress with the “Authorized Devices” provision on content purchased from iTunes (you can share movies and TV shows with iTunes on up to 5 computers and unlimited the iPhones, iPod Touches and iPads they sync with), but the restrictions on video content need to be shaken loose if any set-top device is going to work – even one from Apple. And dealing with the networks and cable providers is even more facepalm-inducing than dealing with studios.

As the guys at Three Guys and a Podcast point out, networks have a deal with the cable companies: when you carry our content, you carry our stable. We’ll give you a couple of studs, like ESPN and a couple gluebags, like Lifetime (note that the examples given reflect a slight bias on the part of the author). Sounds a lot like the record studios, doesn’t it? Except this model is much more insidious. When you’re dealing with a cable company, you’re dealing with multiple networks, each with their own demands. Compound this with different geographical markets demanding different price points (imagine what they get for CMT in Nashville?) and the market power of the particular cable provider. As complex as this is, I’m sure I’m simplifying these relationships by orders of magnitude. You may think “Good luck unraveling a la carte network pricing in our lifetime”, but one should never underestimate the influence of a man who brought an end to DRM for music.

So because the AppleTV is primarily a device that plays content you buy from Apple, its fortunes track the restrictions placed on that content. While they are not particularly onerous now, when compared to the current state of music ownership, it’s enough to render the device a failure relative to the monster successes that douchebag analysts and tech bloggers are used to seeing from Apple.

The Predictions

A lot of people predict a refreshed AppleTV tomorrow. There’s a lot of speculation in the blogosphere about what this will look like, but most of them focus on 2 things that I have a problem with from a common sense perspective: that the AppleTV’s form factor will become somehow smaller or “sleeker” (a pundit term for what makes Apple products too expensive and port-barren) and that the device will become less expensive – in the $99 range.

1. Form factor. I can’t see a reason to change it, but a good one to keep it: it now shares the same footprint as the Mac Mini. I’m sure there’s some manufacturing advantage to having 2 different devices sharing similar dimensions.

2. Price. Apple doesn’t price marquis products at $99. If it does, it’s after a few generations at a premium point.

Of course, if Apple’s design assumptions for the device were predicated exclusively on streaming content (made possible by a revolutionary set of agreements with studios and networks), that would eliminate the need for the local storage currently contained in shipping ATVs. This in turn would probably change the form factor and lower the price. It’s possible that this thing was redesigned in advance of any game-changing content agreements.

The one thing I do agree with is that the device will receive an iOS (read app-centric) UI overhaul. Right now, Apple has 3 major UIs and only 2 of them are developer friendly. The ATV now essentially has a click-wheel iPod UI and no developer inroads. Bringing the ATV into the iOS fold allows Apple to better focus its UI effort for two UI genres instead of three and to open more virgin soil to developers via the iOS SDK.

I like to hedge as much as the next Apple blogger. If I had to commit to a prediction for the AppleTV (or, *sigh* iTV), I’d say yes to #1, although I don’t think the agreements with content providers are yet to a point where a storage-free device is optimal. I don’t agree with #2: that price is an analyst’s market-jerking wet dream and little else. I think the device’s move to iOS is a no-brainer.  Of course, TMA always has hope for that “one more thing” that will blow the roof off of yet another media paradigm.

An AppleTV that replaces Tivo, hosts content that can be played anywhere via MobileMe and has a la carte subscriptions by channel or network isn’t too much to ask, you know.

Update

So the event has come and gone and the iPod line has gotten its fall color. As far as the AppleTV, it looks like I got Apple’s pricing dead wrong. Like analysts, I could use the backdoor “if they made it smaller, they could drop the price”, but honestly I didn’t see it falling to $99. Market-jerking, indeed. Also wrong: iOS. I do think this is the future, though, especially if Apple wants to make it more than just a media terminal.

I also think Steve has to be pissed that rentals are the only option for (the device still called the) AppleTV. I think he had more ambitions for his network deals. Although $.99 is a throwaway as a rental, it’s for a TV show and you get squadoosh once your rental expires. If the offerings don’t include Showtime and HBO offerings, that’s a loser for me. I’ll snap me up some Weeds for $.99 in a second though.

They start at $150‚ so boo for remaining privacy/yay for stealth pr0n‚ depending on how famous you are and what you’re into.

The new Nanos also got a pedometer (for Nike + integration)‚ Voice Memos and FM radio.

While I’m sure someone over in the Zune product design camp is doing a little fist pump of vindication‚ Apple has done what it usually does with useless features stapled onto other people’s offerings – made them useful.  In addition to being easily able to navigate stations and program presets using the scroll wheel and middle button respectively‚  “Live Pause”‚ brings timeshifting to FM radio.  Pause a station when you’re interrupted and resume when you’re ready.  You can even rewind and fast-forward through content.  If you hear something you like and the station supports it‚ you can also “tag” a song for purchase (bonus revenue hook FTW!).  So I guess M$ can go back to sucking it.

In other news‚ the new iTunes 9‚ also announced today‚ features “Home Sharing”‚ which allows you to share content between computers on the same LAN.  While one would think that allowing one to access his content via MobileMe wouldn’t be a stretch‚ apparently that’s not yet supported (at least not in the 15 minutes since I started messing with it and subsequently threw my wireless keyboard).  I WANT MY UBIQUITOUS CONTENT NOW!!  /rant.

All in all‚ Apple looked to further position itself as a media innovator.  As TMA digs further into the upgraded iTunes‚ I’ll be sure to keep my loyal readership posted.  /sarcasm.

Oh – and the Beatles still aren’t on iTunes.  If all media outlets could agree that “the Beatles” and “Apple” would never used in the same sentence for the remainder of time until it fucking happened‚ all famine and war would cease immediately.

Seriously.

Silly rabbit.  Obviously SJ reads TMA and is looking to provide the bandwidth necessary to fulfill my personal fantasy.

But if the thief accesses your MobileMe account under the “Mail, Contacts and Calendar” portion of “Settings” and simply toggles “Find My iPhone” from “on” to “off”‚ there goes a lot of the utility of “Find My iPhone”.

Hey Apple: how bout locking the toggle with your MobileMe password?  I realize we can send threatening messages…

“…I don’t know who you are. I don’t know what you want. If you are looking for ransom, I can tell you I don’t have money. But what I do have are a very particular set of skills; skills I have acquired over a very long career. Skills that make me a nightmare for people like you. If you give my iPhone back now, that’ll be the end of it. I will not look for you, I will not pursue you. But if you don’t, I will look for you, I will find you, and I will kill you.”

Sorry.

I realize we can wipe the phone remotely.  But allowing any moron to deny me the benefit of that extra information especially when it would be easy to password protect it, isn’t too much to ask.

“Though the Apple site is initially expected to employ fewer than 100 full-time workers, legislators said the potential prize was so juicy it justified changing the state’s corporate tax formula to benefit a single company.”  Juicy is defined as a $1 billion investment by Apple within 9 years of start-up.

And why would Apple need a facility of that scale?  Well, there’s always a chance they’ve been peeking at my personal spank-bank…

Put simply‚ my dream is ubiquitous media.  If I own content‚ I want to access to that content wherever‚ whenever.  That BSG episode I downloaded on my Mac at home (one of the ass-kicking ones like Resurrection Ship‚ not one of those whimpering reflections-on-our-shared-humanity episodes) can be streamed to my iPhone or to any other Apple device I own.  I can half-ass this functionality now through a combination of “authorized devices” and syncing‚ but even with that solution‚ I need multiple copies of my media or some major third-party intervention.  Not only do I think Apple can do it better, I think they’re most of the way there.

The Pieces in Place
iTMS
The iTunes Music Store is a media juggernaut.  In terms of available content‚ ease of use and device integration‚ no other service comes close.  Whether I want the latest HD movie release‚ a season subscription to a current network show or just about any song released in the last 100 years‚ odds are that it will be in the iTMS.

MobileMe
Every time my MobileMe subscription comes up for renewal‚ I almost convince myself to bail.  Even for an apologist like yours truly‚ I always feel like I’m leaving some serious value on the table for that $99.  What has tipped the scales?  Most recently, it’s been Back to My Mac.  Having the ability to manipulate a VNC client as easily as the one Apple bundles with Leopard lets me access files – even work with files – remotely.  It’s also killer if you have to troubleshoot other Mac user’s systems.

Airport Extreme/Time Machine
The most recent builds of these devices includes remote disk capabilities via USB and BTTM.  Add a hub and your remote storage capacity is limited only to the number of USB storage devices you own.  The infrastructure to connect to remote Macs exists‚ as does the ability to connect to an always-on remote device to host media.

AppleTV
I own two.  Today‚ it’s a somewhat-limited device that’s basically a link to iTMS content and that media which is purchased from Apple or is converted to .m4v, .mp4, or .mov.  Thanks to hacks like Boxee‚ and ATV Flash‚ new features and a parallel universe of content becomes available. Access to internet TV content from portals like Joost (and to a lesser degree Hulu)‚ SMB network streaming of video in any format and support for  USB peripherals and storage are just the tips of the iceburg.  Third parties have had to show us (probably because of agreements Apple has with content providers) that this device could be much more than a hobby.

The Missing Links
The Bandwidth Problem
Streaming video requires bandwidth.  Streaming HD video requires a lot of bandwidth. The dream of streaming video anywhere – especially to mobile devices – will not be realized for 99% of the population with today’s combination of bandwidth limitations and media file sizes.  There is hope‚ and thankfully it doesn’t lie with those people who own the pipes.  Red‚ the company that developed an ultra high-resolution camera used by the likes of Peter Jackson and Steven Soderbergh ‚ are also working on a codec that they claim will transfer their 4K standard (which is about 2x the resolution of 1080p) at 10 Mbps.  This is well within the capabilities of an n – or even g – wireless network.  If this codec materializes‚ even if proprietary‚ it will be “proof of concept” for the folks in Cupertino (who know a thing or two about codecs themselves).   This may be the solution to the bandwidth problem.

TiVo2 (Bonus wishlist item)
My dream first came to me when I saw a report on one of Apple’s famous patent filings.  The filing for DVR-like capabilities struck me as both comprehensive and polished.  Looking through the figures‚ you can see that a tremendous amount of thought went into how such a device would work.  In my dream‚ I had a TiVo2 UI front end and access to any media – purchased or recorded – on demand‚ anywhere.  My 3.0 iPhone would notify me (via Apple Push Notification) when my favorite show had finished recording and…Excuse me for a moment.  *Ahem*  I think you get the point.

The Upshot
So what’s my recommendation for Apple’s hoard of wealth?  Pursue the technologies and/or companies that will fill the gap in your living room strategy – by any means necessary.

Of course‚ the obstacles to realizing media ubiquity are formidable.  If the ability to stream iTMS content to any device didn’t trigger serious backlash from the people making the media, any kind of DVR device certainly would. Apple would likely have to re-strike – or at least modify – all of the content deals they had to forge with the studios and networks in the first place.  Aside from the fact that major effort (read legal expense and senior personnel time) would be required to re-cast these relationships‚ I’m sure these deals are worth a couple shekels to AAPL in their current form.

I don’t know about Apple’s future intentions for media‚ but the potential to further leverage iTMS through ubiquitous availability of content is huge.  It adds significant value to a somewhat underwhelming MobileMe offering‚ transforms the AppleTV from hobby to must-have set-top device and makes the iPhone (even more) indispensable as a portable media device.  If you combined that functionality with some kind of DVR recording capability‚ Apple would go from “contrived presence” to “living room fixture”- and likely crush a few markets on the way.