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What Apple TV Should Be, but Still Isn't

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Hallelujah. Steve Jobs is finally serious about Apple TV.

At a press event yesterday, Apple (Nasdaq: AAPL  ) unveiled a new box capable of streaming Netflix (Nasdaq: NFLX  ) movies as well as high-definition programming. TV episode rentals are to begin at $0.99, while the box itself sells for $99. Thus ends the era of Apple TV as a hobby for the Mac maker. Now, it's a business, but not much of one.

Time to tune in a strategy
Anyone who thinks this changes Apple TV hasn't been paying attention. This is a price cut with a few add-ons, and that's all. Worse, the moves appear to be driven by fear rather than strategy. You can almost hear the conversation at Apple's Cupertino headquarters. "Google's (Nasdaq: GOOG  ) got a set-top box coming out? Uh-oh. Better make sure ours is cheap enough to sell."

Before you start typing about how I'm just another basher of Apple and its stock, consider that I'm getting no joy from this. I'm an Apple user and shareholder. But unlike my Foolish colleague Eric Bleeker, I see no reason to get excited. Unless you're Wal-Mart (NYSE: WMT  ) , whose business depends on competitive discounting, a price cut doesn't equal a strategy.

Failing to solve the big problem
More troubling is that Apple TV doesn't solve the big problem in home entertainment. It's just another box, modestly different in function from what TiVo (Nasdaq: TIVO  ) and Cisco's (Nasdaq: CSCO  ) Scientific Atlanta division offer. The burden is on the consumer to set up the box, connect it to a TV, and ensure that existing cable or satellite services aren't disturbed by its presence.

At $99, consumers may not care that Apple TV requires work. But let's also not kid ourselves: the iEmpire was built from the ashes of computing and entertainment systems that required work to assemble, install, and maintain. Apple TV is antithetical to the Mac, iPhone, iPad, and iPod in this sense.

But again, the bigger issue here is that Jobs and his team aren't thinking big enough. In the living room, consumers need less, not more, components, and they need a TV experience that combines the innovations we've seen to date:

  • Pausing of live TV (TiVo)
  • Access-anywhere programming (Slingbox)
  • Web connectivity (Google TV, Apple TV)
  • Video on demand (Apple TV, Netflix Watch Instantly, cable providers, etc.)

Apple TV accomplishes nothing new in this sense. And please, don't talk to me about HD delivery. None of us needs Apple TV to get HD programming.

Take the name literally, Steve
Apple TV should be what it sounds like: a television set with all the features I described above embedded within. This wouldn't be cheap, but it would eliminate components while preserving features. No assembly required. Turn it on, use your remote, and get your programming. Record what you want. Order the TV shows and movies you want. Stream TV programming to your iPhone if you want.

Apple would need to ramp up manufacturing and could sign licensing deals to make this happen. One with TiVo, to embed and tailor its software for iOS, and another with DISH Network (Nasdaq: DISH  ) , to active the Slingbox service from a remote.

It wouldn't be easy to broker arrangements with mortal enemies TiVo and DISH, but impossible? No, not at all. This, after all, is the company that just put Netflix on Apple TV -- despite Netflix's close work with Microsoft and Reed Hastings being on their board.

Jobs has the skills to develop the alliances necessary to make Apple TV a runaway success. But it won't happen unless he starts thinking bigger than he is now.

Now it's your turn to weigh in. Is Apple TV the breakthrough you've been hoping for? Please vote in the poll below and then leave a comment to explain your thinking.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Apple and Netflix are Motley Fool Stock Advisor selections. Google is a Motley Fool Rule Breakers recommendation. Google, Microsoft, and Wal-Mart are Motley Fool Inside Value picks. Motley Fool Options has recommended a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool has written Cisco calls and owns shares of Google and Wal-Mart. The Fool is also on Twitter as @TheMotleyFool, and its disclosure policy has reached its full potential, thank you very much.

Read/Post Comments (13) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 02, 2010, at 8:55 PM, accelerando wrote:

    SO RIGHT. Apple user and shareholder and fervent believer!

    What is it with this TV thing. They need to make the TV set itself as article says.

    They also need to apply their unmatched user interface smarts into making a remote that is simple and easy to use. A single remote with a touch interface -- everyone would want this, they could sell hundreds of millions.

    I mean imagine if all the wires and boxes were replaced with a single TV set with a touch remote -- a TV that could stream content from anywhere, could stop live shows and play later with a no muss, no fuss transparent interface. Yikes. How can they miss this opportunity!!

  • Report this Comment On September 02, 2010, at 9:19 PM, artlaz wrote:

    How about games? The new iPod touch and iPhone 4 both have gyroscopes built in. They can be game controllers just like the Wii has. I can't believe this isn't where Apple is going with this device.

  • Report this Comment On September 02, 2010, at 9:47 PM, BrentLB wrote:

    I completely disagree. This is finally the product I have been looking for to integrate my computer into the living room. The existing Apple TV included a hard drive, which I don't need, and that made it too expensive to be worth purchasing. I have a Samsung Blu-Ray player that has much of this funcionality, but it is sooooooo inconvenient to use it to access the thousand of videos and photos that I would like to stream from my computer to the TV. Though I have yet to see how Apple has implemented this funcionality, as a long-time loyal owner of all things Apple I am confidant that they will finally do it right. I have already pre-ordered mine.

  • Report this Comment On September 02, 2010, at 10:41 PM, alexkhan2000 wrote:

    I think Apple needs to take things little by little and step by step with the whole TV business. This isn't going to be a walk-over like the music business was. There are way more big and wary players in this market and much more at stake. With all the other tech giants, the media companies, the cable/satellite and telecom entrenchment and the huge consumer electronics groups like Samsung, LG, Sony, Panasonic and Toshiba, etc. who are not going to cede an inch to Apple, this one's going to be one long bruising fight. But, ultimately, I'm bullish on Apple to get it right and grab a significant "share" of the business, whatever that turns out to be. We're in the second inning or midway through the first quarter on this one.

  • Report this Comment On September 02, 2010, at 10:57 PM, dandles2020 wrote:

    I want to be able to click a button and watch whatever TV show I want. I don't want a cable bill, I don't want to be tied into a subscription model, I don't want Netflix anymore, I got sick of them playing games with how long they would take to ship my discs.

    The price point of 99 cents works great for me, because two dollars was too expensive to buy and episode of something I would only watch once. To me, Apple TV is a step closer to giving me what I want than Hulu or anyone else has provided.

  • Report this Comment On September 02, 2010, at 11:03 PM, dandles2020 wrote:

    I should add that not including games was a big mistake, as artiaz says. I would have loved to have played app store games on my TV, using the iphone as a controller. I'm still interested in appleTV, though.

  • Report this Comment On September 02, 2010, at 11:16 PM, danno1234 wrote:

    Apple just provided what I have needed - the ability to easily play slideshows and videos that are already on my mac onto my TV. Thank God they did not try to integrate it into a TV. They only sell one of each thing they sell and I am particular about the TV I want. This thing is simple, and will finally bring the internet and my computer to my living room - without noise or heat or power hungry computer. If they have an app that turns my iphone into the remote, and maybe even into a handheld game controller - as long as the wifi to iTV is not too slow - Awesome.

  • Report this Comment On September 03, 2010, at 12:18 AM, geoslv wrote:

    You're right Tim Beyers.

    I don't see an easy way.

    For one thing will people need Apple computers?

    What it needs to be is an all-inclusive box rather than TV, but Apple already failed to get the rights to be a network TV provider.

    But this rental plan I expect is the start of something big.

  • Report this Comment On September 03, 2010, at 9:05 AM, BioBat wrote:

    I'm also not that excited. The inclusion of NFLX says to me that Apple wasn't able to get enough content providers on board to really sell the product. I'm not certain people are going to jump at $.99 one time rentals for broadcast TV either. Comcast tried that with its NBC offerings through OnDemand and after a few months of little to no rentals, they dropped it. But the inclusion of rentals the same day as DVD release is a nice feature although $4.99 is a little pricey for a non-HD rental these days.

    I think the price point will be enough to sell the device but I don't really see it as anything interesting or innovating at this point.

  • Report this Comment On September 03, 2010, at 11:02 AM, itsells wrote:

    Integration of Netflix is one of two breakthroughs. Understand that Netflix is getting close to having one-third of their movies offered through streaming and the company is moving in the direction to get all of their movies streamed. This is going to ne huge. It's too bad Blockbuster hasn't twitched a bit to go in the same direction. 99 cent tv shows is very reasonable for those who have never had a tv-cable subscription. I mean who wants to be a couch potato who flips channels everyday and may not understand how badly they're messing up their life.

  • Report this Comment On September 03, 2010, at 2:35 PM, gman5556 wrote:

    Its funny that some say they want this because they are too lazy too hook up their lap tops to their tv. All this does is add another device to the entertainment system where a real innovative product would combine these devices into one like Google TV.

    I mean even the most hardened Apple fan boy has to admit this is nothing close to special or innovative.

    I would assume there is an App for the Iphone/touch for use as a remote since there is already one available for Google TV. The app is really cool because it controls all devices, including game consoles and technically can be used for game play but wouldn't replace controllers.

  • Report this Comment On September 03, 2010, at 9:37 PM, morrisjd wrote:

    It would seem fairly easy for the Wintel platform to gain wider acceptance as a multimedia DVR platform. Do I want a TV (e.g. Samsung) with built in streaming? Do I want a black box (e.g. Apple TV, Roku) to make my TV stream? Maybe a gaming box with a streamer grafted on? Or do I want a TV with a built-in Windows or Mac OS? I'm talking about a large screen HDTV on the wall. Consider the electronic guts required to support streaming with recording capability is really just a PC with video interface. Seems like the All-in-one might be the way to go. Assuming that it can have various chimera to make it look user friendly to the couch potato.

  • Report this Comment On September 05, 2010, at 7:13 AM, oldfart139 wrote:

    My 60" Mitsubishi TV, which came out over a year ago, is built to accept computer output as just another input. All I had to buy was an HDMI cable. My computer has a device from Hauppauge (about 3 years old) which allows it to receive and record TV, playback is through Windows Media Center. So most of what Apple TV offers is out there already.

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