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Apple TV Suddenly Looks Like a Winner

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After years of skepticism, I'm ready to admit that I've been wrong about Apple's (Nasdaq: AAPL  ) strategy for interactive television. Apple TV finally looks like a winner, and it's all because of the iPad.

A TV in your hand
Or, more specifically, it's because of Apple's new iPad, iPhone, and iPod touch software. This week, the Mac maker introduced iOS 4.2. New features for the iPad include multitasking, folders, and the previously announced AirPrint, which allows an iPad to print documents wirelessly.

None of these matter as much as AirPlay, which allows any iOS device to control playback on an Apple TV. It's a simple idea executed (mostly) elegantly. Start a movie, click a button on any iOS device, and watch the movie on Apple TV. Devices also act as a remote control, allowing users to pause, fast-forward, rewind, etc.

A light library
Support is where AirPlay gets tricky. Neither Netflix (Nasdaq: NFLX  ) nor Hulu Plus, the TV streaming service from News Corp. (NYSE: NWS  ) , Walt Disney (Nasdaq: DIS  ) , and NBC Universal, supports AirPlay at present.

Apple may not care. Netflix streaming is already built directly into Apple TV, and Hulu Plus is a competitor to iTunes for selling access to popular television episodes. Content and app sales are big business for Apple, worth just under $5 billion in fiscal 2010.

Audio support is a bit more advanced. But this isn't surprising. AirPlay was an iTunes audio feature when Apple TV was still a hobby. That AirPlay let users stream iTunes playlists through an AirPort Express to Wi-Fi connected speakers. This AirPlay allows users to stream Pandora as well as iTunes, mimicking Sirius XM Radio's (Nasdaq: SIRI  ) partnership with DISH Network.

Closing the consumer viewing gap
That's good news. Consumers are increasingly turning to the Web to get video content. A recent study by Credit Suisse found that one-third of Netflix subscribers aged 25 to 34 eschew pay TV channels in favor of the streaming service. Similarly, Nielsen research published this summer found viewers were consuming 1.3% more videos and spending 3.1% more time watching what they streamed.

Accelerating adoption is likely dependent on creating a consolidated system for playing it all. Both Microsoft (Nasdaq: MSFT  ) and Google (Nasdaq: GOOG  ) are addressing this need with consoles. The Xbox 360 has proven effective for streaming Netflix and Hulu. Google TV organizes available content but opens no new doors. Neither service acts as an all-media manager, yet that's exactly what Apple has built with the iPad.

Consider what you can have on the iPad:

  • Purchased and ripped music.
  • Netflix, Hulu Plus, and YouTube.
  • iTunes movies.
  • Photos and slideshows.
  • Website content.

Raise your hand if you think a developer won't figure out how to get all these services to Apple TV via AirPlay. Exactly.

You know this is going to happen. OK, maybe not soon. Maybe licensing issues will hold up the process for a while. But as its recent agreement with The Beatles shows, the Mac maker is in a deal-making mood.

Somehow, someday, CEO Steve Jobs is going to clear all the obstacles in the way of Apple TV playing all the content the iPad aggregates. If you're Apple -- or, for that matter, one of a growing number of digital entertainment consumers -- that's really all that matters.

Now it's your turn to weigh in. Do you think the iPad is a game-changer for Apple TV? Does AirPlay increase the chances you'll buy an Apple TV? Let us know what you think using the comments box below. You can also respond to Tim directly by sending him an email, or replying to him on Twitter.

Interested in more info on Apple? Add it to your watchlist by clicking here

Apple, Disney, and Netflix are Motley Fool Stock Advisor selections. Google is a Motley Fool Rule Breakers recommendation. Disney, Google, and Microsoft are Motley Fool Inside Value picks. Motley Fool Options has recommended subscribers open 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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple, Google, and Microsoft and is also on Twitter as @TheMotleyFool. Its disclosure policy is enjoying the coffee shop atmosphere.

Read/Post Comments (7) | Recommend This Article (13)

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 November 24, 2010, at 12:52 AM, edgeman59 wrote:

    I definitely believe the iPad is a game changer for AppleTV and here's why... I'm 51 years old, and 2 months ago I bought an iPad for work, and 80%+ of the time I spend on the iPad is work related. I

    Before this week's release of Apple's new OS, and my research into the new features, I had never even heard of Apple TV. Now I'm ready to buy it.

    If the 18 to 34 demographic is the target for AppleTV users, and an old grayback PC like me has been sucked into the vortex, the future is bright.

  • Report this Comment On November 24, 2010, at 4:55 AM, Henry3Dogg wrote:

    "AirPlay was an iTunes audio feature when Apple TV was still a hobby."

    I may be wrong but I think for now it's still considered a hobby, although it's clearly a very active one.

    I think until the content owners stop being coerced by the cable companies into maintaining localized monopolies, particularly is the US where the cable companies seem to have some sort of special legal status, then the market it too distorted.

    But this will break because it's in the interest of the content owners to have their material distributed by competing distributers worldwide.

    Then there is the problem of reticence to move away from a subscription service. Some viewers will want a subscription service, some a pay by view service.

    The market fears to move away from the subscription model because some people may spend less. But if they don't then some people may stop spending at all. At the end of the day, the income stream is more stable when the customer feels that they are getting value, and this will require greater flexibility.

    There remains a number of issues to resolve, but this could happen any time. And then AppleTV won't be a hobby.

    You'll know it's happened by the sudden wall of mainstream publicity for Apple TV that announces that it is no longer a hobby.

  • Report this Comment On November 24, 2010, at 1:56 PM, alexlax wrote:

    I love the direction Apple is going with Apple TV from a tech standpoint. But until Apple permits us to stream and and display content that does not have to reside in Apple walled garden of itunes, it will not be a success. Most content providers offer their content via their web sites, and most consumers want the flexibility of displaying this content on their screens as well. If Apple restricts this, they will limit their market.

  • Report this Comment On November 24, 2010, at 11:08 PM, Semprasectum wrote:

    No, "sudden" about it. The only people who didn't realize the brilliance of AppleTV are the ones too stupid to use it. Clearly, the "motley" crew are???, yes, TOO effing stupid to understand AppleTV. . . or Apple for that matter. morons

  • Report this Comment On November 25, 2010, at 8:33 AM, TMFMileHigh wrote:


    Thanks for writing.

    >>The only people who didn't realize the brilliance of AppleTV are the ones too stupid to use it.

    With dure respect, this is a pretty weak comment. What makes Apple TV brilliant compared to alternatives? I'll grant that its interesting, but better than what TiVo offers? Amazon's on-demand service?

    My view is that the iPad sets it apart, but I'm happy to be enlightened.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On November 26, 2010, at 9:33 AM, JamesRobertDobbs wrote:

    Ugh, way too many layers of technology and software for simply watching Internet videos on TV. I'll stick with my cheap, reliable Roku box, thanks.

  • Report this Comment On November 26, 2010, at 11:42 AM, NailThatJello wrote:

    Why stream content to the Apple TV when Apple TV itself delivers streaming content? Sounds like a solution in search of a problem.

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