What's 42 to 55 inches big, costs more than any competitive device, and will revolutionize a new industry? According to Apple (Nasdaq: AAPL) perma-bull Gene Munster, it's the long-awaited Apple TV. Sound familiar? Munster's been beating the TV drum for years, and his constant theorizing's finally begun to infect the rest of us.

The source of more hype than anything in Apple's product lineup, this mythical device is all but sitting in the living rooms of fans everywhere, despite the fact that we know virtually nothing about it. As more precise predictions emerge, it becomes easier to analyze the market opportunity. Let's take a look at how big an Apple TV could really become, and whether this hype is justified or just too much.

Keeping it simple
Foolish analyst Evan Niu had his own take on Apple's TV design earlier this month. Let's add the latest Munster predictions to the mix:

  • Size: 42 to 55 inches.
  • Pricing: $1,500 to $2,000.
  • Components: LCD panel, aluminum casing.
  • Interface: Siri voice activation, content guide integration.
  • Replaces: Blu-ray player, cable box, game system, universal remote.

The last bullet point is perhaps the most important. Munster doesn't say precisely how Apple would replace the cable box, except that its interface would give users "a new way to search, interact [with], and record cable content." The downside is that he also says that cable companies might charge consumers a fee to use the Apple TV with their content.

Munster also apparently expects gamers to switch wholesale from their PlayStations, Wiis, and Microsoft (Nasdaq: MSFT) Xboxes to Apple's App Store games. Replacing the universal remote with Siri and an iPhone is relatively straightforward -- the company's current $99 set-top device already does this.

Crowded house
Will Apple really come to dominate TV the way it does phones and tablets? The bull case for its success is tied to tearing the current content model up by the roots and replacing it with a la carte cable pricing and on-demand video. This is pretty similar to what happened with iTunes, and cable companies must be keenly aware of the danger in losing control of their content. Music industry revenues were cut in half after iTunes made "a la carte music" mainstream.

Munster doesn't anticipate that the Apple TV will come out with such a scheme, though. Instead, he expects Apple to take three to five years to grind content providers down to the point where they agree to sell content without bundles. The TV would come with Netflix (Nasdaq: NFLX) and Hulu, but the current set-top box already works well with Netflix. So, too, it should be noted, do the Xbox 360 and Sony's (NYSE: SNE) PlayStation 3, as do many existing connected TVs. This seems a bit like selling a "flying car" that doesn't actually fly while promising to add the hoverjet engines in a few years.

Many TV watchers use only a fraction of their channels, and they may not even use the costliest. An SNL Kagan report from several years back tallied up the costs of major cable channels and found that a few make up the lion's share of costs. Sports networks were the worst offenders, with Disney's (NYSE: DIS) ESPN alone adding more than $4 to the average cable bill. Disney's branded channel was also quite expensive, as were many Fox-branded stations. Disney and News Corp. would no doubt fight fiercely to prevent a la carte pricing, as would Viacom, as those content cartels control many of the costlier channels that consumers might willingly forsake. Cable industry revenues are much higher now than the music industry's ever were, so more is clearly at stake.

Foolish final thoughts
Nobody needs another TV that does all the same things their existing TV does for a higher price. Sony and Samsung had to force retailers to prop up their TV prices. Without the "big idea" of a la carte cable options, Apple would not only directly compete with cheaper options, but it'd also have to justify the much higher cost of a TV that does everything its little set-top box does for $99. Content is king, and Apple has competitors aplenty, including Netflix, Microsoft, and many other tech companies in between.

TVs might be a profitable avenue, but without transforming content it's just one of many, no matter how nice the design or how valuable the brand pedigree. And let's not discount the value of game consoles, which are increasingly moving toward the same content-distribution model as Apple's iTunes while offering superior game play. Will there be motion control built into the TV? Will it be able to run games as polished as those found on major consoles? It seems unlikely, and that makes it unlikely that Apple can effectively nudge Microsoft out of gamers' living rooms.

I would love to see a new content pricing model and would have no problem justifying a hardware premium if it meant long-term content savings. But without that big shift, there just doesn't seem to be any reason for Apple to make a TV, except to satisfy the vanity of a discerning minority. Rolling out a more expensive device without reason could be a major failure for a company that the world now looks to for transformations. Don't call this an Apple win. Right now, it's just a pointless money grab.

Apple hasn't created the next tech revolution, but it does have plenty of opportunity in front of it still. Find out more about one lesser-known high-tech winner that's building the future in our free report on "The Next Trillion-Dollar Revolution."