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.
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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.