The Wall Street Journal is reporting that Apple is now in talks with cable companies about a set-top box instead of the full-blown Apple TV. In the following video, senior technology analyst Eric Bleeker shares three areas investors should be watching surrounding Apple TV.
First off, Apple is known to tinker with a series of products, and a set-top box could be an initial foray into working with cable companies before a full-blown TV rolls out. Just because Apple is now discussing a set-top box, that doesn't preclude the idea of a television set in the future. Second, Eric notes that a set-top box would show a level of pragmatism from Apple in moving more toward the home-entertainment market. Media companies have long believed Apple is getting ready to bamboozle them and eventually ruin their existing (and attractive) model. We've seen CBS CEO Les Moonves publically say he's weary of making a deal with Apple. Yet companies have been more than willing to strike deals with Microsoft, which is pushing Xbox toward a set-top-box model. Apple seems to be compromising to get a home-entertainment concept to market.
Finally, Eric notes that the existing Apple TV is already successful with its limited ambition, and a set-top box, if Apple could negotiate one, would surely be more successful, as it'd have the killer feature of live television. However, Eric reminds investors that a $1,500 television set might be able to carry profit margins of several hundred dollars, while that total profit margin would probably be the same total cost Apple would collect for a set-top box. For that reason, a full-blown television is Apple's better long-term opportunity if the company can get there. To see Eric's full thoughts, watch the following video.
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Austin Smith owns shares of Apple. Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.