It seems as if Apple (NASDAQ:AAPL) won't be a TV star after all. The Wall Street Journal is reporting that the consumer tech giant has abandoned plans to introduce an ultra-high-definition television.
The sources familiar with the matter say that Apple had spent nearly a decade of research on the project, but the inability to to dream up enough distinctive bar-raising features leave it nixing the potential new product category.
We know Apple had an interest here. Steve Jobs told his biographer that Apple had finally cracked the code when it comes to television, shortly before he died.
"It's an area of intense interest," CEO Tim Cook said in a 2012 Rock Center interview.
However, the climate has changed, and even Gene Munster -- the Piper Jaffray analyst that has spent the past few years saying that "the iTV is coming" as if he was Paul Revere on a midnight ride -- has conceded that a full-blown HDTV is no longer in the cards at Apple.
It's probably just as well. Let's go over a few of the reasons why it would have been difficult for the iTV to be a hit.
1. TVs don't have short product cycles
A big driver for the iPhone's success is that it's perfectly natural for someone to trade up every year or every other year to the latest model. U.S. wireless companies even seem to encourage trading up every two years.
This was never going to happen with a large TV. No one would be spending four figures on a living room appliance that would be switched out every two years.
2. There's no subsidy angle here
The iPhone is now accounting for more than two thirds of Apple's revenue, more than offsetting the year-over-year declines for Apple's other iOS devices. A big reason for the iPhone's success is that stateside wireless carriers offer subsidies that make the phones cheaper as long as customers commit to paying for service.
This isn't a scenario that was going to play out with TVs. Home broadband connectivity would already be in place, and even Apple's inevitable push into streaming television doesn't have the margin wiggle room for deep subsidization.
3. Apple Store challenges
Can you imagine the logistics behind selling 55-inch and 65-inch TVs through Apple Store locations? Think of the inventory space that it would take up in the back of the store, limiting its ability to stock as many of the smaller iPhones, iPads, iPods, and Macs that it does now. Think of the awkward shopping mall security and transportation issues to get these large TVs into customers in the parking lot.
4. Apple TV is just fine
Apple already has a portable set-top solution that turns most TVs into smart televisions. Apple TV is cheap, and many of the features that would have tried to set the iTV apart like the motion-based camera for high-res video calls and commands could just as seamlessly go into the next generation of Apple TV boxes.
Between Apple TV and the streaming subscription service that Apple will likely roll out soon, it can have some serious skin in the smart television movement without having to worry about the cutthroat nature of the TV manufacturing industry itself.
5. Repairs can get thorny
When your Mac goes buggy or your iPhone screen gets cracked it's easy to bring it into an Apple Store. What happens when something goes wrong with your TV? You're not going to lug that thing into an Apple Store, are you?
Apple can learn from Google's (NASDAQ:GOOGL) mistake. Google introduced Google TV five years ago, and despite teaming up with some heavy hitters in hardware, the actual smart TVs were eventually discontinued. Google realized that the best way to control the living room is through cheap set-top devices, and now it's pushing the dirt cheap Chromecast streaming device.
The iTV would've been cool, and early adopters would've hopped on to the first production batch. However, with the real possibility of sales drying up after that Apple wasn't going to put so much muscle behind a product that would have a hard time standing out -- and reputation-bashing ramifications if it didn't.