13m US Households Would Be ‘Extremely Interested’ in Buying
Apple TV Sets
– Unconfirmed Reports of Apple TV Sets Won’t Go Away
The press should make a New Year’s resolution to NOT talk
about an Apple TV set until Apple actually announces one. That
won’t happen because Apple loves getting written about and the
press are sure to get readers and viewers with rumors and
reports about an Apple set.
Two things happened recently that again brought the Apple TV
set to the fore:
– The Wall Street Journal reported this week that Apple is
testing Apple TV sets with different component suppliers in
Asia: Hon Hai Precision Industry, also known as Foxconn, which
assembles iPhones and iPads, plus Sharp, which is said to make
the world’s best large displays.
– Last week Apple chief Tim Cook told NBC News that Apple’s
interest in TV sets has gone beyond being just a hobby and has
become “an area of intense interest.” He said that turning on
a TV set now is like going “backwards in time by 20 to 30
years,” no doubt referring to the user interface and confusing
process for selecting the set’s “input” for various content
The most interesting thing that occurred is Morgan Stanley’s
Katy Huberty report that an Apple TV set, which she called
“iTV,” would sell very well, even sight unseen. It shows that
Apple has become the brand name for electronics, usurping the
allure that Microsoft once had and desperately wants back, and
that Google strives for, but has made too many hardware goofs
to achieve so far. Only Samsung is approaching Apple in brand
appeal. The Morgan Stanley survey of 1,568 heads of household
in September showed the opportunity that Apple has:
– 18% of Americans own a smart TV, but only 13% know they do.
Those numbers sound low considering that Netflix has more than
20 million subscribers in the States — unless you assume most
of them watch it on PCs, tablets and smartphones. LG VP John
Taylor said at a recent industry conference that, although we
in the trade know all about OTT, most consumers do not. That
reminds me of my friend that lives in a house on 12-foot steel
stilts on Bayou Manchac and only in recent years started
getting pay TV, but still does not have or want broadband.
After his tube TV died a few months ago, he went to Walmart
and bought an LCD TV. He called me while setting it up to ask
what the set meant with its on-screen message “Looking for
network.” Without knowing it and with no desire for one, he
had purchased a smart TV that was trying to connect to a Wi-Fi
network, which he does not have. The point being that there is
an enormous untapped market for Apple TV sets that are easy to
set up and use in the way that an iPad or iPhone is.
– Apple’s allure is shown in the survey by 11% of respondents
saying they would be “extremely interested” in purchasing
Apple TV sets, which comes out to about 13 million US
households. The average price that they said they would be
paid is slightly over $1,000, so there’s a lot of money on the
table for Apple to pick up even if it’s spread out over a
number of years. It confirms a point we have made previously:
there are millions of consumers that are ready to buy an Apple
TV set without even seeing it, because they are convinced it
would be a breakthrough product in both hardware and software.
– Another 36% said they would be “somewhat interested,” which
is another 43 million potential buyers.
– “Extremely” “somewhat” interested totals 47%, many more
than the 23% who said pre-launch that they were interested in
buying an iPhone or the 21% who were interested in an iPad
– People that owned one or more Apple devices were nearly
four times more interested in buying an Apple TV set than
those who did not.
– Respondents were willing to pay, on average, $1,060 for an
Morgan Stanley’s takeaway is that an Apple TV set/sets is a
$13 billion opportunity for Apple.
Huberty provided three possible paths for Apple in launching a
– A full-service virtual pay TV provider.
– Work with existing pay-TV carriers and use the Apple TV set
to replace their STBs.
– Bundle the TV set with its existing Apple TV smart TV
Huberty list several headwinds that Apple faces with a TV
– The 9-year life cycle of the average TV set
– The low by Apple’s standards 20% margins that set makers
such as Samsung and LG get
She might also have added the pay TV services who will be
reluctant to let Apple into their play pens and the content
companies that don’t want to break the enormous money flow
that they get from pay TV services.
However, there are always some companies that don’t want to
miss the next big thing. Think of Disney with iTunes when it
was launching and more recently its exclusive deal with
Netflix. There’s also the possibility that one (or more) pay
TV outfit that wants to become a nationwide pay TV service.
The first one that comes to mind is Verizon, which is
undertaking two nationwide ventures: one with Microsoft for
the Xbox and the other with Coinstar for a nationwide service
that offers both OTT and DVDs from Red Box kiosk. The launch
of that venture has been delayed until Q2 2012, which raises
the question whether the service could be available on an
Apple TV set.
Even If Just an Apple TV-based TV Set
If Apple produced a TV set that only had the services
available in its Apple TV smart TV adapter, it would sell
millions of sets.
Apple sold 1.3 million of the $99 Apple TV adapters in the
quarter that ended in September.
OTT Services on the Apple TV Smart TV Adapter
iTunes for rental and purchases of movies and TV shows
Netflix for monthly subscriptions
Hulu Plus for monthly subscriptions
Google’s free YouTube
Major League Baseball (MLB)
National Basketball Association
National Hockey League
Wall Street Journal videos
Vimeo for home videos
Not Available on the Apple TV Smart TV Adapter
Vudu’s purchase and rentals of TV shows and movies
Amazon’s Prime monthly subscription service
Amazon’s Watch Now purchase and rental service
However, Apple will have to figure out how to access the
home’s DVR, unless it’s going to enable users to store
everything in the cloud. That’s what it does with purchases