Don’t Get too Excited About Apple’s iTV
Greg is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For the past few months, rumors about the pending release of Apple’s (NASDAQ: AAPL) iTV have spread like wildfire. It’s been predicted that the iTV will be unveiled toward the end of this year and could serve to further solidify Apple’s stronghold on the digital media industry. However, projected sales figures and estimated profits are unlikely to be as high or as impressive as analysts have reported.
Some industry experts, including Gene Munster of Piper Jaffray, predict that the release of the iTV will result in over 10 million sales the first year alone. Considering the projected $2,000 price tag and 25% profit margin, the iTV could prove to be one of Apple’s biggest money-makers of 2014.
The iTV would provide consumers with an array of streaming digital content accessible through a variety of online service providers. Using existing Wi-Fi in the home, the iTV could connect to the Internet and display on-demand cloud-based media. The notion of giving customers the ability to choose from a broader selection of viewable content than what’s already offered by cable and satellite providers seems impressive and highly desirable.
Undoubtedly, Apple will sell a ton of new iTVs, but not as many as expected. Why not? First off, aside from the new cloud-based features and fancy interface, the iTV is no different than the dozens of other HD televisions already available for half the price. That means consumers would be paying nearly $1,000 just for the Apple television services. With the ridiculous number of people struggling to make ends meet, convincing the average American to spend an extra thousand bucks just for the privilege of watching cloud content is unrealistic. Today’s consumers are more educated, more informed, and less susceptible to glitzy advertising campaigns than in the past, not to mention they have less disposable income.
The release of the iTV (regardless of when it actually becomes available) is unlikely to generate the same hysterical stampedes of buyers that flocked to buy the iPhone 5. People just don’t get excited about televisions like they do about cell phones and other new gadgets. Plus, the concept of streaming Internet media is nothing new to most average consumers. Comcast (NASDAQ: CMCSA) has been offering viewers a host of such content for years through their On Demand interface. Anything from movies to music to past episodes is readily available, in addition to Comcast’s own proprietary content, and there’s no need to buy a special new TV set.
Streaming content to living room televisions is a matter already satisfied by several existing companies. Google (NASDAQ: GOOG), Boxee and Roku offer small devices that attach to televisions with HDMI cables and provide access to a nearly unlimited supply of Internet-based content. The cost of one of these devices averages around $100, and they can be connected to any television. Users can watch free movies through services like Netflix and Crackle, or rent movies with services like Vudu or Amazon Instant. New channels are easily added, and the availability of games is starting to increase too. With the significantly smaller cost to get cloud-based media compared to the projected iTV price, and the flexibility to use them on any television, educated consumers are more likely to keep that extra money in their pockets.
The iTV will surely be all the rage when it’s first released, and the diehard Apple junkies will run out and buy one to impress their friends. But sooner rather than later the buzz will die down and the iTV will fall into place next to Panasonic’s (NASDAQOTH: PCRFY) VIERA devices. Do you remember those? A while back, Panasonic made a feeble attempt to capture some of this very same market by adding its own cloud-based content software into televisions and Blu-Ray players. Viewers can access a handful of basic services like YouTube and Pandora radio through a special menu, but the feature didn’t take off and development seems to have slowed to a crawl.
Gambone has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Netflix. The Motley Fool owns shares of Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!