TV Platform Wars! Can Apple Win this One?
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Imagine a family coming home to a 55” ultrathin beveled sheet of glass that becomes the center of the household communication. Sitting in the living room, dad turns it on with a simple command of his voice. Or maybe he has his iPad and the iPad syncs with the larger screen on the wall. The young man makes a video call to his father to ask him about mom’s upcoming birthday party. In the early evening the kids want to play games or watch TV and a variety of icons on the screen allow the kids to pick and chose what they want simply by making a motioning gesture with their hand as they flip through station icons.
It’s a TV that is not a TV. At least this is what Forrester Researches James McQuivey calls it "the world's first non-TV TV. Sizes may range from 32” to 55” and he calls it the iHub that could be hung wherever your family spends the most time. The television could move from room to room, according to McQuivey, no other product out there can do this very easily right now.
Can it work?
Some are skeptical that Apple (NASDAQ: AAPL) can come in and dominate the TV industry like it has the phone industry. It is of the opinion of some that Apple strong-armed the music industry (iTunes) into doing exactly what it wanted. If this is true will it fly with the TV and movie guys? Wireless carriers also subsidize the living heck out of iPhone because it operates from a position of massive strength in that relationship. But this may prove hard, they are not coming from a position of strength and most entertainment companies are not willing to let their goods be distributed via Apple, as happened with iTunes and the big record companies.
Apple is not the only company positioning itself for the TV industry. Microsoft (NASDAQ: MSFT) has a TV platform already in place with the millions of Xbox 360 owners. Generating online video views on the TV screen is second nature for this group. If the company can bring something innovative to the industry it already has a different—but nice edge. Google (NASDAQ: GOOG) already announced in January this year LG will be unveiling it’s very first entry into the Google TV bandwagon. Some say it struggles, but others are gun ho about it.
Maybe its in the Brand Name!
Millward Brown, a research company, recently identified Apple Inc. has the world’s most valuable brand name in a brand survey. Millward Brown specializes in media and brand power. The value of a brand based on a company’s earnings and future earnings as well as other factors based on the impact of a brand were taken into consideration. Apple’s brand is one of the most important drivers of the company’s success. Is this enough to create success for Apple in the T.V. industry?
If Apple succeeds, it might attribute much of that success to its reputation already. How hard would it be for Apple to convince millions of Apple fans that they need a new screen in their lives? Simply introducing a new display on which to watch that content as it is currently delivered by existing distributors won’t offer consumers much that’s new—but a TV that isn’t a TV?
Piper Jaffray recent report says that the Apple TV will range in from around $1,500 to $2,000. This is a steep price but will the brand name overcome the steep price? Analyst Michael Olson believes the market for a television like Apple's is approximately 110 million units in 2013, and Munster thinks Apple could get 10% of this market between one and three years following the launch of the product. One million units would equal 1% of revenues.
Apple has momentum, reputation, and a loyal fan base in its favor with this new launch. But to succeed, they will have to deliver something totally innovative in a well established and hard to crack TV market.
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