Yesterday Apple updated their Apple TV product, taking it into a new direction with a 99$ TV dongle that does only content streaming. Apple has long described Apple TV as a ‘hobby’ because they haven’t figured out the right way to create a compelling TV product. Since they’ve spent millions of dollars building up a new data center in North Carolina to support the streaming catalog of the new Apple TV, then presumably they think they’ve got it figured out now.

I actually think Apple is wrong. I think Apple TV is a failure and will continue to be a failure for one simple reason: it goes against the design philosophy of every one of their successful products.

Now, yes, I realize thems fight’n words; but hear me out.

At it’s core Apple is a software company that makes money by selling hardware. Mac OSX is an amazing operating system that they monetize by selling high end laptops & desktops. iTunes and the iPod OS are great pieces of software that they monetize by selling iPods. iOS is a great mobile operating system that they monetize by selling high margin iPhones and iPod Touches.

The Apple TV

And then there’s the Apple TV. It is a piece of hardware that does very little. When originally launched, the Apple TV streamed music, videos, and photos from your desktop; but there are plenty of cheaper alternatives that are just as good. If you hack the Apple TV you can install your own software to make it do all sorts of cool things, but as a stock device directly from Apple it doesn’t do much. Apple updated it with a new interface that added the ability to buy music and video directly from Apple’s catalog. In other words, they added nothing except the ability to pay them more money.

Yesterday Apple updated the Apple TV once again to do the exact same thing in but a smaller, cheaper package. In some ways it does less since the hard drive is gone and it’s likely harder to jailbreak into a useful product. It is now purely a 99$ catalog for the iTunes Store. I’m sure in Apple’s mind this is a win. It can do exactly what the previous version did for less than half the price. Surely that’s a win, right?

I don’t think so.

Monetizing Software Through Hardware

Apple is a software company that monetizes their software through hardware. The Apple TV is a hardware product that is monetized through a streaming media service. It’s fundamentally a different kind of product. Services has never been Apple’s strong point (cough *MobileMe*), and this product is just a 99$ access device to their catalog service. It still could be successful thanks to their focus on user experience, but I think it will remain a failure because of another point.

Most people don’t want another streaming media service on their TV. I love Hulu Plus and I happily pay 10$/mo to get it, but I watch Hulu on my laptop. I don’t own a TV, and that makes me a rarity. Most people have very nice large TVs and already pay upwards of 40$/mo for TV service. They don’t really want something which costs extra to do what they already are paying for, no matter how small and cute the box is. Apple TV doesn’t provide anything new. It competes with something consumers are already quite happy with but doesn’t offer everything the existing product provides. This doesn’t sound like a recipe for success unless they can get all of the networks on board to massively beef up their content. Even then I’m not sure it will work because most people really like an all you can eat plan for TV. They don’t want to pay by the show.

A Good Apple TV

Now that I’ve denigrated the Apple TV, lets talk about what would be a compelling product: an Apple TV with apps. Essentially an iPod Touch for your TV.

The modern flat screen TV is the largest and most expensive display in most homes, and yet it’s wasted. All we do with them is play video. These displays could do so much more with the right input devices and, most importantly, a good app ecosystem. Here’s just a short list of apps that would really add value to a flat screen TV:

  • specialty photo slideshows. Turn your TV into an art gallery
  • music driven lava lamp display to run during music sessions
  • an interactive billboard to combine fun graphics with a live Twitter stream
  • widgets: weather, stocks, rss news feed, world clocks, and your calendar
  • zen space: a underwater simulation with soothing sound and lights
  • games (duh!)
  • Video conferencing

I actually think Sony and Microsoft are far closer to creating this vision than Apple is. Both of them have network connectivity, downloadable apps, and are releasing unique forward looking input devices. Microsoft’s Kinect in particular shows promise. With the right software your TV becomes this portal to the world that brings interactive content and apps to your living through purely through an intuitive gestural interface.

That vision is far more forward looking and interesting than Apple’s; where all they’ve sold you is pricey a catalog for their own store. And in my mind, that’s a big fat fail.