All I Want for Christmas is my Apple TV

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Jeremy Allaire's picture
Jeremy Allaire on December 17, 2012
Coming into 2012, with rumors and theories running wild, we all hoped for a new Apple TV in time for Christmas. While we did get spades of new tablets from Google, Microsoft, Amazon, Samsung and others, all Apple had for us was an upgraded iPhone and a handful of new iPad updates and sizes. The contents of our pockets may have changed, but Apple has left our living rooms largely untouched.
 
Myriad issues have held back the new Apple TV, from complex dealings and integration with established broadcast cable providers to hardware design and supply issues to the necessary evolution of iOS SDKs -- but we won’t be kept waiting forever. There’s every reason to expect the new product to launch in 2013. When it does, we’re likely to see massive disruption of the broadcast and gaming industries, the rise of an age of TV apps and an even stronger leadership role for Apple in software, media, communications and consumer devices.
 
What will the coming Apple TV look like, and what will it mean for our industry? There’s plenty of information available to guide our speculation. Let’s imagine Christmas 2013, and the new line of Apple TV products I hope to find under my tree.
 
 
What is the new Apple TV?
 
The new Apple TV will be defined by three key values for consumers:
 
1) The best way to consume broadcast TV and any online video.  A seamless touch- and TV-based interface makes it simple to consume your existing cable and broadcast content, including video-on-demand (VOD) libraries and DVR features. Via iTunes, you also get instant access to mega-libraries and subscriptions from iTunes, Netflix, Hulu, not to mention YouTube. Naturally, you can also access any AirPlay-enabled videos on the Web, as well as TV apps updated with the new iOS 7 SDK.
 
2) The ultimate game console.  The new Apple TV will be a direct assault on the game console industry, with a living room platform that should leave Nintendo, Microsoft and Sony running scared. With a single launch, Apple will extend the iOS gaming distribution ecosystem into the living room and invent new categories of gaming through the interaction of iOS devices with Apple TV.
 
3) The best way to experience all of your apps. Crucially, the new Apple TV will extend nearly every existing iOS app into being a TV app that brings the power and richness of large display surfaces to consumer computing -- a task that nearly every industry titan has attempted and failed. The combination of touch and TV will ignite a new era in dual-screen software application design and development in which it will become hard to believe that Internet software was once based solely on PCs, phones and tablets.
 
Fulfilling the Apple product design fetish
 
Everyone wants to know what the new Apple TV will look like, what it will include inside and how it will connect all of Apple’s existing consumer and developer offerings. As usual, product packaging and design are fundamental components of Apple’s go-to-market strategy, complemented by their unique ability to leverage their existing app, content and device ecosystem.
 
Apple already has an ecosystem of nearly one million apps, the world’s best library of a la carte media and hundreds of millions of device customers. In an ideal world, Apple would like to sell the majority of these customers a new device product for TV. The company also needs to find new $30 billion+/year businesses to keep up its pace of growth and value creation. The key is to introduce a product franchise that defines the consumer experience, owns the extension of the app platform into the TV, and captures as many users as possible, as quickly as possible - while taking enormous share from an established, multi-hundred billion dollar/year industry.
 
To do this, Apple needs a two-pronged strategy:
 
1) A new companion device for TV that starts at $149, attaches to nearly any existing TV, and does not require customers to buy an expensive new monitor. This is crucial for quickly establishing and maintaining platform dominance quickly and even stand-alone could be a $5-10 billion opportunity.
 
2) A new family of ultra-thin TV monitors that bundles all of the capabilities of the companion device and includes beefed up computing power. These large-screen monitors will be a direct assault on the global TV monitor industry, a market worth hundreds of billions annually, albeit with slightly slower replacement cycles of four years versus two years for smartphones and tablets. This gives Apple that additional $30 billion+ revenue stream it needs.
 
Combined, these new products will radically transform the computing, media and electronics industry, and more deeply cement Apple’s role as the de facto platform for content and apps.
 
Let’s take a closer look at each of these products.
 
The new Apple TV companion
 
Designed with a new A7 quad-core CPU, the device provides enough horsepower to deliver 1080p HD video and the most demanding gaming graphics; built-in front-facing sensors and camera; and enough storage for loads of games, apps, content, and recorded live TV. 
 
The device offers HDMI and digital audio output, a gigabit Ethernet port and built-in WiFi, as well as a two lightning ports -- one for power, another for the included “coax dongle,” which connects directly to most existing cable TV hookups to replace your existing cable set-top box. More on that later.
 
As we’ve come to expect from Apple, the product is offered in a sleek and slim form-factor that sits easily on top of or under any existing TV. I suspect a thin horizontal bar such as we’ve rendered here:
 
 
This design puts the device truly at the center of the living room, a compact porthole into the entire digital economy. Developers can leverage the front-facing sensors and camera in the same way they build on existing iOS APIs; in fact, the new platform launch will likely include iOS 7 with support for new TV apps and Apple TV SDKs.
 
For existing iPhone and iPad users who already own a flat-screen TV, this new TV companion device will be a great bargain that also radically expands the value of their existing devices. This will also be a highly popular form-factor for multi-monitor households, offices and even retail establishments.
 
The new ultra-thin Apple TV monitor
 
Likely coming in 46” and 60” models with solid glass front and aluminum back, and stand and rear mounting options, this ultra-thin monitor will mirror the design aesthetic of the latest iPhone and iPad.
 
 
The full capabilities of the companion device are complemented with additional audio, video and lightning ports, storage of up to 3 TB and of course gorgeous display quality (probably 4K resolution) and exceptional design for a modern environment. 
 
How TV works on Apple TV
 
While Apple TV will support voice- and motion-based input for global menus and navigation, the preferred control method for basic everyday use will be either the bundled simple remote -- or more likely -- new iOS 7 apps from Apple that let you control Apple TV with your iPhone and iPad.
 
 
With the iPhone, Apple created a simple “phone” application on top of existing telephony carrier infrastructure, improving the consumer’s user experience and creating an additional product sales opportunity for carriers. The company will take a similar approach to existing broadcast cable TV, and in so doing, put one or two major U.S. cable operators in the same privileged position that AT&T enjoyed following the iPhone launch. Around the world, cable TV distributors will battle for national sales and marketing rights for the Apple TV.
 
To accomplish this, Apple has likely created a new API for interacting with the IP-based cable broadcast infrastructure that providers such as Comcast, AT&T, Verizon and Time Warner Cable have been moving to for a number of years. This will enable Apple to present a consistent user experience worldwide for accessing live broadcast channels and recording content for later consumption. With program guide data, VOD metadata, and the ability to use network or local DVR APIs, the new TV app for iOS will become the simplest form we’ve ever had for watching broadcast television.
 
Cable companies may initially resist supporting this offering, viewing their ability to cross-promote offerings in their guide and VOD menus, and the customer relationship in general, as their provenance. This would be as misguided as the mobile carriers were who thought they could control and customize the home screens, operating systems and bundled apps of mobile phones as a strategic advantage. Smart operators will understand their role as broadband and infrastructure providers, and will continue -- for now -- to be the primary packagers of broadcast content with its lucrative tolls for subscription programming. For all of the hope that Apple would help to blow up existing cable packaging, for now the company’s priority is to navigate and establish global partnerships with multi-system operators (MSOs) and multichannel video programming distributors (MVPDs) to sell their new TV and TV companion devices.
 
With natural hooks into the iTunes a la carte content library, Apple will be able to combine premium cable subscription content with their on-demand library to offer users the broadest choice for video content.
 
 
Apple’s TV app in iOS 7 is also likely to take ownership of the core second-screen category for companion content to broadcast shows. Apple can easily provide rich, contextual meta-data about shows, characters and social chatter while providing new APIs that broadcasters can use as a launching point into show - and channel specific - iOS apps. These apps will give broadcasters the greater brand control and direct consumer relationships they’ve wanted, with the added benefit of cross-promotion from within Apple’s own TV app.
 
Because Apple TV users will be linked to a cable provider just as your iPhone is linked to a mobile operator, broadcasters will also gain a simple and seamless way to authenticate consumers into apps that offer their full slate of catch-up TV programming.
 
It also seems likely that AirPlay updates will include streaming from an Apple TV to your iPhone and iPad (e.g. the inverse of current AirPlay use-cases), allowing you to access and stream content from your Apple TV via your iPhone and iPad, including live television and DVR content, the original innovation from Sling, presuming their deals with MSOs include these wireless streaming rights, which seems increasingly market.
 
 
As with iPhones and iPads, the new devices will come with many pre-installed Apple and third-party apps, in this case likely including leading online video services like Netflix, Hulu, Amazon VoD, and YouTube, as well as TV Everywhere apps such as HBO Go. More importantly, any developer will be able to build content and apps for Apple TV. Just as nearly every app you download for your iPhone is also available in a version that fits the iPad display, new iOS 7 Universal Apps will include code for deployment on Apple TV.
 
Apple continues its disruption of the gaming industry
 
Putting all of this together -- the new hardware, the new APIs, the new input capabilities -- adds up to nothing less than a full-frontal assault on the game console market, as Apple and iTunes become the distributor of choice for everything from casual to hardcore 3D gaming.
 
While the large installed bases of industry incumbents provide some advantage, it pales in comparison to Apple’s hundreds of millions of touch device users, millions of apps, and unparalleled catalog of a la carte media. It’s hard to imagine a scenario where Microsoft, Sony or Nintendo can win.
 
iOS is already the world’s most important gaming platform in terms of new game content creation and the velocity and scale of consumer usage. With new gaming-friendly APIs for controllers and user input, complemented with local CPU, graphics and storage horsepower on the device itself, the new Apple TV is a deeply significant threat to Nintendo, Sony and Microsoft in the console market. The same is true for the multi-billion dollar businesses built by Amazon, Wal-Mart, Target, Toys “R” Us, and GameStop around selling game CDs; Apple TV will be a download-only install medium, as we reach the tipping point in storage and bandwidth where it no longer makes sense to distribute games on physical media.
 
Some have argued that Apple and iOS aren’t for hardcore gamers -- but tell that to the teenage boys playing Assassin’s Creed and Call of Duty on their iPhones and iPads. By owning the TV runtime, Apple TV provides amazing development opportunities for the technical and creative elite and will bring a flood of innovative content creation from major game studios. For the launch of the first iPod with video, Apple brought Disney on stage to announce the availability of Lost and Desperate Housewives for download, heralding the age of a la carte television. For the Apple TV launch, Apple will stand alongside the world’s top game developers to showcase the ultimate gaming platform.
 
To achieve this, iOS 7 will likely support APIs for interacting with and connecting to third-party game controllers via Bluetooth and possibly RF as well classic gaming handhelds, to steering wheels, to guns and any other device that suits the gameplay needs.
 
 
The use-cases for gaming are mind-boggling, especially when you bring together geographically dispersed users for collaborative games like massive multiplayer online games. Imagine playing Call of Duty Massive with a gorgeous 60” display: you’re using a standard controller for first-person shooter play, a friend next to you manages ops from the iPad controller, and a few more friends watch along from their iPhones while they’re riding the bus. Another friend receives a push notification alerting them to a crisis that could use their help -- they look away from what they’re watching on TV and jump into the game from their tablet. If killing games aren’t your cup of tea, other options span edutainment games, basic single-user games, and even the mundane but always enjoyable family game of Monopoly, with the board rendered with real-time updates on the TV rather than the coffee table.
 
Which leads us to the third and key value proposition of the new Apple TV.
 
Its all about the apps
 
While Apple TV makes a strong case with its broadcast TV and gaming capabilities, its ultimate killer app is, appropriately, the app ecosystem it will offer as millions of iOS apps extend onto the television display surface. I’ve written about this more extensively elsewhere, but the basic idea is that we’re moving into a software world where more and more applications combine a touch device with a TV display surface. That’s a huge reason why consumers will cheer for Apple TV -- they’re already embedded in the Apple ecosystem, and so is all of their favorite apps and content. Bringing the familiarity and integration of these platforms together will give Apple a red carpet into the living room, and revolutionize again the world of software to offer value far beyond the consumer experiences of today.
 
Consider an important (and often expensive) task that we all face many times in our lives -- buying a car. How can the Apple TV platform and their broader platforms help make buying a car a better experience?  Let’s use BMW, always an innovator in the customer experience, as an example. You find and download the BMW App from the App Store to your iPad (while in the background the same app is installed on your iPhone). When you open the app, it detects that you have an Apple TV and asks your permission to display views onto your TV.
 
 
You begin with a quick view of models and narrow down to the latest midsize sedans, watch the marketing video on your TV, then decide to take the car configurator for a spin. As you’re taken through each area of customization, your TV updates with visual displays of your choices in that section; if you want to learn more about a feature, a quick touch invokes an HD video on your TV. As you make choices on your iPad, the car you’re building takes shape in a picture-perfect rendition on the TV screen in front of you. Once you’re done, you can have the app geo-locate your nearest dealer and schedule a test drive. On arrival at the dealership, your geo-location triggers a push notification to a sales associate who greets you by name before handing you the keys to the car.
 
Every app in our lives will benefit from the connection of phone, tablet and TV, and for this reason Apple TV will become an essential consumer platform. The critical point to understand is that Apple TV is not just about television and games -- it’s about us all figuring out how to make the best use of the large displays in our lives.
 
Technically, there are still a number of key problems Apple needs to solve in iOS 7 regarding  how apps discover and get user permission to AirPlay on Apple TV, but these are the kinds of user experience problems that Apple is renowned for addressing. Expect an overhaul of AirPlay protocols and user experience in iOS 7, not to mention many of the new APIs and capabilities that I’ve described above. 
 
The new Apple TV offer for consumers and developers
 
We look forward to the day that Apple’s new product and developer pages look something like these.
 
 
You can watch and explore all of the images and more in this New Apple TV image gallery.
 
This is already the direction things seem to be moving. For brands, media publishers and app developers, it’s never too early to re-envision their apps and consumer user experiences for Apple’s latest revolution in the way we live.
 

Jeremy Allaire is the Founder, Chairman and CEO of Brightcove, a leading provider of cloud platforms for distributing media and apps, with a suite of platform APIs, SDKs and web services aimed at Web and App Developers and the businesses they help to drive.

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Comments

Can Ozmen (not verified) on February 2, 2013

What about online radio apps like Pandora Radio?

Andrew Korf (not verified) on December 19, 2012

Fantastic, insightful post. How do you see the app development eco system evolving? Who will be disrupted? What new opportunity will be created?

We are following Apple TV rumors and news here:

http://www.tumblr.com/blog/allappletv

& http://www.twitter.com/allappletv

Should be an exciting year.