Apple TV May Encourage Convergence Services

Jan 20, 2008  •  Post A Comment

The greatest opportunity in the revamped Apple TV may not be in the device itself, but in its potential to nudge cable and satellite operators to introduce Web-to-TV convergence services quickly, as TiVo did for the digital video recorder business.
At last week’s MacWorld in San Francisco, Apple CEO Steve Jobs introduced a new version of the Apple TV service, a set-top box that brings iTunes and other content to the TV, including movie rentals from all major Hollywood studios through the new iTunes rental service. Apple also lowered the price of Apple TV from $299 to $229.
Apple sold only about 400,000 Apple TVs last year, but the price drop and the addition of new features is likely to drive additional adoption.
If that happens, look for cable operators to add competitive services to their set-top boxes, said Mike Hudack, CEO of Blip.TV, an online video service. “Cable companies will feel the pressure to commoditize and put it on every set-top box, not Apple TV, but the capability,” he said. “It will mirror what happened with DVRs.”
TiVo drove the DVR revolution, but it did not benefit as greatly as cable companies, where most consumers now get their DVR services from.
Cable companies have other reasons to fight back. Since consumers now can rent movies on Apple TV via the iTunes rental store, Apple TV competes directly with cable operators’ video-on-demand services.
“Apple has already outflanked ISPs’ digital music stores with iTunes+iPod,” wrote Ian Fogg, research director at Jupiter Research, in his blog. “Operators must adjust both their broadband and TV strategies to ensure the same does not happen to their on-demand TV services as video becomes the crucible for net neutrality debates and the planning of operator business models.”
If successful, Apple TV could tax the capacity of broadband providers as consumers stream and download movies and TV shows with regularity on the device, said Bill Tancer, general manager of global research at online audience measurement firm Hitwise.
Cable operators will only fire back if Apple TV is a hit, and there aren’t any guarantees. Consumers have proven to be a fickle bunch and true Web-to-TV convergence has not emerged, although companies like Akimbo, Vudu and Microsoft are still trying to make it happen.
“Apple TV is helping the mainstream connect to the idea of PC-TV convergence,” said Kaan Yigit, analyst with Solutions Research Group. “Apple TV, along with the rental model, will begin to socialize the mainstream to the idea of high-quality content—movies and TV—without the cable or the DBS box.”
However, a drawback of the service is the limited 24-hour watching period for the movies, he said. That limitation may irk consumers, especially if someone accidentally hits start before he or she is ready to start watching.
Apple TV probably won’t become mainstream until the service incorporates more Web services, said Lori H. Schwartz, senior VP and director of emerging media for the Interpublic Emerging Media Lab. “That’s where Apple will have to go. Ultimately the real winner is having all Web services in the living room,” she said.

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