Apple analyst Gene Munster of Piper Jaffray has a big report on Apple’s plans for the TV industry.He says it’s a question of “when” Apple releases its television, not “if” now.
However, he says a lot of analysts are hung up on the idea that Apple will not release a television if it can’t do something special with content. He thinks this is wrong. What will make the Apple television special isn’t blowing up the cable industry, it’s the interface that it will deliver for users.
While users, and maybe even Apple, want to be able to deliver “unbundled” content, or individual channels, the people in charge of those channels aren’t going to let it happen any time soon.
As a result, Apple won’t fight the power, right away.
Here’s his take on what Apple will do with content:
While many believe content will be the key differentiator for the Apple television, we expect at launch Apple may not necessarily revolutionise the content industry. Ultimately we believe that consumers and Apple want unbundled channels and more options including time shifting to watch content, but note that content owners are hesitant to change. For example on the Disney Mar-12 earnings call, CEO Bob Iger suggested that unbundling channels would make cable bills more expensive. Our take is consumers are willing to pay more for each channel as long as their overall bill goes down (i.e. pay more for fewer channels you actually want). The bottom line is that we believe in five years Apple will have a significant hand in changing how people consume content on their TV. We know the end point, unbundled channels and DVR in the cloud. However this will take time (3-5 years.), and while we believe Apple will innovate on its existing TV content offering at the launch of Apple Television, we caution that the initial offering may more closely resemble the current Apple TV content offering (Netflix, iTunes, and eventually Hulu). As mentioned, we expect at launch the interface will allow users a new way to search, interact and record cable content, which will likely give users the feeling of an improved content offering. We expect to gain more clarity on the specifics of the content offer when we get closer to the launch.
Here’s how Apple will make its television special, according to Munster:
- “Interface. We expect the TV to include Siri and compatibility with third party devices as well as potential integration with content guides, offering consumers improved control which should lead to greater value from their monthly cable subscription. We note that cable companies could charge a fee for consumers to use Apple Televisions ($5-10/month similar to cable box rental fees). Some investors do not believe Apple will be able to gain control of cable interfaces due to advertising on the interface, but we note that the ads are typically house ads and are not significant revenue contributors.
- Apps/Games. We expect Apple to ultimately enable the App Store so consumers can play games, listen to music, etc. on their Apple Television set. We believe gaming will be of particular interest given the large base of iOS game developers. We believe games could be controlled by voice, iPhone/iPad and eventually motion capture built into the display,
- Design. We believe the Apple television will include many existing Apple styling cues including aluminium casing and reduction of wires. We expect the design of the TV to make it the stand-out centre piece of the consumer’s living room. We expect the TV to be LCD given the high cost of OLED panels.”
Munster thinks it will be released in the first half of 2013, and he believes the prices will be $1,500-$2,000, and screen sizes will be 42″ to 55″. Here’s how he gets the price:
“We believe an Apple television could cost between $1500-2000 and is likely to be available in larger screen sizes (42-55″). The reason we are comfortable with that range is based on our thoughts of what an average Internet connected TV set up consists of (50″ Internet connected HDTV, game system, Blu Ray player, cable box, universal remote). We believe a set-up as outlined would cost around $1,650 (TV $1,200, game system $200, Blu Ray $150, universal remote $100). We note that the iPhone typically carries about a 20% premium to other high- end smartphones, thus a 20% premium to the $1,650 set-up above would suggest a ~$2,000 TV.”
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