Apple TV's "failure" depends on your yardstick

It's a slow news week. So what better to add spice to your life than
Phillip Swann, president of TVpredictions.com, who claims that Apple will dump Apple TV by the end of 2008. He also doesn't put any facts behind this prediction, relying instead on estimates of 400,000 units sold as the basis of his argument. He also complains about the $300 price tag which he seems to think is excessive considering that it only lets you buy videos from the iTunes store.

Now I'll be the first to admit that the Apple TV value proposition is incomplete; I've been expecting Apple to offer high-definition movies and rental content for the Apple TV for more than six months now. And why haven't they done so? That's simple: for Apple to provide HD content and movie rentals, they need deals signed with the movie studios, and the movie and TV studios fear Apple having as much power in their industry as it now does in music. So instead, Apple now has hardware in the field waiting for the content that makes it valuable to the consumer.

But that 400,000 estimated sales number isn't the damning evidence that Swam thinks it is. That number is from a Forrester Research report that we've noted has some logic flaws before, and follows up on its earlier incorrect claim that paid media can't ever compete with free TV (Comcast, HBO, and Showtime will be very upset to hear that given the billions they make from paid media) and Forrester's incorrect claim that iTunes music sales were slowing back in January). Quick quiz: how many dedicated HD DVD and Blu-ray high-definition players have been sold in the US, excluding game consoles? Turns out that the TOTAL number of HD-DVD players sold to date after almost two years is about 750,000, of which 269,000 were sold as attachments to XBox 360 game players, leaving only about 580,000 as pure high-def TV players. The Blu-ray numbers are similar: There have been about 2.7 million Blu-ray players sold to date in the US, but those include all Sony Playstation 3 gaming consoles. Subtract out the roughly 2.5 million PS3s in the US, and Blu-ray is left with only 200,000 or so stand-alone players. Suddenly 400,000 Apple TVs doesn't look bad, not bad at all. Oh, and last time I checked, consumers had to pay hundreds of dollars for those devices that allow them to play high-definition content, a flaw which Mr. Swammi claims dooms Apple TV

One more point: I was in a recent brainstorming session for a client with about 20 or so other consumers. At one point, one gentleman from the audience struggled to articulate what he wanted an upcoming product to work like, and he ended up raving about his Apple TV, which was small, easy to use, and produced beautiful results, particularly with his home photos, on his HDTV (he didn't get the memo that the lack of HDTV content made it a failure). So even without HDTV content, Apple TV isn't a failure in consumer minds; Apple adding HDTV content could be as explosive a boost to its fortunes as the iTunes store was to the iPod.

The bottom line: Yes, Apple could decide to cancel Apple TV. But my bet is that they won't, since by my analysis, they will be #2 in the high-definition TV movie player market when they release high-definition content. The only thing that could stop them would be the movie studios deciding that they don't want their content distributed by Apple to consumers. And given that Apple customers have been proven to provide more revenue to music labels than the general population, that would be the movie studios' loss, not Apple's.

One final bit of irony: Phillip Swann, the analyst who posted this prediction, didn't write it. He posted the prediction on YouTube. So far as I know, the only way you can easily sit down at your HDTV, pick up your remote, and watch Mr. Swann's predictions without firing up a computer is, you guessed it, to use an Apple TV.

Full disclosure: the author was a Forrester analyst until 2002 and is long Apple at the time of writing.

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