Apple unable to recreate iPhone success with TV
Earlier this month, Apple poached the chief of Amazon’s Fire TV unit to run its television operations. Timothy Twerdahl brings hardware and content experience to his new gig, and his hiring suggests a renewed focus on the Apple TV settop box.
Twerdahl’s arrival comes as the company tests a new, fifth-generation Apple TV that itmay release assoonas this year. Internally code named “J105,” the new box will be capable of streaming ultra-high-definition 4K and more vivid colors, according to people familiar with the plans.
The features will probably boostAppleTVsales as consumers increasingly upgrade to 4K television sets, but those enhancements alone probably aren’t enough to turn the gadget into a groundbreaking, iPhone-caliber product. Time and again, the people say, Apple engineers have been forced to compromise on Apple’s vision of revolutionizing the living room.
Early on, the Apple TV was going to replace the clunky set-top boxes from the cable companies and stream live television. It never happened. The team debated bundling a gaming controller with the current model to better compete with Microsoft Corp.’s Xbox and Sony Corp.’s PlayStation. That didn’t happen either. Originally, viewers were going to be able to shout commands fromthe couch to theApple TV. Instead they must talk to the remote control.
Apple has essentially settled for turning the television set into a giant iPhone: a cluster of apps with a store. “That’s not what I signed up for,” says one of the people, who requested anonymity to talk freely about internal company matters. “I signed up for revolutionary. We got evolutionary.”
Gene Munster, who covered Apple for more than a decade as a Piper Jaffray analyst and now runs Loup Ventures, echoes the criticism. “Apple TV begs the question: Why does Apple do hobbies?” he says. “Either do it right or don’t do it at all.”
Apple doesn’t disclose how many Apple TVs it sells, but Chief Financial OfficerLucaMaestriacknowledged that sales decreased year-over-year from the 2015 holiday season to this past 2016 holiday period.
Apple declined to comment or make Twerdahl available for an interview.
The Apple TV’s history is a study in gradualism. Previewed by Steve Jobs in 2006, the first box was designed simply to stream iTunes video from aMac to a TV set. The next version, launched in the fall of 2010, let users stream content fromthe internet. Thelatest box was announced in September 2015, a few months later than originally scheduled. Widely considered an improvementby consumers and product reviewers, the Apple TV features the App Store, voice control and a glass remote that enables motion-controlled gaming, whichfor examplelets players use the remote like a steering wheel for a car-racing title.
But the latest Apple TV sells for $149, more than twice as much as its predecessor, $60 more than Amazon’s Fire TV and $20more than the priciest Roku.
The current model was originally supposed to replace the cable box altogether. Early prototypes had connectors for a coaxial port, which sends the live cable TV signal to televisions. Under this plan, Applewas to control the interface, collect fees from viewers and then share most of the revenue with the cable and media companies.
A new TV app was to be the main interface for accessing live shows and sports. But when the app was launched in December, it merely let viewers access their iTunes video library and the iTunes Store, functions that already existed on the Apple TV. The key new element is a “Watch Now” panel, a Netflix-style repository of favorite movies or shows and recommendations for new ones.
Apple had a backup plan if it wasn’t able to replace the existing cable box— the much-ballyhooed “skinny bundle,” a stripped down web service that would let viewers choose channels rather than paying for ones they don’t watch. The media companies were willing to engage with Apple due to concerns about the rise of online services like Netflix and the cord-cutting phenomenon.
But the two sides stumbled over cost, the composition of the bundles and negotiating tactics. The media companies blamed Apple’s arrogance; Apple blamed the media companies’ inflexibility. In the end, the talks fell apart, leaving Apple to tout stripped-down bundles from Sony PlayStation and DirecTV.
To a certain extent, the Apple TV is handcuffed by its parent’s addiction to fat margins. Apple is constitutionally allergic to losing money on a product— even if it can make up the difference by selling content. Some engineers initially believed the current set-top box should be capable of streaming 4K video, which offers about twice the resolution as the previous generation of high-definition TV.