Unauthoritative Pronouncements

Everyone expected more details on the Apple Watch today at the event in San Francisco. The special 12” retina MacBook had also been teased as a possibility. No one seriously expected any Apple TV news. I’ve cracked a few jokes about it, but even I didn’t think it would really get an update.

It Didn’t Get an Update

They reduced the price by $30, to $69, which means you can now buy an Apple TV and a Chromecast for the same amount of money! What a deal!

The device, the physical hardware, has remained virtually unchanged for several years. The last revision changed some components but didn’t add any hardware features, and that was in January of 2013. Two years of … basically nothing happening. Competitors have entered the market with similar boxes, and some even smaller sticks. They offer channels and access to on-demand content from various sources. Apple TV has the dubious honor of being the only device that will let you stream iTunes Store content to your TV. (You know, when you really want your rental to fail, or a movie to buffer for a projected 5 hours.) Google and Amazon have mostly kept pace with Apple in terms of content that can be purchased online. Apple offers still offers no all-you-can-eat streaming service of it’s own, but does allow for other partners. Amazon isn’t present, and Google’s purchases must be conducted on another device linked to the YouTube account shared with your Apple TV.

The last major revision to the software on the device was also years ago. In the intervening time, updates have brought only the headache of a download and a restart to provide some unheard of service. Since the Apple TV’s software is based on iOS, it’s baffling to me that adding channels requires a restart. Could you imagine restarting every time you installed an app?

While the iTunes Store provides many things for purchase, the other services amount to almost no value at all. Several apps allow for users to pay additional monthly fees to access content (unless it’s sports, which is sometimes under local blackouts).

Apple TV is pretty nice for Netflix though, and it has the largest library of the monthly subscription services on the device (not much of a contest!). Netflix is available on literally everything under the sun that can plug in to a TV, or in most cases even the TV itself. Even premium services, like HBO Go, are available elsewhere.

In a previous diatribe on the state of online media as a whole, I lamented the current stagnation of Apple’s entertainment efforts. If the lack of significant progress is directly tied to the content providers, then that’s bad, but other companies are finding ways to work with content providers, or work around them.

Apple Worked With an Exclusive Content Partner

The biggest news was, of course, that Apple is bringing HBO NOW (an over-the-top service, and shouty name) to the Apple TV. Oh, except it’s only getting that exclusive for 3 months. [Update: This deal also took one year to put together. Read the Re/Code piece on it for more info, and to get some quotes of HBO’s Richard Pleper talking like a cartoon CEO.]

That is not a very long time. I’ve been around for several three-month periods so I feel pretty confident in making that assessment. That is approximately the current window of time between a movie being shown in theaters, and the movie being available to consumers in their home. Think back to the last movie you saw available for home purchase, you know, when you said, “I thought that was just in theaters.” That’s how short this window of exclusivity is. It’s not even as long as most video game exclusives for different game consoles which can typically last a year. Once the exclusivity is over with, will there be any differentiating factor between the Apple TV and the other devices that this is available on other than access to the iTunes Store?

Whither Growth?

Does this drive sales, or does this ensure people are actively using the little plastic boxes tucked in their media centers? I’m guessing it’s the latter since it seems most of the sales are driven by product refreshes.

As we can see on this chart, from Horace Dediu’s site, the biggest sales spikes have been after product refreshes. So why hasn’t the product been refreshed? It would score some points, no?

Today, at the Apple Event, Cook said that Apple has sold 25 million units to date.

In May of 2013, Tim Cook said that 14 million Apple TVs have been sold.

“Frankly, the popularity of the Apple TV has become much larger than we thought it would. We aren’t marketing it.”

Yes, this is very apparent to me, Tim, thanks.

Fortunately, thanks to the lack of any upgrades at all, it’s pretty easy to do the math and determine that Apple sold 11 million of the 2013 model over the last 2+ years. That’s not exactly explosive growth, but it is a large install base of mostly identical appliances at a rate of about 1.3 million units per quarter. After the initial price drop, and smaller form factor, the device was about to pass a million units total in late 2010. In January of 2012, Cook said they sold “a bit above 2.8 million units, and just in the past quarter, we set a new quarterly record for Apple TV at over 1.4 million.”

The iPhone, in contrast, is sold 51 million units from October to December in 2014 alone. That’s double the entire install base of Apple TVs. This is not a case of iPhone owners buying Apple TV so they can use AirPlay with their TVs. Even if we compare sales to the iPad, which were 26 million for that same quarter, that’s still more than all of the Apple TVs ever sold. That press release for the quarter makes no mention at all of the Apple TV in any form.

Apple’s largest pool for future-buyers has always been its existing customers. With no update to the model, what would compel any of the people that own those 25 million units to upgrade what’s in their home? Obsolescence hasn’t been a factor in 3 years.

My (joking) open letter:

Dearest Tim,

Hey, bro, what’s up? Nada mucho here. I was wondering if you guys have considered doing literally anything to refresh the Apple TV? I have a couple freebies for you:

1. You bros love gold right now. It’s totes sweet. Why not just make a gold one? That doesn’t even mean you need to change anything!
2. Make a stick. Sticks are so in right now.
3. Software refresh. It’ll feel like a new model, because hey, you can market it and it looks different. You can still push the update out and claim a consistent install base across all the Apple TVs.
4. Streamline the setup and operation of the device. Your remote is stupid and painfully irritating to most of humanity. The Remote app for iOS would be fine if it didn’t seem to want to completely jump out of RAM and reload every time I wanted to use it.
5. Crush the bugs. There are tons of them, mostly involving rentals and purchases, which is strange because that’s where you stand to actually make money off the thing you are selling people.
6. Build in a way, a button right there on the movie page, to convert a rental to a purchase. It’s possible to do, but not easy, which makes very little sense.
7. Universal search, Spotlight, to find media across all the services.

This is low-hanging fruit that requires the consent of no content partners.

Things that would require the consent of content partners, but would make your platform more enticing to people looking to purchase it, or as a device current owners might recommend to other humans:

1. Force rentals. The studios want to push the value of “owning” content, and rentals undercut that, but persuade the studios that you have a brilliant way to leverage rentals into purchases, and it’s called making the movie worthwhile for people to keep it. It’s a crazy mechanism that requires the studio to exert a little effort.
2. Allow users to lend purchased movies to other iTunes users. It’s all in the cloud anyway. Amazon has been able to do this with Kindle.
3. Produce your own behind-the-scenes iTunes Extras. You might not be able to make your own movies without ruffling studio feathers, but surely you can obtain access to produce Apple-quality featurettes that make purchasing content from iTunes more valuable than it currently is, where it’s mostly what’s available from different DVD and Blu-Ray extras. There should even be previews of those extras to entice people considering a purchase.

I have lots of other thoughts that are mostly inapplicable to your business, so please don’t hesitate to call me about those.

Love ya,

Joe