On Every TV in Dongle Town

According to The Information, Apple has considered launching a low-cost Apple TV dongle, similar to what Amazon offers with the Fire TV Stick models, Google’s Chromecast, or what Roku offers with some of their lower-end streaming devices. Those dongles offer inexpensive hardware, sold either at a loss or with low margins, in order to expand a services ecosystem where recurring subscriptions are the name of the game. Apple has looked toward service revenue for growth, with a new TV service around the corner, it makes sense that Apple should reconsider what they charge for their TV streamers.

  • $149.99 - An HD-only streaming box first introduced in 2015.
  • $179.99 - A 4K streaming box introduced in 2017.
  • $199.99 - A fantastic way to rip people off.

I was critical of this pricing when the fourth generation Apple TV was introduced because $150 was not only more expensive than all of their competitors, but it was more than twice as expensive as the third generation Apple TV that it was replacing. That antique device lingered another year on Apple’s site, with a helpful link to take people to the more expensive fourth generation model. When the fifth generation, the Apple TV 4K, was announced I had assumed that Apple would cut the price of the previous model, and place the new one at the old model’s pricepoint. To my chagrin, Apple cranked up the price and put it $30 above the old model resulting in the pricing we still have to this day.

Jason Snell wrote a great column for Macworld about the importance of Apple growing this streaming service, using The Information’s stick rumor as a jumping off point.

Before we even get to fun, wish-casting, imaginary hardware let’s just get the simplest solution out of the way:

Sell these devices for less money.

Revolutionary idea, I know. It could be accomplished by slashing the margins on the hardware with the expectation that the video service would offset the profit lost, and then some. It’s not even brand new hardware we’re talking about discounting here. It wouldn’t even be the first time Apple TV hardware has been discounted. When the third generation Apple TV was exceptionally long in the tooth, Apple cut its price to $70. I would argue the fourth generation’s tooth has past that point.

Another financial-only option is to subsidize the cost of the device if a customer signs up for X number of months of service. Many over-the-top streaming television providers offer these kinds of deals. A “free” Apple TV. You can also reverse this and offer X months of free service with the purchase of an Apple TV - but since customers don’t know what they’re getting with Apple’s service, this doesn’t seem like it would help grow the service as much as “free” devices would.

Stick With Me

So what would a trimmed down “stick” device include? My ILM bro, Todd Vaziri, thinks that an AirPlay-only stick makes sense, because it’s a way to rely on the phone, a device Apple does make money on, to drive the video being displayed. This seems like a stretch because AirPlay for long form video is not very good. AirPlay is great in a pinch, when you have a short video, presentation, or some photos, but no one really wants to commit their iPhone — the most important thing in their life — to being tied up for streaming video for extended periods. You run into issues like wanting to use social media while you watch something, or even looking at Photos will interrupt your video stream to mirror the Photos app on the screen. The controls for it are also pretty terrible — like that weird rainbow arch thing over the media player widget in control center. Also it’ll chew up your battery, so you need to charge your iPhone which makes it inaccessible. I don’t know how Apple gracefully remedies any of that.

A more likely possibility for a stick was suggested by Jason Snell:

Then there are the more radical possibilities: What about a TV stick that only runs the TV app? You could still subscribe to third-party streaming services, but only by using Apple as a reseller. (This feels too restrictive to me.)

A big strike against it, as Jason points out, is that Apple has not won over everyone making TV streaming apps for the Apple TV to also integrate support for TV the app that Apple uses as a unified interface. Notably, Netflix is still absent. I can’t imagine Apple marketing a streaming media device in 2019 that doesn’t support Netflix. Maybe they work something out with Netflix and get them into TV the app or do something super weird and make a launcher just to open Netflix but … c’mon. No.

A possibility I’ve considered is something like CarPlay, where an iPhone drives what’s displayed on the screen, and can accept inputs from sources other than the iPhone itself. That wouldn’t have the same issues as AirPlay, which leaves control of the media up to the iPhone, but it does have the same issues when it comes to powering the iPhone to do this, and what happens when the person that’s been connected to the TV needs to go to the store. There’s no way to gracefully handoff things to people staying in the living room, or resume playback on a device under a different Apple ID and subscription service profile for that matter.

For me, the most expensive part of the Apple TV hardware has always been the remote, and I think any economized Apple TV offering is unlikely to include it. Apple charges $70 for the thing by itself. I don’t think they have high margins on replacement remotes, which leads me to believe the thing costs a great deal to produce. Imagine taking $50-ish off the price of the Apple TV by forgoing that particular remote.

It is possible that since it’s been over a year since the last remote revision, and minor price reduction, that there might be further savings to be had just from sourcing different parts or switching suppliers, thus keeping the same spiteful glass shard going but being able to sell it bundled with the Apple TV at a lower cost.

I am of the opinion that a hardware remote is still an essential component of the TV viewing experience, so I wouldn’t forgo it completely, even though voice assistants mitigate many laborious things in regards to searching for something specific you have in mind, they do not replace browsing, or “channel surfing”. The Remote app Apple makes is too fiddly to quickly get in and out of for TV controls, and you have to look at the iPhone the entire time you’re using the Remote app. I think there’s a path forward with a pragmatic hardware remote that replaces the touchpad with a directional pad and loses the accelerometers.

Sadly, that means loosing out on parallax icons. Here is an appropriate violin to express my sorrow:


But What About Games?

What about them? Apple has had no serious commitment to gaming on the Apple TV since the platform was launched. There were two course corrections designed to accommodate developers:

  1. Games could require a third party controller instead of the remote.
  2. Games could fill up more space on the device so that assets would not have to be downloaded and purged as often.

These changes have resulted in … basically nothing. Apple still doesn’t make a first party controller. The asset cap seemed to be a way to finally justify the 64 GB storage tier, but no developers have really capitalized on it in a way that would make a 32 GB device owner jelly. The games are typically marginal ports of existing games for iOS, which aren’t usually that large anyway, and the controls don’t seem to ever translate well to a TV screen experience. There are a few exceptions, but they’re typically party games. There is no need to have graphical horsepower and storage tiers.

Unless Apple has an entirely new high-end Apple TV revision waiting in the wings that takes gaming seriously then who cares if storage on a stick, or small box, would be restricted, let alone the horsepower? Even then, there’s nothing attractive about Apple’s business model for the developers of console games.

If we all agree that gaming isn’t a thing, and won’t be a thing, then we have no reason to support it on a lower-priced device.

However, a less expensive stick, or box, would still face an uphill battle in global markets where these cost saving measures are negated by import tariffs, and other issues. It’s not going to be just the elimination of gaming, or just a simpler remote, Apple would really need to get more creative.

This is US

The Apple TV has always had a heavy US-centric set of features, but Apple has been trying to be more thoughtful about regional providers and consumption habits. Apple has been struggling to expand into India, with three executives departing in July, so let’s take a look at the Apple TV page for India and it’s prices. Hilariously, Apple reuses their MLB viewing photo with the San Francisco Giants, but they do mention regional services that they support and work with. The prices are worse than they are for a US consumer, with the 2015 fourth generation Apple TV for sale at 14,100 rupees, which is about $202. According to The Economic Times, smart TV sales have just passed sales of regular TVs for the first time in September. With the Apple TV being a third, or a quarter of the price of a TV set for the 2015 HD-only model, it’s hard to see how Apple could produce a video service with regional appeal that would be worth a barrier to entry that’s even higher than it is in the US.

The Smart Solution

Most TV’s have streaming media software embedded in them for major services, like YouTube, Netflix, and Amazon Prime Video. If a customer wants more than that they might shop for a media streamer, or use what’s in a video game console which they also play video games on (no, not the Apple TV). Customers might be willing to spend more for the Apple brand when it comes to phones, but according to data from Parks Associates in this article from Variety Apple’s share of the media player market in the US is stagnant, while Amazon and Roku growth has incremented up. Part of that growth can be attributed not just to low prices on streaming sticks and boxes, but on Roku and Amazon’s aggressive dealmaking with the people peddling these panels to get their software embedded.

If a TV comes with Amazon, Roku, or some Android flavor, then what drives the customer to purchase a box, or a stick to plug in at all? The embedded Samsung interface and apps in my 2012 plasma TV makes me physically ill, but I could get by with an Amazon interface. I suspect many shoppers can too.

One route around this is to make the Apple TV service available as an app on these competing platforms, as Netflix and Amazon Prime Video do. That might sound insane, but Apple already makes an Apple Music app for Android phones, and on December 17th Apple Music will be on Amazon Echo devices. Services revenue obviously won out in the conversation over hardware revenue when it comes to Apple Music, so why would video streaming be different? Apple could still make the case that their hardware showcases the services the best, while also allowing them access to global markets where they can’t come close to competing on price.

In Jason Snell’s piece for Macworld, he mentions his TCL TV set which comes with Roku on it, and suggests that Apple could do the same. I think that’s less likely than Apple creating an app for Roku, or Fire OS, because Apple would need to either tailor their software to the hardware that the manufacturers use, or sell their A series chips to TV manufacturers. They would also need to include software controls for parts of the TV experience that Apple has had no interest in colonizing, like over the air TV. What remote would these licensed sets ship with? An Apple TV remote? None of these are permanent road blocks, but it would require a series of extensive changes to their approach. It kind of reminds me of Apple with the clones in the 1990s. Apple owns the Power Computing brand, maybe they could license that back out to a low-end TV set manufacturer for some thick, boring, plastic cases with a lot of flex.

Of course cutting out the TV manufacturers and making their own TV sets is a possibility. Gene Munster, an analyst, was infamous for his theory that Apple needed to make it, but he gave up when he realized the margins just aren’t there for it to make sense. I agree. The deeply discounted sales, variety of TV sizes, and razor-thin margins seem like a headache for what Apple would get out of it.

TV on iOS

It might be pretty easy to discount the living room, and television sets, as relics of a bygone era, but the reality is that a lot of people want to watch long form video content on a large display that takes up a large portion of a wall. Small, personal TV sets that kids might have had in their bedrooms can be supplanted by phones and tablets, but when those kids grow up, they want a TV set in a living room.

On top of that, the people making content for Apple want their work to be seen by people in the living room, and eligible for awards alongside all the other stuff displayed in a living room.

I don’t doubt that filmmakers that work with A24 on content for Apple’s service will also want their films screened in theaters, and eligible for those awards. That’s a fight that Netflix has been losing for years. Even if Apple follows Netflix’s path and makes the films available day and date on their video service, those filmmakers aren’t going to be thrilled that the majority of people will be watching their work on iPhones because they won’t buy a $180 box for a movie, and a couple shows.

It would be very difficult to retain talent if Apple doesn’t take showcasing their hard work seriously.


Apple’s desire to grow services revenue stands in direct opposition to whatever passes for a TV hardware strategy in Cupertino. To grow subscribers they need to lower the cost of the devices required to view video service content, subsidize their sale, or make the service available on the platforms they compete with. If they don’t, then this is over a billion that they wouldn’t be able to make back as a niche, premium content provider.

2018-12-03 09:00:00

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