Among the Apple iPad"s biggest early successes are all the excellent video streaming apps that companies have made for it. These include popular apps from Netflix, ABC, and MLB.com, Apple's built-in YouTube and iTunes apps, and could soon include apps from Hulu and Boxee.
While these apps certainly make the iPad a more attractive video streaming device, they could also mean a potentially brighter future for Apple's struggling Apple TV set-top box. That is, if Apple decides to reinvent the Apple TV as a hi-def video apps machine, as we and others have long suggested it might.
Today, Apple TV is an expensive novelty that few have found a need for in their homes. It basically plays videos from Apple's iTunes store and YouTube, and pushes photos to your TV screen. These are fine features if you want them. But to most people, they're not worth a separate, costly device in the living room.
And Apple knows this, which is why it has put almost zero marketing muscle behind Apple TV, and still calls it a "hobby."
Apple has even buried Apple TV in its online store, taking it off the graphical section of its storefront, and sticking it under the iPod accessories section. Ouch.
But we've long argued that if Apple were to make the Apple TV a less expensive device that streamed video from far more sources -- preferably without requiring users to buy and download them from iTunes -- it could be a bigger hit.
There's even the possibility that Apple might bake the Apple TV software directly into HDTVs, an idea the company has recently dismissed. Or Blu-ray players. Or something else. But for now, for argument's sake, let's focus on the Apple TV as a separate device.
What's changed in the last few months that makes this a better bet?
First, Apple has expanded the iPhone OS from a handheld gadget operating system into something broader and more sophisticated, which it's using to power the iPad. It's easy to see how the iPhone OS could now be ported over to more devices, such as the Apple TV. "We would love for Apple TV to be based on iPhone OS," Boxee CEO Avner Ronen tells us. "I hope this is where it is going." (Ronen tells us that Boxee is working on an iPad app.)
Second, developers (especially media companies) have started to create more, better video streaming apps for the iPhone OS, thanks in large part to the iPad. Convincing Netflix and ABC and MLB.com to tweak their iPad apps for the Apple TV -- assuming it's a simple experience -- is a lot easier than convincing them to write Apple TV apps from scratch, for a foreign platform. It's especially handy now that they already have their back-end streaming systems set up for the iPhone and iPad.
These developments, combined with cheaper Apple TV hardware -- perhaps with only a small hard drive, designed more for streaming instead of downloading -- could make for a much more attractive product. We'd easily spend $99 or maybe $149 or even $199 on something like this, but we'd never spend $229 for today's Apple TV.
To be sure, there are other avenues for Apple. It has reportedly tried to get media companies to let it sell $30 per month iTunes TV subscriptions, which could be marketed a sort-of TV replacement. It's also trying to lower the price of TV episodes to $1. This could push back any openings Apple allows for third parties, such as Netflix or network apps from ABC or CBC or Hulu. (Apple has historically tried to control the entire Apple TV content ecosystem, but we think its positive experience with the iPhone and iPad App Stores may finally convince it to open up. Apple still makes much more profit selling hardware than content or apps.) And, heck, now that Apple is getting into advertising, via its iAd mobile ad business, maybe it'll even try to sell Apple TV ads.
It may also completely abandon Apple TV, focusing instead on the iPad. Perhaps an A/V cord for the iPad is all Apple needs to invade the home entertainment market. Or maybe it's not the TV set that Apple wants to conquer, but it'll instead focus on getting people watching video only on iPads and Macs.
But we think the TV market is still far too big for Apple to completely ignore. Especially now that it's getting close to something good: Its iPhone OS is home to some of the best video streaming apps around, and that a new Apple TV -- based on iPhone OS -- could be a much more compelling product.
So we still expect to see something new here within the next year or so.