Trender Research™

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Video Distribution Round-Up Part 2: AppleTV

In previous posts we provided an overview of some of the major players and content options for Internet video, audio, and telephony and helped to define the problem statement. We also started to take a look at the future of home video distribution with our coverage of Pulse~Link’s chipset technology and Belkin’s FlyWire device. We pick up where we left off here, where we will dig deeper on the devices and services that are shaping our home entertainment experience.

I have to admit that, while I am pretty knowledgeable in this space, I am having a tough time putting on my hat of the “everyday Trender” and trying to figure out how anyone is going to make sense of it all. In short, there is a dizzying array of approaches for how to get, distribute, and control both traditional TV and Internet video content throughout the home. As I continue with the research for my upcoming report on this topic, I am finding the need to develop a new Trender framework to filter all of this techno mumbo-jumbo into a set of standards that will guide the mainstream adoption of these technologies. More on that later. For now, let me introduce you to a few more players in this space.

The Tentative Innovator

It is difficult to begin any conversation of Internet TV devices without discussing AppleTV. Over the years, Apple has excelled at taking geeky, limited-appeal technologies and turning them into mainstream devices and services. The iPod and iPhone are the best examples of its design and marketing prowess.

At first glance, AppleTV delivered. AppleTV is a sleek, simple device that uses your home network to link your iTunes (audio and video) to your TV entertainment center. It has a beautiful interface and since it works with iTunes, it makes the process of choosing and paying for Internet videos as simple as using an iPod (check out this demo). But that has also been its biggest drawback. Launched a couple of years back and initially hailed as a breakthrough device that would change the locus of power away from traditional Cable TV and emerging IPTV services, AppleTV has failed to live up to this hype. One of the biggest drawbacks is that it remains what is called a “walled garden”, meaning its content is mostly limited to what you have to pay for from iTunes, a conundrum for savvy Internet denizens who can get much of the same content for free from sites like Hulu.

A second problem for AppleTV has been what some have called a lack of focus or strategy from Apple itself. Apple executives have famously and persistently called AppleTV a “hobby” for the company, leading some to question its staying power.

More recently AppleTV is being called a hobby with a future. Last week, Apple reported its Q1 financial reports and the company reaffirmed its support for AppleTV after announcing first quarter sales three times higher than the same quarter last year. All guns were firing for Apple, with iPod and iPhone sales going strong and iTunes revenues up with help from strong video sales.

Despite all of this, CEO Tim Cook still gave what I consider a lukewarm endorsement. "We still consider this a hobby,” he said. “However, it is clear the movie rental business has helped AppleTV and there are more and more customers who want to try it. We fundamentally believe there is something here for us in the future. We will continue to invest in it."

To learn more, I had a chance to catch up with their PR people since Apple did not go to CES. I wish I could say I learned more, but I came away with the sense that there was no real news to report. Oh sure, they continuously update the software for AppleTV. The iTunes video library is always growing. Prices have come down (BestBuy and other stores sell it for about $229). 160 gig version available. Etc. But I failed to get a pulse for Apple’s real strategy or their plans for AppleTV. Which is a shame I think-- because if anyone has the resources, credibility, and marketing might to drive Internet TV adoption to everyday consumers, it is Apple.

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