Tuesday, October 25, 2011

While tech sites speculate about whether Apple will become a TV set maker, the real question becomes what impact would this have on the platform overall?

The tech sites need something to talk about now that the iPhone 4S has been released – it's a bit early for talk about the iPad 3 (though I expect those rumors to start heating up), so now the talk is about the idea that Apple will get into the television set business.

In reality this is an old rumor, warmed up a bit by some comments by Steve Jobs spoken to Walter Isaacson.

I’d like to create an integrated television set that is completely easy to use. It would be seamlessly synched with all of your devices and with iCloud. It will have the simplest user interface you could imagine. I finally cracked it.
There are lots of good reasons why Apple entering the TV market seems like a bad idea, but two of them make the most sense to me: 1) prices of televisions sets are dropping each year; and 2) the market is hardly void of competition.

But I can also think of two good reasons why the company might enter the space: 1) if Apple begins manufacturing its own displays, or has such a price stranglehold on display pricing, it might feel it is at a strategic advantage (Apple would want to come it with a device competitively priced like the iPad); and 2) it has something new to offer the platform, the way the iPhone was something very different from a BlackBerry or a Razr.

Marco Arment, developer of Instapaper, wrote a couple of days ago about what Apple could be up to:
Apple makes a class of obviously disruptive products, such as the iPhone and iPad, that blow away the industries that existed before them. They also make another class of products, such as the Airport Extreme, that don’t revolutionize their category but simply stand as high-quality implementations of what everyone else is doing. If Steve was excited about Apple’s potential entrance into the TV market, he probably intended to revolutionize it, not just make a nicer version of everyone else’s TV set.
So let the rumor sites continue to feeding frenzy for awhile before seriously considering whether there is any meat on the bones of these rumors. Instead, let's consider what Apple, or anyone, would do to transform this platform.

First, consider that the current state of television distribution didn't always look like it does today. Today about 90 percent of Americans get their television though cable or satellite providers. But for most of its history, cable television was almost exclusively a product used by viewers in rural areas, too far away from the television stations to pick up a decent television broadcast signal. In the 1960's there were less than a million cable TV subscribers. By the end of the '80s, however, that number had grown to 53 million households. The point is that many networks, and many producers of content, still remember the day when television was a direct to consumer product, with only the networks to deal with (but since there were only three major networks, that was actually a far bigger barrier to entry).

Today, the growth of mobile and tablet products has stoked the direct broadcasting dreams of many in the industry. In some ways, I would think that we are already seeing the future of television, but in microcosm.

Many television manufacturers are already moving in an interesting direction – so-called "smart TVs" already have "apps", most of which have little to do with network television content, and don't require cable or satellite box sets to run, all they need is an Internet connection. Whether it is WSJ Live for financial news, Pandora for music, or Angry Birds for gaming, these smart TV apps are already providing content that is competitive with what cable has to offer.

Then there is the AppleTV. A so-called "hobby" for Apple, the AppleTV grows in importance every time Apple updates its software. Today you can watch baseball, basketball and hockey through an AppleTV (and many "smart TVs", as well). But you can also stream photos and videos, and most importantly, can mirror the content on your iPhone or iPad.

The initial objection to the newest version of the AppleTV, that it doesn't have a hard drive, becomes far less important to users once they are streaming from another iOS device, or getting content from iCloud.

For me, the future of television is actually what the future of all media is: fragmentation. Today the major networks compete against all kinds of programming, some of which come from small channels, some for channels owned by the cable companies, and some from their viewers themselves. This explains why the premium channels have moved strongly into content creation: the current levels of fragmentation have forced many networks to stop producing quality programming, creating an opening for the premium channels. Fragmentation doesn't always drive down quality, it just drives up mediocrity!

But fragmentation also creates an environment where a company can come in and reorder the chaos. This is accomplished by creating a device that can grab all the content, from all sources, and organize it easily. An iPhone, for instance, isn't just a phone, but it is also way to listen to radio (and your own music collection), read the news (as well as your own email), etc. You get the point: the complexity of content is simplified through the device and the user interface. Create a good UI for an old product and suddenly you have a revolutionary new product.

So while the media continue to wonder whether Apple (or Google, or anyone else in the tech industry) will be entering the television set market, for me the big question will be "what will this actually mean for content?" and what is it exactly that Jobs thought he had "cracked"?