Copyright 2007 San Francisco Chronicle
All Rights Reserved
THE SAN FRANCISCO CHRONICLE (California)
January 22, 2007 Monday
By Ellen Lee, Chronicle Staff Writer
Apple Inc. forges into new territory and takes on a new pack of competitors next month as it begins to sell its Apple TV set-top box.
And that new road could be much more challenging and bumpy than the relatively straightforward path to success the Cupertino technology company has had with the iPod.
Available in February for $299, Apple TV is a set-top box that can wirelessly beam music, photos and videos from your computer to your living room television and home entertainment center.
The idea is to make Internet-delivered media more user-friendly, building on the digital entertainment empire the company has created with its iPod music players and iTunes music service. Over the past five years, people have downloaded 2 billion songs, 50 million television shows and 1.3 million movies through the iTunes online store. They have also transferred untold millions of tunes from their CD collections to their computers. They've then used iTunes to organize all of it and move it to their iPod so they can take it wherever they go.
As Apple's logic goes, why not make it possible to move the same music and movies into the living room?
While not novel -- consumer-electronics-makers have already been selling similar media adapters and television set-top boxes for the past few years -- Apple TV is poised to help consumers truly access their content whenever and wherever they want it. It could also energize a new way for people to get their entertainment fix, downloading it via the Internet instead of buying DVDs. Apple Chief Executive Officer Steve Jobs went so far as to call Apple TV the "DVD player for the 21st century."
"We think this is pretty cool," Jobs said during his speech at the Macworld Expo earlier this month. "Movies, television shows, music and photos, all on your widescreen TV."
But getting there may not be that easy. The living room consumer electronics industry is crowded and complicated, inhabited by set-top makers such as Scientific Atlanta, now owned by Cisco Systems, and gaming devices such as Sony's PlayStation 3 and Microsoft's Xbox 360. Then there's the TiVo digital video recorder, cable, satellite and Internet-based television carriers, media center PCs and networking companies such as Netgear and D-Link.
Hewlett-Packard also offers "smart" televisions that connect wirelessly to the Internet, and Sony introduced this month a video link that enables its televisions to download a selection of videos from the Internet.
"There's a tendency in the tech intelligentsia to kneel before Jobs when he begins to speak," said Phillip Swann, president of TVPredictions.com. "Because he has been so successful on so many products, there's a tendency to believe he will be successful in all. But no one is. No one is always right."
Most living rooms are already overloaded with DVD players, game consoles, TiVo digital video recorders and set-top boxes supplied by a cable or satellite television carrier, he said.
"This country has set-top fatigue," Swann said. "People are tired of it. It clutters up the living room."
A better bet, Swann said, is for cable and satellite television providers to upgrade their existing set-top boxes so that they can download material off the Internet, something that they have begun to do, albeit on a limited basis so far.
This month, AT&T Homezone subscribers will be able to use one set-top box to get Dish satellite television service, as well as video clips, television shows and movies supplied by San Mateo's Akimbo and downloaded via the Internet.
Microsoft also announced this month that it plans to turn its Xbox 360 game console into a set-top box that records, plays and time-shifts live television. Last year, it also enabled the Xbox to download movies and television shows.
Another drawback for the Apple TV, said Sling Media CEO Blake Krikorian, is that it shifts movies and music only from the iTunes folder. It doesn't work with clips that stream on YouTube, for instance, or movies downloaded from other Web sites. Sling unveiled this month a rival set-top box that promises to port everything on the computer to the television.
Plus, it isn't clear that people will buy and download movies for $9.99 to $14.99 as readily as they purchase songs for 99 cents each. And iTunes doesn't offer a movie rental or subscription service -- so far. Nor does it enable consumers to burn it onto a DVD. "There are a lot more questions than answers," said Michael Greeson, CEO of the Diffusion Group, a research company.
So far, consumers haven't been itching to get their hands on another set-top box, analysts said. Last year, MovieBeam, whose backers include Walt Disney and Cisco Systems, introduced a set-top box that serves as a continuously updated repository of about 100 movies, which can be viewed anytime. So far, it hasn't been widely adopted.
D-Link has been selling its media lounge adapter for two years. Like the Apple TV, it moves certain files from the computer to the television wirelessly. Since its introduction, the company has sold more than 100,000 of them, said Daniel Kelley, D-Link marketing director.
"With the attention it's getting, and with Apple getting into the market, we expect to see increased sales in this product," he said.
What will help boost the Apple TV is if, and when, Apple begins selling high-definition videos on iTunes, said Bob O'Donnell, a vice president at research firm IDC. Currently, iTunes offers only near-DVD quality movies. But Apple TV is capable of supporting high-definition videos of up to 720p (1080p is the top level of high-definition television available). "It's definitely a more challenging market," O'Donnell said.
The iPod's market isn't a small or tidy one, either. Technology giants Microsoft and Sony have introduced their own digital music players. Motorola, Samsung, LG and others have also stepped in with music- and video-playing cell phones. And Apple didn't take over the market from day one. The iPod suffered its share of setbacks, most notably, complaints about its battery life. Currently, only about 2.2 percent of iPod video users actually watch video on their iPods, according to Nielsen Media Research.
But with an already developed following from the iPod, Apple TV starts the race with an edge. Apple also has an advantage with its Apple retail stores, where its employees can evangelize the concept to customers. And it has a reputation for making products that are easy to pick up and use. According to Gene Munster, an analyst with Piper Jaffray, the Apple TV is the best-selling product on Apple's Web site, which has begun taking orders.
"They're blazing a new trail in some ways," said analyst Tim Bajarin, president of Creative Strategies. "No one can say at this stage of the game it's going to be a slam dunk. But at the same time, Apple's approach is so easy. ... If anyone is going to jump-start this market, it's going to be Apple."