Will Apple Launch an Integrated TV?

Analysts have been speculating on a fully integrated Apple television for close to two years, and have convinced themselves it is inevitable.  Just this week, there are new reports on testing at Foxconn.

However, as a long-time observer of Apple, I still am not a believer. I am convinced they will evolve their hockey puck sized Apple TV set-top box into something much more revolutionary than what is there today, but I am not convinced it will be a fully integrated TV. Here’s why:

1. Obsolescence: TVs have a life cycle of 5+ years – much longer than the innovation cycle of Apple’s phones, tablets and computers.  Apple has been reinventing AppleTV once a year, similar to their other products. It makes more sense to implement Apple’s vision through a separate (and hardware upgradeable) set-top box or external module that plugs into the back of a TV (flushly mounted since these need to fit on walls). The interface will evolve, and new hardware (including faster processors) will be needed

2. Sizes Matter: TVs are sold in a wide variety of sizes, and Apple is all about limiting the number of SKUs and simplifying the customer decision. iMacs, MacBook Pros, MacBook Airs, IPhones and iPads all come in only two sizes each, and the Mini comes in only one. Yet TV demand covers 32in, 40in, 46in, 55in, 65in etc. – picking only two would mean large portions of demand would go unsatisfied. Not to mention variations for HD, 4k-HD, etc.

3. Boxes too big: TVs come in boxes that are large, and Apple’s Retail Stores are all about $/sq ft in very expense retail space. There is not enough room in the backroom of Apple’s current stores to accommodate enough inventory to satisfy daily demand – particularly if the TV comes in multiple models/sizes and variations for HD, 4K, etc.

4. Margin Disconnect: TVs are a commodity business. It is questionable that Apple will convince consumers to buy them in large numbers if Apple slaps on the margin that they are used to realizing. And if Apple accepts something closer to the razor-thin margins prevalent in the TV industry today, analysts will rebel.  It would be so-unlike Apple to sell at anything short of a huge margin

It certainly is possible that a version of Apple TV could be licensed and embedded in TVs made by others, just as Google TV, Netflix, Hulu and others have done, but if the implementation is only in software then such an architecture might be limited compared with the track Apple is on now with its AppleTV hardware device.

So while I am not surprised that Apple is experimenting with TVs in its research activities, I think it will be a long-time before we see anything Apple in a TV that is not co-branded with a manufacturer that is currently selling TVs. In the meantime, please bring on AppleTV 4^th generation set-top box (or plug in stick) with an AppleTV app store and maybe even a subscription model -- and let the fun begin!