Greg's Bite: Apple Frightens the TV Industry
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Greg's Bite: Apple Frightens the TV Industry

Posted by Greg Mills

The tech rumor mill is in overdrive right now over the prospects of Apple revolutionizing another major industry: television. The television manufacturers, according to reports, is in full panic mode not knowing what Apple is going to do their market share.

Razor thin margins are the norm, so losing market share without being able to quickly pare down expenses could be disastrous. Not knowing what magic Apple will do leaves them very worried. The 3D and internet connected TV never really pushed sales and these days, 55 inches and up displays are not that big a deal .... so what does Sony or the other TV hardware companies do?

The TV "software" business is so fragmented it is bewildering to both consumers and the industry as well. NetFlix and other internet downloaded video content providers struggle to keep up with innovation and they all know Apple, at least, has its feet wet in that industry. What revolutionary digital video content download plan does Apple have up its sleeve?

Steve Jobs will go down in history as the innovator that up-ended the status quo of numerous industries that had settled for mediocrity and failed to innovate. Never suffering fools, Steve knew that the industries to go after had a number of characteristics that made them vulnerable to Apple elbowing its way in. Also, we can gather from the experience of previous industrial revolutions that Steve Jobs led what is different about the TV industry.

1. There is enough money in the target industry to be worth Apple getting into the business.
2. It is somehow related to the synergy of Apple, electronics or Internet related.
3. The industry is complacent and has not innovated or been able to reinvented itself.
4. The legendary Apple user friendliness and a fresh, innovative device of some sort (iPod for example) are perfected at Apple.
5. On the down side, hopelessly fragmented markets are a problem that is hard to fix.

Examples of this are:

The Music industry had become such a cookie cutter process of creating physical media and marketing that music in a set way, through established wholesalers and retailers. As storing music on computers became popular, the piracy rate suddenly became the elephant in the room. The copyright police began to punish the very few users who got caught downloading music and applied amazingly harsh fines. The publicity over massive fines for online music theft was still not enough to kill the growing music piracy problem.

Music sharing web sites were also attacked legally and finally shut down as others popped up. Once people got used to stealing or "sharing" music over the Internet, sales of music in media form at the local record shops of the world dropped off to unsustainable levels. Steve Jobs offered the music companies a cash flow that was less than the industry wanted, but more than they were getting at the time.

This marketing plan leveraged the iTunes Store with on-line payment and a very cool new MP3 player, the iPod. The iTunes Store and iPod changed music distribution and created what Steve Jobs called a new "go to market" plan that worked, made the industry money and Apple got a cut for every song they sold in addition to selling millions of iPods.

Digital publishing has begun to convert the dead tree book stores as people become used to buying books o- line and reading them in digital format. Magazines and newspapers have had limited success, due to greedy publishers who want to pocket the savings of going digital instead of passing it on to consumers. When the price for digital books and magazines settles down to fully reflect the savings of digital distribution, the revolution in publishing will have taken place. We already see the great books stores closing stores around the country.

Famously, the Daily newspaper launched for iPad users hasn't taken off very well. Murdoch can afford to continue to support the Daily for a while, but no matter how well funded, a basic law of economics has to be realized. There is a perception of market value that causes consumers to either anti up or refuse to buy something that seems too high. Market perception of a deal is critical for swift changes in an industry.

Ironically, the concept of digital publishing has allowed people to publish manuscripts and sell their books without going to the publishers, who used to have the power of an industrial god to make or break writers. Now, one can simply write a book in Apple Pages, export to ePub format and then upload the resulting file to Apple's servers and the act of digital publishing has been accomplished. The book is then sold by Apple with a 30% cut for them and 70% for the author.

I will divide the TV industry into to two major divisions for this analysis, TV hardware and TV software.

All of this relates to the industry of television, in that there is plenty of money to make it profitable for Apple to innovate. Actually, TV has a number of facets that are within the synergy of Apple, the industry isn't very innovative despite strong marketing for incremental improvements in TV sets. We will see what killer new hardware Apple brings to market.

The problem is likely to be content providers sometimes won't play ball. Steve Jobs isn't there to twist arms and it remains to be seen if anybody at Apple can play the GodFather as well as he did. The software or content is certain to be delivered via the Internet and likely will use the new server farm Apple built. The problem they will have to overcome to compete with the cable and satellite TV companies is the fragmentation of channels and copyrighted content that will have to be provided to make any delivery system competitive. Fox, for example, has had knockdown, drag-out fights with cable providers demanding unreasonable fees for content.

The rumor is that Apple is going to revolutionize the hardware of TV sets but without content, no hardware magic will matter. Steve Jobs didn't indicate anything more specific than he abhorred the spaghetti tangle of wires that plug into a generic TV set. He also hated the complication of the plurality of remotes we all have for all the various boxes that deliver digital content to our screens. Apple TV for example has an HDVI out port and operates with a one button remote.

His point is well taken, as our big screen Visio has a remote for the TV, a remote for the Dish Satellite box, a remote for the Blu-Ray player, a remote for the Apple Sound System, a remote for the PlayStation 3 and a remote for the Apple TV device. We have to rely upon our 12 year old daughter to keep it all working. I joke but she knows shortcuts using remotes that I never bothered to learn. All of this reminds me of my elderly parents who needed me to change channels since they could never quite grasp the concept of the cable remote, which required you to first address the device you wanted to change, such as TV, VCR or cable box.

I can appreciate the potential of Apple upgrading the existing Apple TV device and perhaps adding Siri to streamline the control of television. I have a hard time seeing how Apple could really revolutionize the screen portion of the TV enough to convert it from being a commodity item to being an Apple magical product, able to generate Apple sized margins. Apple has a history of making monkey out of tech writers, so lets see what comes out this spring, according to some researchers.

That is Greg's Bite

 

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