AppleTV: Not Mainstream, But Then Again Neither Are DVRs (Yet)

Categories: New TV Technology

Written By

July 20th, 2008

Steve's little hobby has been so little, not even he is talking about Apple TV lately.  I still mantain that currently it's nothing more than a glorified, overpriced media extender, but I still envision a futuristic AppleTV that has both DVR and Slingbox capabilities and that version changes my view dramatically.  

We're seemingly nowhere closer to that world than when I first started thinking about it over a year ago.  But this blog post: Is The Apple TV Dead? got me thinking about it again.

Perhaps we should have a little discussion about mainstream and what this word means to people.  As defined by Webster, the primary definition of "mainstream" is: the principal or dominant course, tendency, or trend

As a literalist, the words that grab me there are principal or dominant.

By this standard, even after being in existence for over 10 years, digital video recorders (DVRs) are not yet mainstream.  Nielsen estimates currently place DVRs in about 25% of the homes in the US, or just over 28 million homes.  That means three out of four homes do not currently have any DVRs in them.   

If three out of four homes aren't using a technology it strikes me as neither principal nor dominant.   Therefore, DVRs are not mainstream.  TiVo?  Decidedly not mainstream.  There are 3.8 million TiVos out there after ten years, but Nielsen pegs the total number of active DVRs at 36 million (30 percent of the DVR homes have more than one DVR) giving TiVo just over 10% share.

Due to Sarbanes Oxley, I'm reasonable comfortable that TiVo accurately reports its units in use.  Nielsen estimates are just estimates, but I'm guessing that since Nielsen took a lot of flak for undercounting DVRs in the past that it's being more rigorous with its DVR estimates now.   It's not completely fair to couple TiVo's actual numbers with Nielsen estimates but when we do it anyway, TiVo has only around a 10% share of market among all DVRs.  This percentage will only continue to shrink.

It's well documented that it's hard to compete with free, but that's what TiVo is attempting to do.  With increasingly poor results on the side of the equation where they attempt that competition.  Sure, TiVo may ultimately receive lots of cash in licensing its intellectual property (patents), but a.) that remains to be seen and b.)  that doesn't mean selling hardware is a good business for TiVo to be in.

As a software, data and intellectual property venue, I believe TiVo never goes away. As a hardware product, unless it's bought out, I don't see how it stays in that business over the long haul.  When it comes to AppleTV improving, TiVo may be part of the problem.

Two Problems: The Market (see TiVo) and Politics

Apple has to understand that the TiVo loyalists are very similar to Apple's loyal core.  These people love the TiVo product, consider it inherently superior to any of the free DVRs, and even factoring price into the mix, wouldn't have another product.  Ok, fine.  We know what that gets you: currently less than 11% (and shrinking!) of the market.  Apple has to look at that and think, "Uh, yeah sure, we want to make media portable for everyone and give people a way to take control of their media, but #&@!, look at TiVo!?  Why would we want any part of that?

This part of the equation, at least theoretically Apple can get over.  It might be hubris on Apple's part to think it would fare any better than TiVo, but witness the hundreds of millions (perhaps billions) that Microsoft has lost with its Media Center product.  It's a fairly decent product, it's free (assuming you already laid out the cash for a computer with a TV Tuner in it) and they currently charge NOTHING for the programming guide.  Yep, that thing TiVo charges you north of $10 a month for in most non pre-paid cases, Microsoft simply gives away.  The Microsoft subsidy. 

Microsoft is willing to take these losses under what I suppose are two premises:

1.) Microsoft believes at some point the ability to take control of your digital media is going to be a huge deal

2.) Given 1.), Microsoft figures in some acceptable loss in the name of research and development

My gut is that Microsoft is absolutely correct.  Fortunately, Apple and Microsoft have a luxury TiVo doesn't.  Way, way more cash to play with.  TiVo isn't cash poor, but its core business has consistently been a money loser.  While I've long thought that Comcast is just waiting for TiVo to be beaten down enough to just buy it outright, there are others who I could see making that play (the usual suspects: Google, Microsoft, Apple, hell, even Yahoo or AOL may want to get in on it).  In any event, companies like Microsoft and Apple can take some losses in the name of R&D and hoping to capture a fairly non-existent market for management control of your digital media.

So despite TiVo's lack of market success against inferior (but "free") DVR products, I could see Apple getting over that aspect quickly enough.

It's the politics that scare me though.  Apple's in a tricky situation.  What will surely fuel the need for digital management is digital content. The biggest digital content that can be monetized currently is traditional music and video (TV and movies) all of which Apple resells through iTunes.  For a lot of reasons, Apple and Steve Jobs aren't favorites with many of the studios.  Really though so much of that probably comes down to Steve Jobs sitting in the room and saying, "Hi, I'm Steve, I created Apple, the Mac, the iPod and the iPhone - and in my spare time I launched a little company I like to call Pixar.  What have you done?"

Yes, Jeff Zucker, he's looking at YOU.  I do love 30 Rock, but even if you throw in Heroes and the Today Show, Burn Notice and Monk,  it's not exactly Apple/iPod/iPhone/Pixar like success.  And so, Apple must navigate all of the egos. 

In terms of focus, I believe Apple mostly prioritized correctly because a big piece of the plan has just been getting people comfortable with iTunes.  Despite the small group of vocal naysayers, I'd say Apple has succeeded wildly with that piece of the plan.

But we have to remember, it is a slippery slope.  Old media (which Apple does need) does not easily embrace new technologies.  They'll spend every ounce of time, energy and dollars they can resisting (as they did with the tape recorder, and as they did with the VCRs, DVRs and MP3s, etc) but ultimately, the technology that provides more and better control wins.  Resistance really is futile.  But, they'll resist anyway!

In the end, there is no doubt in my mind that there will be a media server that will have full DVR and Slingbox functionality built into it.  Whether that happens anytime soon at Apple (or ever) is another story.  If Apple announces a DVR in AppleTV it will upset a few people.  If it announces Slingbox functionality it also will rub some folks the wrong way.  It's too bad that is the way it is, but because it is, it's not easy for Apple and I believe that's why it has played AppleTV down so much (in addition to most people simply not caring about this stuff yet).

But so long as services like broadband, DVRs, and WiFi continue to proliferate,  I'm pretty sure we'll see a pretty cool version of AppleTV...someday.  Sadly someday doesn't look any closer right now than it did a year ago.


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