An Apple TV for under the Christmas tree? Prepare for disappointment.
Hopes are fading fast that Apple’s all-in-one television set, which has entered tech folklore, will hit the market before the end of the year — or the next for that matter.
For five years there have been rumors that Apple would upend the traditional TV business and render the remote obsolete with a fully integrated, flat-screen panel capable of piping all sorts of content into the home.
The prediction from notorious Apple bull Gene Munster of Piper Jaffrey that the device will be here next month is running out of time to come true and seems even more unlikely as Apple has already had two major product launches in as many months.
While Apple's fans have visions of the company reinventing the TV business, there are big obstacles to it taking over the living room.
'The television business is a lousy business to be in right now.'
- Gartner analyst Van Baker
First, blame the sad state of the TV set market, which has been hurt by oversupply, razor thin margins and slumping sales. It’s so bad that Japanese giant Panasonic is exiting the business to focus on building smaller devices like tablets.
“The television business is a lousy business to be in right now,” said Gartner analyst Van Baker. “The margins are low and the profitability is minimal to nonexistent.”
Baker believes Apple has a better future with its set-top box that delivers content from the Internet than with selling actual TVs. It has sold more than 5 million of its $99 Apple TV devices in the past year.
Meanwhile, the TV set business is in decline, with sales dropping every year since 2009. The average selling price of a TV is about $500, according to the Consumer Electronics Association. That’s a far cry from Munster ’s prediction that an Apple TV set would cost up to $2,000.
Nevertheless, with 10.5 million TVs expected to be sold during the holidays this year, even a small percentage of those sales would lift Apple’s bottom line. The company could be looking at $2 billion in revenue for every million TVs sold.
The key to profitability, however, is in the sales of TV shows and movies and other content that could stream through the Internet into Apple’s coffers. Yet there are reasons the TV business isn’t exactly welcoming Apple with open arms.
Despite the rise of cord-cutting options such as Netflix and Amazon Prime, the cable-TV business isn’t in dire shape like the music business was when Apple disrupted it a decade ago.
In fact, trying to “unbundle” programming the same way Apple broke up the record album and started selling single songs on iTunes is getting tougher in some respects for newcomers.
Facing threats to their ad business, broadcasters and cable TV networks have increased their reliance on revenue from cable and satellite operators that deliver a standard TV package.
Indeed, the broadcast networks and their local affiliates are asking pay-TV providers to pay up for content that was once free. So-called retransmission fees are now a booming business for the broadcasters and only strengthen their ties to big distributors like Comcast and Time Warner.
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