The HDTV business is notoriously cut-throat and low-margin — a departure from Apple’s usual territory. What will Cupertino need to do to set itself apart and justify the legendary “Apple Tax.”
The Apple news website Cult of Mac reported Monday that an anonymous, but very reliable source close to Apple has viewed a prototype of the much-speculated upon Apple “iTV,” and that the device will include Apple’s voice recognition software, Siri, as well as FaceTime for video calls through a built-in iSight camera. Granted, Apple rumors are a lot like opinions: Everybody’s got one. That being said, rumors regarding a foray by Cupertino into the HDTV business have been building for the better part of four years; lending a bit of credence to this speculation was Walter Isaacson’s allusion last year to the new device in his biography of the late Steve Jobs, reporting that Steve had “cracked” the code to creating a television that everyone on Earth would want to own.
Although we don’t doubt Cult of Mac’s source — the website claims the source is well-placed and has offered numerous correct predictions and insights in the past — it seems to us that Apple would want to include more in its initial television offering. Generally, entirely new product categories from the company tend to do more to disrupt the current field than these rumors would seem to indicate: The iPhone rewrote the book on mobile phones, the MacBook Air essentially heralded a new class of high-performance ultra-portable laptops, and the iPad, well — you get the point. Throwing a few features that have been around for years into a display that has also been around the block (though admittedly still represents the best in the business) simply does not seem to follow Apple’s logic.
The flat-panel television business is also a notoriously low-margin one: Sony, perhaps the most celebrated of all television makers, lost $10 billion over the last decade on the 20 million plus sets it sells each year. And according to ZDNet, Japan’s three largest TV makers — Sharp, Sony, and Panasonic — bled a combined $21 billion in 2011 alone.
But those numbers do not take into account Apple’s near-magical propensity to charge more for a product than virtually anyone else. Wireless carriers heavily subsidize iPhones so that consumers can afford them, and Apple computers generally command hefty premiums for specs comparable to their PC counterparts. In fact, what Apple is arguably best at is bringing to market an entirely new genre of device — the tablet for instance — and setting a price that leaves its healthy profit margins intact, either because consumers have no base of reference to compare to, or because the products and features are simply too compelling to ignore. An internal Best Buy survey leaked earlier this year suggested that the new device may cost as much as $1,499 for a 42″ 1080p model.
In order for consumers to flock to an Apple branded television set that keeps Apple’s much-vaunted profits unscathed, it will need to offer a truly unique experience to set it apart from the the myriad sub-$1,000 big screens available far and wide. Apple is likely planning to accomplish this through a content delivery system that perhaps sidesteps traditional cable providers to some extent, or at the least more tightly integrates content delivery from many different sources — a feat Google has attempted in the past with its Google TV, but has yet to find widespread success with. Following a report from earlier this year that prototype devices were already in the hands of Apple’s Canadian launch partners, we may not have much time left to wait. What would it take for you to joyfully pay a premium price for an Apple television?
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