|Innovating The Next Big Thing||February 26, 2015|
• Analyst Insights
• Enterprise Insights
• Network & Information Security
• Enterprise Mobility
• Remembering 9/11
Next Innovator Group
Feedjit Live Traffic Feed
• Ghost City
Barry's Book Shop
iSuppli: Can Apple Breathe New Life into the Moribund TV Market?
Nov 14, 2011 – Randy Lawson
By offering a complete television solution that seamlessly integrates the three key elements of display, user interface—and most importantly content—Apple Inc. has the opportunity to develop a lucrative new business model that could allow it to cut a profit despite the weak market conditions of the TV market, according to new IHS iSuppli Home & Consumer Electronics research from information and analysis provider IHS (NYSE: IHS).
Rumors and press reports indicate that Apple is planning a television product. While conjecture on the nature of this product varies widely, IHS speculates that Apple could achieve success by offering a complete television solution.
This is partly because such a product would be simple to utilize and functional right out of the box, in keeping with Apple’s user-friendly approach to hardware. However, it also would allow Apple to integrate access to pay television right into the TV, differentiating the product from the competition, and allowing the company to tap into the expanding market for subscription revenue. Apple could do this either by expanding its existing iTunes services, or by partnering with pay TV providers to deliver programming via cable, satellite or other means. Such a partnering deal could be critical to the success of Apple’s television and could serve to reshape the television business, much in the same way the company has revolutionized the music market with iTunes.
“Apple has the opportunity to do for television what has done for PCs and tablets—offering something that’s easy to use, works right out of the box and that delivers a compelling user interface that’s unparalleled in the industry,” said Randy Lawson, principal analyst, display and consumer electronics at IHS. “But even more important than that, Apple is really the only company that can pull off partnerships with operators, allowing it to offer a television set that’s completely ready to watch when a consumer buys it, requiring no additional hardware like a set-top box, or a subscription for service from a third party.”
Television Sales Go Flat
After riding high during the flat-panel replacement wave of the 2000s, the growth of television unit shipments has slowed, impacting market revenue. Having frequently risen by double-digit percentages in the mid to late 2000s, global television shipment revenue growth will slow to the low single digits in 2011 and 2012, will stagnate in 2013 and actually will decline in 2014 and 2015.
In contrast, global pay television subscription revenue is expected to continue to rise in the coming years. Although growth will slow somewhat, revenue still is set to expand by a healthy 5 percent in 2015.
The figure below contrasts the IHS forecasts of global revenue growth for televisions and for pay TV subscribers.
Meanwhile, the already thin margins are dwindling in the television market, making it increasingly difficult to cut a profit.
“In light of these diverging trends, if Apple does enter the television market, it will have to make its money not on hardware, but rather on subscriptions to content,” Lawson said. “This is a similar model to the wireless communications market, where cellphones are sold to consumers at a breakeven price or even at a loss, and the profits are all made on mobile service subscriptions. Apple has achieved major success with this model with the iPhone in the wireless market and could bring a similar business model to the television business.”
Watching Apple’s Television
“Apple TV is only a marginally successful product because it doesn’t allow Apple to control the entire experience, as it has done in the past with products like the iMac” said Lee Ratliff, principal analyst, broadband and digital home for IHS. “If Apple were to offer another set-top box, it would have the same problems that Apple TV has with consumer being forced to hook the box up to a television, and integrate the device into their existing entertainment system. I think Apple might may to enter the TV market so it can offer an integrated experience, where all the hardware, software and content comes in one easy-to-use package.”
IHS speculates the product may be at least a 50-inch set using liquid crystal television display technology. The panel represents the most expensive component of an LCD TV. However, the large-sized LCD market is currently in a state of oversupply that may worsen over time, making such panels increasingly affordable when the Apple television begins shipping, which is rumored to be in late 2012.
Combined with Apple’s capability to manage the supply chain to obtain optimal pricing, the company should be product the set at a competitive cost.
The Apple television would also likely integrate the electronics from Apple TV set-top box into the television chassis.
A critical feature of the Apple television will be the user interface. Press reports indicate Apple plans to use the Siri voice recognition software first employed in the iPhone 4S smartphone. This will bring revolutionary ease of use to the set, allowing users to eschew complex, easy-to-lose remote controls and instead employ voice commands using natural language.
Content is King
“To make money in the low-margin television business, Apple’s product is going to have to be different from every TV that’s on the market today—and it will have to deliver more than just a whiz bang interface,” Lawson noted. “The company likely will partner with television service providers, allowing Apple to cash in on subscription revenue.”
The most likely partner candidates for Apple in the United States and Europe would be the cable service operators. Similar to the cellphone market, consumers may be able to lease or purchase Apple’s television from a cable operator at a subsidized price.
To address multiple pay TV operators, Apple likely would have to produce multiple versions of its television. This would be a time-intensive process, requiring as much as six months to year of development to each operator.
Finally, Apple’s move into the content side of the television market may represent an incursion into the pay TV operators’ traditional territory, reducing their incentive to enter a partnership.
“Apple may benefit from controlling the pay TV ecosystem—but it’s critical for cable operators to control that ecosystem,” Morrod said. “The television market is different from the mobile handset market. In the phone market, wireless coverage is a commodity—so Apple’s iPhone had an opportunity to create differentiation. However, the content services operated by the cable operators are the differentiator. There’s less need to differentiate on the hardware, and more benefits to find innovative services and application, like digital video recording (DVR). However, unless Apple can find and monopolize one such service, there is little incentive to share subscription revenue with a hardware maker like Apple.” Apple in the past has shown an unparalleled skill at managing the complexities and pitfalls of partnering with content providers. This is most notable in its agreements with music publishers to create iTunes, and its deals with publishers to provide access to newspapers and other periodicals on the iPad.
“Given its history of success, Apple is really the only company that can strike a deal with the pay TV providers to make a truly integrated television product—complete with content,” Lawson said.
However, if these challenges prove insurmountable, Apple has an alternative route to delivering an integrated TV product.
“Apple could simply beef up the Apple TV hardware and service and integrate it into a display,” Morrod said. “This would allow them to offer built-in content without having to integrate with a pay TV service.”
» Send this article to a friend...
» Comments? Tell us what you think...
» More Analyst Insights articles...
Commentsblog comments powered by Disqus
Support This Site
• 2/12 Faultline: Streaming services “chip away” at Broadcast TV
• 2/12 Faultline: WiFi Alliance voices “concerns” over growing LAA services
• 2/12 Faultline: “Survey shows linear TV’s hold is slipping as viewing habits shift
• 2/12 Faultline: Charter Q4 results show footprint growth but not profit
• 2/12 Faultline: “Internet services will face increasing content costs”
• 2/11 Canalys News: Over 720,000 Android Wear devices shipped in 2014
• 2/5 Faultline: Two newest Telefonica UK MVNO partners show positive results
• 2/5 Faultline: SeaChange jettisons staff to stay afloat
• 2/3 Canalys News: Media alert: Micromax reaches number one in smart phones in India for the first timef
• 2/2 Canalys News: Worldwide tablet shipments fall for the first time – down by 12% in Q4 2014
• 1/30 HP Security Products Blog: “I’m just here so I don’t get fined”Enterprise security: What’s new for the week of January 26, 2015
• 1/30 HP Security Products Blog: “I’m just here so I don’t get fined”
• 1/30 McAfee Blog Central: Hackers Access Taylor Swift’s Social Accounts. Her Advice: Shake It Off
• 1/30 McAfee Blog Central: New Year, New Opportunities; Special Guest Scott Lovett
• 1/30 IBM News: IBM Research To Lead Company's Advanced Computer Chip R&D At SUNY Polytechnic Institute
• 1/30 IBM News: IBM Announces Services Center in UK, Creating up to 300 New Tech Roles
• 1/30 IBM News: IBM serves real time interactive data to fans at the Australian Open
• 1/29 HP Security Products Blog: The effect of management turnover in your SOC
• 1/29 HP Security Products Blog: HP TippingPoint DVLabs threat assessment--Ghost
• 1/29 Ovum: Apple Watch could bring an extra US$16.5bn to Apple’s revenues by 2020
• 1/29 Wireless Watch: Apple posts record numbers, but it all hinges on the iPhone
• 1/29 Wireless Watch: As Samsung’s low end dash crushes profits, Huawei turns premium
• 1/29 Wireless Watch: Sky defects from Vodafone to O2 to join UK quad play race
• 1/29 Wireless Watch: India lowers spectrum prices, but not as far as GSMA wants
• 1/29 Faultline: UK communications numbers mostly heading in the right direction
• 1/29 Faultline: Broadband Delivered sports to increase 10-fold by 2025
• 1/29 Faultline: Apple posts record numbers, success hinges entirely on iPhones
• 1/29 Faultline: Sky throws in its quad play hand with Telefonica
• 1/29 Faultline: Vultures circle as India enters final cable digitization phase
• 1/29 Faultline: Imagine buys RGB Networks for multiscreen delivery portfolio
• 1/29 RSA Security News: EMC Reports Full-Year 2014 Financial Results, Record Fourth-Quarter Revenue
• 1/29 McAfee Blog Central: What We Need to Fight Back (Blog 1 of 4)
• 1/29 McAfee Blog Central: Super Scammers Flock to Super Bowl. Here’s How to Avoid Them
• 1/29 McAfee Blog Central: To Make Security Work for Work, Companies Need to Invest in Automatic Solutions
• 1/29 Intel News: 5th Generation Intel® Core™ vPro™ Processors Aim to Transform Today's Workplace
• 1/29 IBM News: IBM Research and Mars, Incorporated Launch Pioneering Effort to Drive Advances in Global Food Safety
• 1/29 Cyber Trust Blog: The Importance of Effective Information Sharing
• 1/28 Gartner Says By 2017, U.S. Customers' Mobile Engagement Behavior Will Drive Mobile Commerce Revenue to 50 percent of U.S. Digital Commerce Revenue
• 1/28 iSuppli: Apple's record iPhone results prove no mobile market leader's position is ever secure
• 1/28 Symantec News: Symantec Selects Veritas Technologies Corporation as the Name for its Independent Information Management Company
• 1/28 McAfee Blog Central: 2015 – Intel Releases New Discovery Education Module on Cybersecurity
• 1/28 McAfee Blog Central: 2015 – Time to Reexamine Cyber Parenting and Cyber Safety
• 1/28 IBM News: IBM Research Announces Cloud Breakthrough For Protecting Personal Data
• 1/28 Cyber Trust Blog: Data Privacy Day in a World of Cloud Computing
• 1/27 Gartner Says Power Shift in Business Intelligence and Analytics Will Fuel Disruption
• 1/27 Canalys News: Media alert: Apple takes top spot in China for first time in smart phones
• 1/27 McAfee Blog Central: Mobile Ad Networks Puncture Your Personal Defenses
• 1/27 McAfee Blog Central: Security Skills Shortage? Don’t Panic!
• 1/27 IBM News: EMLYON Business School to Create a 'Smart Business School' via IBM Cloud
• 1/27 Cyber Trust Blog: Six Proposed Norms to Reduce Conflict in Cyberspace