Riddle Me This: Aren't the Rumors of a $99 Apple TV a "tell"?

By Mark Sigal
August 23, 2010


I think that I am safe at this point in generalizing that Apple, as a Company, is dedicated to delivering real, sustainable value to its base of users. All of the economics and first-hand customer experience bear this point out.

That is why I can't reconcile an iOS-based Apple TV device reboot with the rumored $99 price.

Why? iOS's existing library of Games (and the developer base behind it) presents an obvious and fundamental beachhead into disrupting the video game console segment, which is currently dominated by Xbox (40M+ units), PlayStation (36M units) and Wii (70M+ units).

Simply stated, Apple is holding a good hand, and this time they are NOT going to deliver an Apple TV that struggles for relevance.

The new Apple TV - rumored to be called iTV (yeah, yeah, I know, lawsuits are standing by) - at its most basic, will be a dialing up of the iOS App Delivery Truck to a new type of environment - big screen living room TVs.

Quantifying things a bit, simply adding up the installed base of the video game console market's leading incumbents shows a target of 150M* potential users -- a massive opportunity.

That is, of course, parallel to the existing 100M iPod touch, iPhone and iPad owners for whom such a device is not only not a hard sell, but strangely is now a no-brainer.

Now, back to the rumored $99 price point. To me, this implies one of three paths for Apple TV.

One is the Limited Storage, cloud dependency path. The thinking here is that Apple is growing new datacenters, which could be commensurately timed with such a launch.

The second path is getting to $99 via Subsidy, as is the case with iPhone. This path has the dual benefit that it delivers an end-consumer $99 price point and supports a higher bill-of-materials cost, thereby enabling a more powerful device.

Regarding the second path, I just don't see it happening anytime soon, given the large affiliate fees that could be compromised under such a model and the general intransigence of the satellite and cable services providers.

In terms of the first path, knowing the process of building apps on the iOS Platform (my company, Unicorn Labs, has built photo, music, game and ebook apps), I am gonna go out on a limb and say that the rebooted device will need to have ample local storage and processing power to be at least as good as iPad is.

Now that we know the capabilities of a bigger-screen iOS device (i.e., iPad), Apple isn't gonna deliver a solution that yields a worse user experience than a predecessor product. That's just not how they roll.

In other words, the $99 case where most of the cost runs in the cloud, is shaky, at best.

That's not to say that Apple won't have the iOS version of Apple TV able to take advantage of an iPad as a Fat Client (and perhaps, even as a Thin Server).

But, fundamentally my money is on the third path; namely, running on top of the Mac Mini as a $99 software add-on, with the user being able to choose between a $69 Magic Trackpad, a $200 iPod touch, a $99 iPhone or $500 iPad as the controller.

I guess, the point that I am making is that the $99 Apple TV rumor, which Apple has done nothing to dissuade, is a "tell." What do you think?


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