Analyst: Apple To Face Tough Challenge In Internet TV

LONDON -- While most of the attention from Apple Computer Inc. this week has focused on the iPhone, Steve Jobs in his keynote also made good on his 2006 promise to release an Internet TV Adapter (iTVA) and rolled out AppleTV.

The box, scheduled to sell in the U.S. by next month for $299, features a 40-Gbyte hard drive and 720p high-definition video that will allow users to wirelessly transmit digital video, music and photos from their computers to TVs.

Apple TV supports 802.11b/g/n, includes an Intel processor and allows users to stream content from up to five computers.

Analysts generally welcomed the initiative, which the computer maker flagged almost two years ago, and suggested the move was an important one for both Apple and for the entire broadband video industry.

However, many also pointed out that Apple is coming quite late on the scene with such a device. For instance, Michael Greeson, founding partner and Principal Analyst at the Diffusion Group, noted Internet-enabled DVRs and set-top boxes, not to mention digital media adapters, have been around for several years.

Is the industry not aware, queried Greeson in a note, that the latest generation of game consoles do pretty much the same thing as AppleTV (sans iTunes), including burning content to an embedded hard drive.

And he questioned "the often nauseating level of presumption extended to Apple by the public media and (in many cases) the analytical community. It's as if everything that Apple touches will not only turn to gold but fundamentally redefine how we experience media."

Why is Apple's entry into this space considered "revolutionary" when so many others offering similar solutions were there first, queried the analyst.

"Everyone's in the game, so Apple's entry could hardly be considered "revolutionary," said Greeson.

He also cautioned that this may also be a concern for Apple itself. "Could these pundits have possibly set the expectations for this device (and the whole concept of Internet-based digital video to the TV) any higher? There is no way Apple can live up to this kind of hype."

Greeson stressed AppleTV is not the iPod and suggested the box is most unlikely to enjoy the success of that phenomenon. He also noted the online video business is not a simple mirror image of the online music business. While the similarities are strong, they are not universal.

"For example, purchasing a song download at $.99 is quite different than purchasing a movie download for $150-$20. Just ask someone who doesn't work in the business how appealing this sounds."

Greeson noted TDG found in a recent study that fewer than 13 percent of consumers would respond positively to such an offering. He added iTunes on the TV is not the same as iTunes on the PC, and nor should it be.

And he stressed: "The cable, satellite, and TelcoTV players will not sit still and let someone like Apple, Sony, or Microsoft simply step in and cannibalize their TV revenue."

While Greeson concurs the future of Internet TV is bright, "allowing consumers access to a wide variety of unique content that is not carried by the major players is not the same as offering a movie service that competes directly with the incumbent video offerings - especially movies."

He also concedes Apple's entry into the living room is significant, and in the long term will have a positive impact upon both the 'digital home' and 'connected consumer' industries. But he adds: "This box is not 'revolutionary' in the slightest, nor is moving iTunes to the TV. This is just the latest move by a very important technology innovator, a market leader whose every move is in the professional and public eye."

The public has yet to weigh in on Internet video-to-the-TV in general and Internet movie downloads in particular, so that best that can be said is that the jury is still out, concludes Greeson.