Apple TV faces many challenges

COMMENTARY As always seems to happen with Apple, there's the barest hint of a rumor of some new device and on the spur of the moment you get the incessant watch for actual products to hit the market. The latest noise is about an Apple TV -- not the set-top box version, nevertheless an Apple-branded full set. According to the Walter Isaacson biography, the late Steve Jobs said that he had cracked the problem of a successful offering.

The interface

Jobs had focused on the interface, syncing the television with all devices and cloud services, and leaving no need to fiddle with "complex remotes for DVD players and cable channels." However there is more than one problem in play. The television set market is unlike any other that Apple has entered. Not to say that the company doesn't have a chance -- far be it from any of us to rule out the opportunity of success. Yet here are the strategic hurdles that Apple CEO Tim Cook faces:

Apple went into the personal computer market when it was nascent. Though there were MP3 players previously the iPod, the gadget was nevertheless an early entry. Smartphones had been limited in scope and distribution previously the iPhone.

Early markets offer some major advantages. An innovative company has a chance to help define a product category and expectations. In the TV set market, that's far more difficult in a fundamental way, largely because current research and the way it works has had enormously high adoption for decades.

The existing innovation is a complex

Supporting the existing innovation is a complex, massive ecosystem where the dominant players largely have interlocking interests. Retailers will evidently want to sell Apple TV, and analysts suggest that the company will provide programming in a disruptive way. However as much as Hollywood studios have worked with Apple earlier, they will be wary of providing content directly, because they want to protect cable and satellite distribution deals that provide such an important part of their earnings. Though Jobs was a genius in negotiating with the networks, the iPhone and iPad provided alternate revenue streams. Anything delivered on TV sets goes to the core of programming revenue. The minute Apple TV appears to be a threat, the studios will pull back.

An important factor in Apple making high profits is regular turnover in consumer product. There is some significant expectation that people will upgrade products every two years or less. Television sales don't work that way. People have become conditioned to expect a decade or more of service out of their TVs. One reason for price pressure on set manufacturers may be that the sets have a shorter lifespan than they once did, and people want a lower price in expectation of increased replacements. So Apple probably can't use replacements as a way to boost revenue. Not only does the company have to find a way to add value beyond what televisions already offer, nevertheless it as well has to develop a different business model than it's been using.

The way products work

One of Apple's big selling points with consumers has been simplifying the way products work. The company's whole ethos is that a computer should be as easy to use as...a TV. Ah, right, TVs are already simple to use. It could be that any research will be in integrating television and Internet access into one device, nevertheless that would have the limitations of what the web requires. And it's not as although smart TVs that integrate traditional television and Internet video are scarce.

Apple may be able to overcome any or all of these limitations, however each is a significant hurdle. Like as not Jobs and all the other people at Apple have cracked a major interface problem, yet unless they've overcome some of these other issues, an Apple TV won't become a financial success for the company the way the iPhone and iPad have.