Apple has long dominated the digital-audio market and now it's set its sights on video. But can it really expect another huge success with Apple TV?

Apple TV isn't the first product to collect, manage and play downloaded video on a TV. But then, the iPod wasn't the first portable digital-audio player.


Not surprisingly, some industry experts say the delayed Apple TV – now shipping in the UK for £199 – will be a huge iPod-style success. And it will do for digital video what the iPod did for audio. Some even think Apple TV could be bigger than Apple's much-lauded iPhone.

"Long term, strategically, Apple TV as a revenue-generating platform is much bigger than iPhone," said Jeff Heynen, directing analyst for broadband and IPTV for Infonetics Research. "It's a $300 device that multimillions of people will put in their homes, versus a $500 device in a market that's saturated with similar things."

However, some observers will tell you that while Apple TV may be successful some day, it has significant hurdles to overcome. "The reality is that this class of device faces challenges," said Ross Rubin, director of industry analysis at The NPD Group. "None has been successful so far."

What nobody disputes, however, is that Apple TV heralds a new age in which we obtain and manage our media in significantly different ways than before.

Potential gain

While vendors such as Netgear and D-Link – not to mention Microsoft with its Windows Media Center – have offered similar devices and technologies as Apple TV, not one has yet succeeded. But Apple can make it if the quality of its previous products is any indication, said Martin Olausson, director of digital media strategies at Strategy Analytics.

"You need to be able to bridge that gap from the PC to the TV set, and there aren't many technologies that do that very well," Olausson said. "What Apple is trying to do is to use its user-friendly technology to bridge that gap."

Other companies have entered the on-demand TV market in the UK, but none is dominant as yet. Virgin is offering on-demand video via its cable service, while BT's Vision service is currently available only to a small proportion of customers.

Olausson added that products such as Apple TV are even better than on-demand programming because they don't require users to pay for expensive cable TV or satellite subscriptions. "If I'm into Desperate Housewives or 24, I can just buy that. I don't have to pay for anything else but a broadband connection."

Users are becoming accustomed to watching their programming whenever they want, and Apple TV will make it that much simpler. And the millions of video iPods already in circulation, which can be loaded with Apple TV video downloads, will boost Apple TV's chances of success.

"The fact that there are so many video iPods out there, and the mere fact that Apple sees the video on-demand market as a low-hanging fruit, means that it can go get subscribers who want both to take video with them and watch the same video on their television," Heyen said.

The result will not only be significant sales of Apple TV, but dramatically increased sales for the iTunes Store to the detriment of cable and satellite providers.

"It's already working," said Heynen, citing the success of iTunes' US video store, which has reaped $25m in downloads of Disney's Cars movie. "Given the still low penetration of digital video recorders and the fact that
on-demand is starting to take shape, the potential for Apple TV is huge," he added.

Success for Apple TV could also lead to increased sales of Mac computers. The market share of Macs has increased significantly in recent years, with many observers giving credit to the glow created by the iPod.

"Apple TV will have a bigger effect on video iPod sales, but it will have an impact on Macs, too," Heynen said. "Mac minis are priced for that pull-through effect. Mac market share is still very small. There's a lot of room to grow."

Apple TV vs Apple iPhone, part II - click here

This story appears in the June 07 issue of PC Advisor, onsale now in all good newsagents