Questions about the future of television and where the Apple TV fits in

Television is changing. It wasn't too long ago that the structure of the industry was pretty straightforward: TV studios and networks created the content, which was distributed by cable companies or broadcast over the air to antennas. Viewing was typically live on television sets in the home. But viewer preferences started to change enabled by new products and services such as the DVR, cable boxes with on-demand features, YouTube, and Netflix. Americans, especially younger ones, are replacing and supplementing live television with streaming and on-demand options. A recent study by Forrester reports that only 40% of Americans aged 18-34 watch live linear TV in a typical month (although live viewing may still command a higher share of total hours viewed). To meet these evolving needs, new services are emerging. A new breed of 'cable company' is forming, one that owns no infrastructure but licenses content to distribute over the internet. Dish's Sling TV and Sony's Playstation Vue will launch in the US this year with a focus on smaller bundles of live and on-demand content. Netflix and Amazon Prime focus on licensing large libraries of back-catalog content in addition to some first-run movies and financing and producing exclusive content. Hulu aggregates current-season and back catalog TV programming and also finances exclusive content. Meanwhile, several TV networks are or will soon be offering their own programming over the web for a monthly subscription (CBS All Access, HBO, Showtime, Nickelodeon, and likely more to follow).

What's interesting about all of these services are they change the idea of what TV is: no channel numbers, no clunky remote controls, no special equipment needed, no installation appointments, and painless cancellation.

For now, each of these offerings has major holes when compared to the traditional cable TV bundle, but that may not matter to an individual viewer. Question is, how many of those viewers are out there. Some viewers may combine multiple services, but then the question becomes whether or not they'd be better off with a cable TV subscription.

So how do the Apple TV, Roku, Chromecast, etc fit into this world? The market for these products has been growing, likely due to the popularity of streaming services and the desire to occasionally/frequently watch content on a big screen. Other devices typically connected to a TV are building in streaming services, such as game consoles, DVR's, and blu-ray players, as have the TV sets themselves. The Xbox One has perhaps the most advanced set of features, but in their review The Verge says: 'The TV integration is an awkward hodgepodge of menus and overlays and dead ends' and published another article with the subtitle: 'Microsoft learns nothing from Google TV's mistakes'.

Apple has never been hesitant about introducing forward-looking products. For example, they were early to introduce laptops without optical drives, completely skipping over blu-ray drives. If Apple does radically redesign the Apple TV, it would seem the time has passed for it to hook up to (or replace) a cable box or include a hard drive for a DVR.

So what will be at the center of the TV experience in the future - a set top box, a TV set, a smartphone? I believe content and convenience will be the driving factors of how the TV landscape evolves. Viewers clearly prefer to consume their content when it is convenient for them on whatever screen they choose, just as they do with Netflix and Hulu today. For some people these apps are already the center of their experience. But as more of these services proliferate how will viewers find something to watch? This may not be a problem for the Netflix subscriber today, but I can see a future where I subscribe to Netflix, HBO, and Sling TV (for ESPN), in addition to free options and a la carte movie and TV purchases. What will become my 'TV guide' or replace channel-surfing?

In his biography, Steve Jobs was famously quoted speaking about television:

'It will have the simplest user interface you could imagine. I finally cracked it.'

That was over three years ago, and it seems very fitting today. He could have been referring to a service that Apple was building, or building a better interface for the apps already on the Apple TV.

When thinking about Apple's plans I try to think product-first. A full TV set from Apple still doesn't make sense to me from a financial point of view, but perhaps it does from a user experience point of view. If they think in order to make the best product it needs to be a TV set then they will, regardless of the market size or how much it might cost. However, it would seem a disservice to make that interface Steve Jobs was referring to exclusive to a TV set or set top box. Is the future of TV just an app or collection of apps or is it something more?