Apple's Next Big Opportunity: Could It Be Remote Controls?

While there continues to be widespread speculation that Apple could enter the television business, the company might already have all the elements it needs to play a major role - and make gobs of money - in the digital living room.

Barclays analyst Ben Retizes asserts in a research note that Apple's real opportunity could be to turn iOS devices into television remote controls.

"While there has been ample speculation around Apple’s next move – potentially into TV’s - we believe 'the next big thing' for Apple may more about TAM [total addressable market] expansion of existing product lines," he writes. "We believe Apple has more control to expand the total addressable market for its iPhones and iPads than its competitors given its vertically integrated business model. For example, the company can easily add new features and capabilities to its touch screen devices through software updates – and leverage Apps made by others – to expand the utility of its devices."

For instance, he says one TAM expander would be integrating near-field communications technology and fingerprint authorization to make the phone a secure payment system."With this utility, one could argue that using the iPhone as a credit card expands the TAM significantly considering that according to The Nilson Report there were over 6.54 billion debit, credit and prepaid credit cards in use worldwide at the end of 2011," he writes. " [T]he U.S. Census Bureau estimates that there will be over 160 million credit-card holders in the U.S. by the end of 2012. However, the iPhone TAM is arguably limited given Apple doesn’t control its destiny completely – and must adhere to desires of carriers (subsidies), payment partners and even technological barriers (carrier bands)."

But he sees an easier option.

"The lower-hanging fruit for Apple seems to be TAM expansion for the iPad near-term," he writes. "The iPad doesn’t seem to be capped by carriers and seems to cater to Apple’s business model even better than phones. Given Apple’s reputation for superior design, software, content delivery and overall brand, the iPad seems like a market where its share could arguably be permanently higher than that of the iPhone’s ...In short, the iPad seems a bit like the iPod. As a result, Apple needs to make this product better through software – and allow it to control more tasks in your life."

The key here could be the pending iPad Mini, he thinks.

"We believe the big secret about Apple’s TV strategy is not the TV itself – it’s about selling the remotes," he writes. "Currently, the new iPad can send content to a TV wirelessly via AirPlay if that TV has an Apple TV attached. The important thing about AirPlay is that it enhances the use case for any iOS device – along with Apple’s 'remote' app. We believe Apple should really evolve this vision further with iPads acting as a 'central command' for the digital home."

Reitzes contends that the first step could be for those that own the current Apple TV  box, with the iPad acting as a more fully functioning remote control. "{W]ith iCloud, we don’t see any reason why Apple wouldn’t eventually allow an iPad to be an interface for the TV – to perform basic computing tasks with a virtual keyboard like checking emails and calendars, surfing websites, editing your PhotoStream and even chat with iMessage. These tasks would clearly infringe further on tasks usually earmarked for desktops and laptops – and the iPad and Apple TV combination doesn’t even require Apple to get into the TV market."

He still things Apple will one day get into the actual TV market, "but not until it is able to negotiate a service offering for TV – building on iTunes and iOS – that revolutionizes the market for enjoying content and computing in one platform."

We believe Apple will be patient until it finds the right cable TV partner to work with to promote this vision. But he sees a huge opportunity first. "If every U.S. home needed to have an iPad to use as a 'command center' or TV remote, one could argue that Apple could add hundreds of millions of units to [the] TAM," he writes. "We also believe that the iOS device TAM can be significantly expanded through use of the iPad as an in-car navigation device and an interface to enhance in car entertainment features. There is also a significant TAM in the global automotive market, as worldwide auto sales totalled about 60 million in 2011."