Last night, after a brief resurrection by vocal billionaire investor Carl Icahn (he’s like Tony Stark minus everything but the money), rumors that Apple would sell an HDTV were finally laid to rest. Which is good! Because they, much like the nonsensical television sets in question, never should have existed in the first place.
The Wall Street Journal finally (hopefully?) ended the era of dumb Apple-idiot-box rumors last night. The WSJ patiently explained that Apple abandoned any HDTV plans well over a year ago, the way one might outline the ways Santa Claus doesn’t line up with the laws of physics to an especially guileless tween.
This isn’t to say that Apple didn’t explore the possibility of making a television set. It certainly did, as the WSJ and others have pointed out over the years. But experimenting with new products is far from actually putting them on shelves---especially when that product has virtually no upside to a company that values little else.
Rumors of an Apple-made television set started as early as 2010, when an analyst named Gene Munster foretold its arrival within “two to four years.” Munster would go on to be the Apple HDTV’s most vocal champion, proclaiming multiple times through the intervening years that it was just on the horizon, a fata morgana slowly bobbing further out of reach.
What Munster and other enthusiastic analysts could never quite demonstrate, though, is why Apple would make a television set in the first place. Or rather, what would be in it for them.
Television is a notoriously slim-margin business, according to IHS analyst Paul Gagnon, gross margins average out to about 10 percent (net margin, meanwhile, which factors in marketing and other ancillary costs, amounts to a break-even proposition for most). It’s also slow turnover; you don’t buy a new television every two years, like you would a smartphone or (Apple hopes) a watch. You hold onto your set for seven, eight 10 years if you can; it’s not worth ponying up for a new one unless the old one dies, or until a new standard like 4K forces your hand.
"The one thing that's always struck me as odd about Apple entering a market like this," says Gagnon, "is how often people upgrade or replace their equipment. Something like a computer or mobile phone, they're generally upgrading every two to five years, so Apple can count on selling more hardware."
It’s not impossible to make money selling television sets, but it is very, very hard. More importantly, it’s not the kind of money Apple likes to make. The company’s projected gross profit margin for 2015 is bumping up against 40 percent, four times what a television typically commands. And thanks to sluggish iPad sales, it’s found out the hard way that products with long lifespans don’t look so hot on its earnings reports.
Television would also be an arena in which Apple would have to do something it (rightly) hates: cede control. Yes, it’s likely going to present a streaming TV plan this summer, one that would allow cord-cutters to bypass the excruciating interfaces and customer service nightmares of Comcast and TWC. But the millions and millions of people who aren’t ready to part ways with their traditional cable companies will experience all the traditional frustrations of ISPs through a box with a big ol’ Apple logo on it. Bad by association is still bad. Apple doesn’t do bad.
And those are just the headlines. Finding space to display an Apple HDTV in Apple Stores would have been a logistical nightmare. Apple has plenty of television-related patents, but all for features (glasses-free 3D, motion control remote) that have either already flopped in the marketplace or aren’t enough of a differentiator to make wading into the HDTV waters worth it.
In a world where television sets are so thoroughly commoditized, there’s simply no killer feature Apple can provide that makes it worth the trouble. Even Munster, the Don Quixote to Apple’s HDTV windmill, has finally admitted as much, saying in a note to clients that he “incorrectly assumed that a combination of Siri, FaceTime, a TV app store, and PrimeSense based motion control could be compelling enough as a unique feature set for the device.”
Besides, Apple already has the perfect path into your living room. It has Apple TV.
For years, Apple executives have described its little set-top box hockey puck as a “hobby,” even as it topped 25 million total sales earlier this year. With a refresh slated for this summer, Apple TV is poised to become so much more.
The upcoming Apple TV will reportedly come with apps---including plenty of games---as well as a fancy new remote, smart home hub capabilities, and seamless integration with Apple’s laptops, smartphones, watches, and more. It’s also the perfect way to execute against Apple’s true vision of what television should be.
"The only thing I think Apple could do that would be really tough for other [television] companies to copy would be the services; the operating system, the content packaging," says Gagnon. "But you don't need a $2000 TV to do that; they can do it with a $100 set-top box."
Rather than the onerous, barely profitable drudgery of manufacturing TVs, a set-top box allows Cupertino to mold any existing television into its home entertainment vision. It allows for the possibility of the bulky margins Apple prefers, at an affordable enough price point that it’s reasonable to upgrade every couple of years---or better still, to buy multiple units for a single household.
It also lets Apple control every aspect of your experience, creating distance between what it’s offering---sane interfaces, content synched across all of your devices, fun mirroring tricks---and what your cable company can’t, instead of conflating the two. All of these advantages disappear the minute you stuff them inside a 65-inch display instead of a tiny black box.
Apple’s known all of this for at least a year. Almost anyone else who’s been watching the industry has known it for even longer. And now, finally, even the staunchest Apple HDTV believers can find a better unicorn to hunt.
