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The next Apple TV is on the way, according to recent reports including one published last night by the Wall Street Journal. The Journal's Daisuke Wakabayashi apparently has inside information (seemingly from Apple) that contradicts Carl Icahn's claim that the market undervalues Apple's stock. Icahn thinks the price should take account for its entry into the television and car markets. "The company’s aggressive increases in R&D spending (and some of the more well-supported rumors)," he wrote in an open letter to Tim Cook yesterday, "have bolstered our confidence that Apple will enter two new product categories: television and cars. Combined, these two new markets represent $2.2 trillion, three times the size of Apple’s existing markets (if we exclude Apple Watch)."
According to Wakabayashi, Apple shelved its efforts to produce a standalone 4K panel television a year ago. Cupertino's current plan, he writes, is to "unveil a slimmer version of its Apple TV box with a redesigned remote control and revamped software, according to people familiar with the matter," in time for WWDC in June. Certainly if you look at the graphic for WWDC 15, one possible interpretation of the central shape of the rainbow-colored Venn snowflake is that the new
Apple TV fantasy prototype by Martin Hajek
Reading too much into Apple's announcement graphics is, of course, a fool's game. But it does seem highly likely that Apple will position its new set top box as the nexus point of both entertainment and home automation. Is a TV just a TV, or is it the digital hearth around which the post-modern household revolves? There is a good case that your TV is more engaging than, for instance, your Nest thermostat. Did Apple make a tragic mistake by letting Google acquire Nest? Or did Tim Cook correctly assess that getting consumers to pay attention to their thermostats, no matter how cool, would be a hard habit to build?
Now that even indefatigable Apple TV evangelist Gene Munster has had to admit that, "we no longer expect a television to launch indefinitely," it is time to embrace the logic of Apple's decision. One way to look at Apple is that it is neither a hardware or a software company, but a software distribution company . By this rationale, the company is most successful when it deploys the minimum amount of hardware possible to distribute its software platform . Think about how much content Apple delivered through the mass distribution of the iPod. Think about the relative success of the iPhone over the iPad. By this logic, the Apple Watch will be successful based on how much software it can dispense through the relative simplicity of its aperture.
When you think about a TV, it is clear that you do not have to manufacture the screen to harness it as a software distribution medium. In the end, Dieter Bohn explains on The Verge, there is only one real advantage Apple would get from creating an integrated TV. "Apple’s interface would have become 'Input Zero,' the default thing that appears when you hit the power button." Without the power of that default, he writes, "Apple has to fight directly with the cable box to become Input One."
Instead, Apple is betting on the iPhone's halo effect to make it "Input One." After all, the iPhone has become "Interface Zero" for hundreds of millions of people. Apple's success in the 21st century has been through the wide distribution of small devices. Its desktop and laptop computers continue to improve as products, but Apple might not even still exist if it were not for the iPod and the iPhone. So from this perspective, it would have been an invitation to failure for Apple to have pursued the 4K TV dream.
And what about Icahn's other big ticket product, cars? Again, this makes no sense. Apple does not need to build the car to win the distribution rights for its consumer-facing software. If Apple can turn the screens and audio system of a car into an extension of the iPhone, it will win. If it wants more immediate purchase on the app ecosystem of the car, it could simply acquire a company like Automatic. It makes a $99 piece of hardware that slots into the standard diagnostics port in almost any car post-1996 and just launched the first app store for cars.
A somewhat more hardware intensive product category for Apple to contemplate instead of competing with Detroit or Tesla over cars would be consumer robots. I don't mean full-on humanoid robots or those Google-acquired animal robots. I'm thinking about something more like the Jibo, a cute little "social robot" which raised more than $2.5 million on IndieGoGo last September and just raised a $25 million A round in January. The advantage that Jibo has over the Apple TV as a household hub is that it exists dynamically in space. It is just a pedestal for a large mobile eye with a friendly personality that can interpret sophisticated social signals from family members. It's friendliness, I think, makes it less creepy than a TV that watches you.
What should make this kind of small household robot appealing to Apple is the ratio of hardware to software distribution. Once economies of scale kick in, these kinds of devices will be priced in the low hundreds of dollars (the early adopter price for Jibo is $749). They are easy to reposition and become more powerful when working in teams distributed throughout the home. The genius of Jibo is that you are more likely to talk to it than your thermostat—or your iPhone, for that matter. Like Automatic, Jibo is in Apple's sweet spot for minimum hardware required to distribute useful and engaging software. A question for Carl Icahn: how would you value an Apple that entered these two new product categories?
