As a backdrop to the all too common mobile device war, TVs are starting to capture the attention of technology enthusiasts with the rumours of an Apple television set possibly appearing sometime in 2013. The recently unveiled biography of Steve Jobs has revealed a vague trajectory of Apple's plans in an entrance to the television market. In the meantime, Sony warned investors a fortnight ago of an imminent 2.2 billion dollar loss on its bleeding television business, making it the fourth consecutive year in which Sony's television division has remained unprofitable.
There's a powerful demarcation to be made here - why would investors and pundits be potentially excited over the notion of Apple television when Sony, a long time and trusted manufacturer in this business isn't even capable of hauling in a profit themselves? Most of us, would have never pictured Apple building their very own in house television set, the Apple TV always looked about as far as they would be willing to dip their toes into the deep television pond. The deep television pond infested by manufacturers willing to reap the slimmest margins to undercut competitors.
You see, that's the biggest problem with the television business for Apple, and even Sony, - it's heavily commoditised and highly competitive. With its vast manufacturing scale and supply chains, Samsung is more capable than most other manufacturers of profiting from television, and even their performance remains modest at best.
You see, that's the biggest problem with the television business for Apple, and even Sony, - it's heavily commoditised and highly competitive. With its vast manufacturing scale and supply chains, Samsung is more capable than most other manufacturers of profiting from television, and even their performance remains modest at best.
Apple as a newcomer to the competition couldn't possibly expect to be able to develop in-house and manufacture quality televisions at the same scale as Samsung or even Sony and be able to deliver an affordable product to the end consumer. On the flip side of the coin, if Apple were to outsource production and buy flat panels from existing manufacturers - like Samsung - then they wouldn't exactly be innovating with their product would they, which by all accounts would most likely oppose Apple's ethic entirely.
Television is a business where it's very hard to differentiate or maintain an exclusive, Sony's Phil Molyneux even criticised the nature of television labelling this monotonous line of similar products as the 'sea of sameness'. Given product differentiation is so difficult to achieve, price differentiation is the only remaining resort, turning television into the bleeding, painful and low margin business that it is today.
Television is a business where it's very hard to differentiate or maintain an exclusive, Sony's Phil Molyneux even criticised the nature of television labelling this monotonous line of similar products as the 'sea of sameness'. Given product differentiation is so difficult to achieve, price differentiation is the only remaining resort, turning television into the bleeding, painful and low margin business that it is today.
Apple doesn't like playing the game that way. Historically speaking, Apple enjoys exclusivity around their products - a business model that doesn't always equate to leading market share, but always pulls in a huge profit, brand loyalty and evidently a glorious stock price. A sweeping dichotomy from conformist television manufacturers. So how do you work around this? How can you win in a business when it's hard to even break even?
First off it's important to evaluate the importance of television in an overall vision, or perhaps more importantly, the role of television in the the direction of the technology industry as a whole. It's fair to say that the whole industry is leading towards an almost universally pursued four screen strategy involving smartphones, tablets, personal computers and of course the television.
When Google and Apple begin hinting at entrances into certain markets, you know things are about to get real, and for television, Google's already waddling in the water albeit with a little uncertainty and we're expecting Apple to take a fully committed chunky dunk. Apple revolutionised the music industry with its ubiquitous iPod. Apple almost single-handedly crafted the modern smartphone, and Google made it big. Apple created and revolutionised a practically non-existent tablet market and Google made sure there was a little more variety to suit everyone. There's no reason that in their monstrous tandem, these two will be able to revolutionise the plateauing television business as well.
Consumers aren't going to be prepared to pay anymore than they are already for a television, especially given the state of the economy. Even if manufacturers gathered to form a pact that ensures a handsome profit for every unit sold, consumers wouldn't buy, even if they had no choice. Televisions are costly, low replacement devices, so consumers typically only replace televisions when they really need to. And a steep price increase for already rather steeply priced televisions would only push consumers to eBay and second hand items. To pursue this current business model in selling televisions as passive displays is not a feasible model, it never was, but now, we have better options.
The analogue age was a time when devices could thrive even when operating on a shallow and superficial microcosmic level. Devices were sold on the merits of their hardware capabilities, the quality of its parts and its physical design, as opposed to its potential for customisation and expansion. That analogue era, was long ago, but for the most part, television is still there - with picture quality and hardware quality still very much on the priority list for TV buyers. To win in television, we must relay our focus completely from commoditised hardware and aim to sell on the merits of potential expansion, integration, connectivity and content. Aim to emulate Amazon's business model for the Kindle Fire tablet - make a small loss or just break even on the hardware, and aim to cover that cost in packaging good software and selling content.
Google TV was initially poised to be the redefining of television but I think it's fair to say that we all misjudged, or more suitably, over-judged it's potential. Logitech's CEO went so far to state that the company had made 'a mistake of implementation of a gigantic nature', and the company had no plans to release a second generation Revue set top box. Sony hasn't achieved much success with their Google TV either.
Google TV never took off and still hasn't largely because it simply doesn't offer anything exclusive in the way of content, it contains Netflix and Pandora among other video and music subscription services but these services are all accessible through other mediums. And with all these content services being provided by third parties, once again we're not making much money on selling content and therefore unable to afford reaping negative or neutral margins on TV units.
But securing profits directly from selling content isn't the key, because most of the revenue is inevitably turned over in royalties to the content owners. In fact, the most popular online music store, iTunes, earned $1.9 billion dollars in revenue in 2007 according to Ed Christman, the retail columnist for the Billboard. However, taking into account royalties and operational expenses, Apple took away less than $400 million on its music store that year. Google recently sent out invitations to a Los Angeles event on November 16 which appears to be hinting at a music store, if Google has indeed struck a deal with the major labels I'll be damned if they're going to make as much dough per song purchase as Apple's iTunes store.
The idea though, in operating content stores is to provide a little extra change to allow for more flexibility when pricing television sets, after all, you can expect to subsidise at least some of the losses on unit sales with profits from content stores. Additionally, content stores that integrate well within an established ecosystem are just another incentive for consumers to want in - a core reason why Google TV has failed to catch on. Google currently has no music or video store and therefore no genuine reason for Android users to invest further in Google's ecosystem; adding insult to injury, the assortment of Google's cloud services like Docs, Gmail and Reader have no meaningful integration in Google TV.
The Google TV saga also serves to teach us that evidently, it's not enough to simply throw in some apps, integrate subscription services and allow native Youtube and web browser access to 'revolutionise' television. That's not enough because a consumer savvy enough to even adopt a young platform in Google TV would most likely be in possession of a tablet; and why compromise the display real estate of the television when you could be web browsing, Facebook-ing and Twitter-ing right from your tablet while watching TV. Essentially, the additions Google TV provides are more novel than genuinely useful.
You see, if Apple had simply thrown in a well-performing web browser, some fun apps and deep music store integration into a basic Blackberry form factor, would Apple still have revolutionised entirely the smartphone industry? No, not at all. Not even a little bit. So it's no surprise that Google hasn't done so with the television.
Apple revolutionised the smartphone because they changed the way we interacted with and used our phones. Apple turned scrolling into flicking, and pushing into pinching. Google on the flip side has only added quasi-useful functionality to television and we're still stuck with the same basic interface model of remote controls and navigational D-pads. Apple is now poised on the precipice of perhaps another revolution, and now couldn't possibly be a more timely hour for Apple given they've created a potentially revolutionary new way to interact with our devices, Siri. Siri, the voice interaction engine more human than anything we've seen before. Or heard before. If Steve Jobs' message to his biographer - 'I finally cracked it' a TV that is 'completely easy to use' - is anything to go by, then Siri is an almost certain implementation.
A lot of the time, it's not alterations in what we use a device for that cause excitement, but how we use it that strikes a certain spark in our fickle emotions. Take the Playstation Move and Xbox Kinect as a classic example, serving the same purpose but in two completely different ways. Sales figures can speak for this story. Siri can be our new remote control, and even then, it could probably do so much more.
We're standing on the very edge, the dividing line, the stepping stone to a new generation of television. And if any company believes that right now is a good time to depart the painful television business, then, well, bad move. Television is a crucial element in the completion of our technological circle, we'll always have living rooms - and to simply exit the business soully because of non-profitability is a little short sighted.
Previously, in the analogue age where products were sold largely on the merits of themselves, as opposed to their integration with other devices, television would have been a poor business. But today, television isn't heading towards being a lucrative business that rakes in an abundance of dough, but rather a crucial business which provides a little chump change. The rise of the 'ecosystem' and cross device integration has allowed for the creation of the 'prison', though more often than not this prison is one that we, as consumers voluntarily move into. Locking consumers in is priceless for those corporations hoping to capitalise on their existing user base, and of course, force loyalty from the consumer.
Apple TV was never enough for Apple because it's simply not enough to add your ecosystem to a television set when you're merely a 'connection' as opposed to the real deal.
This is why I am almost certain that Apple will make a television set, one which has unsurpassed integration with Apple's ecosystem as its highest value proposition. Because a great ecosystem and great software is the only viable path in an industry infested with competitors who are inevitably capable of making better hardware and selling it for less.
Having said that, Apple's not going to be reaping huge profits on television, in fact, television for Apple may very well end up being a loss leader. Apple will probably sell a television set at an enticing price point coupled with revolutionary interaction models (Siri), invoking an almost impulse purchase and naturally building a large user base for Apple's televisions. Sure, they've lost money on selling the television sets at such a price but they can subsidise that loss partially with content sales on the device, via iTunes. To place the cherry on the cake, one more Apple product in the hands of consumers, is just one more reason to invest further and deeper into Apple's ecosystem, equating essentially to subsequent profits from selling more iPods, iPhones, iPads and Macs.
It's a plan for the long term, and that's how you win in television.
First off it's important to evaluate the importance of television in an overall vision, or perhaps more importantly, the role of television in the the direction of the technology industry as a whole. It's fair to say that the whole industry is leading towards an almost universally pursued four screen strategy involving smartphones, tablets, personal computers and of course the television.
When Google and Apple begin hinting at entrances into certain markets, you know things are about to get real, and for television, Google's already waddling in the water albeit with a little uncertainty and we're expecting Apple to take a fully committed chunky dunk. Apple revolutionised the music industry with its ubiquitous iPod. Apple almost single-handedly crafted the modern smartphone, and Google made it big. Apple created and revolutionised a practically non-existent tablet market and Google made sure there was a little more variety to suit everyone. There's no reason that in their monstrous tandem, these two will be able to revolutionise the plateauing television business as well.
Consumers aren't going to be prepared to pay anymore than they are already for a television, especially given the state of the economy. Even if manufacturers gathered to form a pact that ensures a handsome profit for every unit sold, consumers wouldn't buy, even if they had no choice. Televisions are costly, low replacement devices, so consumers typically only replace televisions when they really need to. And a steep price increase for already rather steeply priced televisions would only push consumers to eBay and second hand items. To pursue this current business model in selling televisions as passive displays is not a feasible model, it never was, but now, we have better options.
The analogue age was a time when devices could thrive even when operating on a shallow and superficial microcosmic level. Devices were sold on the merits of their hardware capabilities, the quality of its parts and its physical design, as opposed to its potential for customisation and expansion. That analogue era, was long ago, but for the most part, television is still there - with picture quality and hardware quality still very much on the priority list for TV buyers. To win in television, we must relay our focus completely from commoditised hardware and aim to sell on the merits of potential expansion, integration, connectivity and content. Aim to emulate Amazon's business model for the Kindle Fire tablet - make a small loss or just break even on the hardware, and aim to cover that cost in packaging good software and selling content.
Google TV was initially poised to be the redefining of television but I think it's fair to say that we all misjudged, or more suitably, over-judged it's potential. Logitech's CEO went so far to state that the company had made 'a mistake of implementation of a gigantic nature', and the company had no plans to release a second generation Revue set top box. Sony hasn't achieved much success with their Google TV either.
Google TV never took off and still hasn't largely because it simply doesn't offer anything exclusive in the way of content, it contains Netflix and Pandora among other video and music subscription services but these services are all accessible through other mediums. And with all these content services being provided by third parties, once again we're not making much money on selling content and therefore unable to afford reaping negative or neutral margins on TV units.
But securing profits directly from selling content isn't the key, because most of the revenue is inevitably turned over in royalties to the content owners. In fact, the most popular online music store, iTunes, earned $1.9 billion dollars in revenue in 2007 according to Ed Christman, the retail columnist for the Billboard. However, taking into account royalties and operational expenses, Apple took away less than $400 million on its music store that year. Google recently sent out invitations to a Los Angeles event on November 16 which appears to be hinting at a music store, if Google has indeed struck a deal with the major labels I'll be damned if they're going to make as much dough per song purchase as Apple's iTunes store.
The idea though, in operating content stores is to provide a little extra change to allow for more flexibility when pricing television sets, after all, you can expect to subsidise at least some of the losses on unit sales with profits from content stores. Additionally, content stores that integrate well within an established ecosystem are just another incentive for consumers to want in - a core reason why Google TV has failed to catch on. Google currently has no music or video store and therefore no genuine reason for Android users to invest further in Google's ecosystem; adding insult to injury, the assortment of Google's cloud services like Docs, Gmail and Reader have no meaningful integration in Google TV.
The Google TV saga also serves to teach us that evidently, it's not enough to simply throw in some apps, integrate subscription services and allow native Youtube and web browser access to 'revolutionise' television. That's not enough because a consumer savvy enough to even adopt a young platform in Google TV would most likely be in possession of a tablet; and why compromise the display real estate of the television when you could be web browsing, Facebook-ing and Twitter-ing right from your tablet while watching TV. Essentially, the additions Google TV provides are more novel than genuinely useful.
You see, if Apple had simply thrown in a well-performing web browser, some fun apps and deep music store integration into a basic Blackberry form factor, would Apple still have revolutionised entirely the smartphone industry? No, not at all. Not even a little bit. So it's no surprise that Google hasn't done so with the television.
Apple revolutionised the smartphone because they changed the way we interacted with and used our phones. Apple turned scrolling into flicking, and pushing into pinching. Google on the flip side has only added quasi-useful functionality to television and we're still stuck with the same basic interface model of remote controls and navigational D-pads. Apple is now poised on the precipice of perhaps another revolution, and now couldn't possibly be a more timely hour for Apple given they've created a potentially revolutionary new way to interact with our devices, Siri. Siri, the voice interaction engine more human than anything we've seen before. Or heard before. If Steve Jobs' message to his biographer - 'I finally cracked it' a TV that is 'completely easy to use' - is anything to go by, then Siri is an almost certain implementation.
A lot of the time, it's not alterations in what we use a device for that cause excitement, but how we use it that strikes a certain spark in our fickle emotions. Take the Playstation Move and Xbox Kinect as a classic example, serving the same purpose but in two completely different ways. Sales figures can speak for this story. Siri can be our new remote control, and even then, it could probably do so much more.
We're standing on the very edge, the dividing line, the stepping stone to a new generation of television. And if any company believes that right now is a good time to depart the painful television business, then, well, bad move. Television is a crucial element in the completion of our technological circle, we'll always have living rooms - and to simply exit the business soully because of non-profitability is a little short sighted.
Previously, in the analogue age where products were sold largely on the merits of themselves, as opposed to their integration with other devices, television would have been a poor business. But today, television isn't heading towards being a lucrative business that rakes in an abundance of dough, but rather a crucial business which provides a little chump change. The rise of the 'ecosystem' and cross device integration has allowed for the creation of the 'prison', though more often than not this prison is one that we, as consumers voluntarily move into. Locking consumers in is priceless for those corporations hoping to capitalise on their existing user base, and of course, force loyalty from the consumer.
Apple TV was never enough for Apple because it's simply not enough to add your ecosystem to a television set when you're merely a 'connection' as opposed to the real deal.
This is why I am almost certain that Apple will make a television set, one which has unsurpassed integration with Apple's ecosystem as its highest value proposition. Because a great ecosystem and great software is the only viable path in an industry infested with competitors who are inevitably capable of making better hardware and selling it for less.
Having said that, Apple's not going to be reaping huge profits on television, in fact, television for Apple may very well end up being a loss leader. Apple will probably sell a television set at an enticing price point coupled with revolutionary interaction models (Siri), invoking an almost impulse purchase and naturally building a large user base for Apple's televisions. Sure, they've lost money on selling the television sets at such a price but they can subsidise that loss partially with content sales on the device, via iTunes. To place the cherry on the cake, one more Apple product in the hands of consumers, is just one more reason to invest further and deeper into Apple's ecosystem, equating essentially to subsequent profits from selling more iPods, iPhones, iPads and Macs.
It's a plan for the long term, and that's how you win in television.
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