Rumor: Apple planning TV with iTunes integration and DVR capability?

iOnApple

by Yoni Heisler

In a recent note issued to clients, Apple analyst Gene Munster of Piper Jaffray predicts that Apple will eventually come out with an Apple-branded television set with DVR functionality, and the ability to stream content directly from iTunes.

We expect Apple to design a connected television over the next two years (launching in 2011) with DVR functionality built in. These recorded shows could then sync with Macs, iPhones and iPods over a wireless network. The device would push Apple further into the digital living room with interactive TV, music, movie, and gaming features. With its iTunes ecosystem, Apple could develop a unique TV without any set-top-boxes or devices attached.

Could Munster be onto something?

One of the more overlooked items in Apple's earnings statement a few weeks ago was the phenomenal growth of the Apple TV, which saw its sales increase by 300%. Specifically, acting Apple CEO Tim Cook noted that the movie rental business on iTunes was particularly strong, and that Apple would therefore continue to invest in the Apple TV. Considering that an Apple TV allows users to stream content from their computer onto their big screen TV's, does it make sense for Apple to come out with their own TV altogether?

Rumors of an Apple branded HDTV have been around for quite some time now, but it never quite made sense for Apple to enter that market as the competition between HDTV manufacturers is fierce, and the margins extremely low by Apple standards. But like any market Apple chooses to enter, it would only come out with a product if it contained features that would immediately distinguish it from all other competing products. Purchasing an HDTV with built in iTunes integration and DVR capabilities seems attractive enough to meet that standard. Even more compelling is the idea that users could record programs via their TV, and then sync that content back to their iPods and iPhones for later viewing. Such a feature would allow Apple to command a premium on the price of an HDTV, and altogether avoid the price wars that the majority of other HDTV manufacturers typically and routinely engage in.

While Munster acknowledges that his predictions are somewhat rooted in speculation, he points to a number of factors that when taken together, indicate that Apple might have something big up its sleeve. Specifically, Munster points out that Apple is continuously trying to create an iTunes-centric ecosystem in the living room. He also points to a number of DVR and TV related patent filings submitted by Apple, as well as Apple's recent partnership with LG to provide Apple with a supply of LCD screens. If we've learned anything from Apple over the past few years, it's that it is never content to live off the success of its past products, and is always looks ahead towards the next big thing. It used to be portable MP3 players, and now the 'hot' market is smartphones. If Apple believes that TV's as a media hub is next, then an Apple branded TV might not be as far fetched as it initially seems.

At the same time, there are also a number of reasons why Apple releasing a TV doesn't seem plausible. For starters, adding DVR is more involved than simply furnishing the necessary software, and such a move would also put Apple in direct competition with almost every cable provider that furnishes their own dvr-enabled boxes. Second, one has to wonder if Apple really has anything substantial to gain monetarily by releasing their own TV's. Even assuming that Apple releases a fully featured HDTV in 2011, consumers don' t purchase television sets as frequently as they do MP3 players or phones. As cool as an Apple HDTV might be, it's hard to imagine anyone who's already happy with their current TV actually purchasing a new television from Apple solely for the DVR and iTunes integration.

The fight for digital dominance in the living room has been going on for quite some time, and almost every intiative to win that battle has resulted in failure. Apple, though, seems uniquely positioned to actually succeed where so many others have failed because it can leverage the popularity and simplicity of syncing iTunes content with other media devices. A networked Apple branded TV would undoubtedly help in that regard, but it would probably end up causing more problems than it would actually solve. Also, it's important to remember that no one knows what products Apple is going to release six months from now - let alone 2 years down the line. With all that in mind, the chances for an Apple branded TV seem quite slim.