Apple Unveils Tiny New TV Device

Steve Jobs Apple TV
Steve Jobs Apple TV

At a much-anticipated event Wednesday, Apple (AAPL) unveiled a palm-sized overhaul of its set-top TV device.

The size of a hockey puck, the new Apple TV box is designed to allow users to stream TV shows and movies from Netflix (NFLX), Fox and ABC for a bargain basement price of 99 cents for an HD TV show or $4.99 for first run HD movies. The new device, which aims to free users from storing and syncing their iTunes library with the set-top box, will sell for $99 and is scheduled to launch in the next four weeks.

Currently, Apple sells its set-top box for $229 and charges users between $2.99 to buy a TV episode or rent a movie and $9.99 to buy a movie from its iTunes service. Once the new pricing model kicks in, it could start a price war on par with the 99-cent burger wars.

A Hobby Gets a Bit More Serious

Apple CEO Steve Jobs said since launching its Apple TV in 2006 as a "hobby," the computer maker has come to learn that customers aren't interested in downloading and storing the beefy files on their computers and porting them over to the TV, or wrangling with settings or gadgets to stream things from one device to the other. As a result, Apple has redesigned its Apple TV to be smaller and stream the content to the tube.

According to a live blog post from Engadget, Jobs said:

They don't want to manage storage. They don't want to think about -- they just want to watch movies and TV shows. And they don't want to sync to a computer. And they want whatever hardware we have to be silent, cool, and small.

Stephen Baker, an NPD Group analyst, characterized Apple's announcement as more evolutionary than revolutionary. He pointed out that the device basically makes it easier for users to access and select their movies and shows, but doesn't move the ball forward with the media companies in allowing a subscription-based service from Apple.

Competitors Gather

Apple's competitors are circling in on the TV front. (AMZN), for example, is reportedly developing an online subscription service to deliver unlimited access to TV shows and movies, according to a report in The Wall Street Journal, while Apple's arch-rival Google (GOOG) is reportedly exploring a pay-per-view video service via YouTube. Last May, Google unveiled its Google TV amid much hoopla. The set-top box, which it's developing with hardware partners, is intended to marry the Internet and TV once and for all.

Revenues from music, movie and TV-show rentals have been a strong source of revenue for Apple, compared with its maturing iPod line. Over the last couple of years, revenues from the iPod have been less impressive than those from its other segments. In the first nine months of this year, iPod sales grew 4% from the year-ago period to $6.8 billion. That's after revenue dropped 12% last year, over the previous year, to $8 billion. Meanwhile, Apple's other music-related products and services -- a category that includes Apple TV -- have steadily grown by double digits since 2007.

During the event, Apple also unveiled upgrades to its iPod line. Changes range from adding a playlist feature and buttons to its $49 iPod Nano to adopting some of its iPhone 4 features like video chat capabilities and high-resolution Retina display for the iPod Touch.