More Apple TV Hints, Directly From Steve Jobs

More Apple TV Hints, Directly From Steve Jobs

Apple (NAS: AAPL) is building a TV. That's about all we mere mortals know at this point.

There have been little hints here and there, starting with the now-famous quote when Steve Jobs told his official biographer Walter Isaacson, "I finally cracked it." More recently, Apple CEO Tim Cook also said that TV "is an area of intense interest for us" at All Things D's D10 conference last month.

A trip down memory lane
However, back in June 2010, Jobs made what would be his final appearance at the same tech conference, D8 that year, and actually provided a veritable treasure trove of his views on the TV market, which in hindsight might help us glean what Apple has up its sleeve.

First-generation Apple TV. Source: Apple.

First-generation Apple TV. Source: Apple.

For some historical context, at the time, the Apple TV was still in its first generation as the pricier model that featured a larger hard drive for content storage, while the smaller black "puck" version that we see today was introduced later that year. Google (NAS: GOOG) had just announced its first Google TV platform several weeks prior and would eventually be launched within a few months.

After the interview, the floor was opened for questions, and this was the last one:

Question: Do you think it's time to throw out the interface for television -- the classic up, down, left, right -- and bring in a new human interface to make television truly interactive? And if so, when is Apple going to do something in that arena?

Steve Jobs: The problem with the television market ... the problem with innovation in the television industry is the go-to-market strategy. The television industry fundamentally has a subsidized business model that gives everybody a set-top box for free or for $10 a month, and that pretty much squashes any opportunity for innovation, because nobody is willing to buy a set-top box.

Ask TiVo (NAS: TIVO) , ask ReplayTV, ask Roku, ask Vudu, ask us, ask Google in a few months [crowd laughs]. So all you can do ... Sony's (NYS: SNE) tried as well, Panasonic's (NYS: PC) tried, a lot of people have tried -- they've all failed. So all you can do is add a box onto the TV system. You can say, "Well, gosh, I notice my HDTV has a bunch of HDMI ports on it. One of them is coming from the set-top box; I'll just add another little box with another one!"

Well, you just end up with a table full of remotes, a cluster full of boxes, a bunch of different UIs -- and that's the situation we have today. The only way that's ever gonna change is if you can really go back to square one and tear up the set-top box and redesign it from scratch with a consistent UI across all these different functions and get it to the consumer in a way that they're willing to pay for it. And right now, there's no way to do that.

So that's the problem with the TV market. You know, we decided: What product do we want the most? A better TV or a better phone? Well, the phone won out, but there was no chance to do a better TV, because there was no way to get it to market. What do we want more? A tablet or a better TV? Well, probably a tablet, but it doesn't matter, because if we wanted a better TV, there was no way to get it to market. The TV's going to lose until there's a better ... until there is a viable go-to-market strategy.

Otherwise, you're just making another TiVo. Does that make sense to you? That's the fundamental problem. It's not a problem with technology. It's not a problem of vision. It's a fundamental go-to-market problem.

Question: Obviously in the phone area you were able to re-create that go-to-market strategy by working with a carrier. So does it make sense to partner with a cable operator to -- ?

Jobs: Well, then you run into another problem, which is there isn't a cable operator that's national. There's a bunch of cable operators. And then it's not like there's a GSM standard where you build a phone for the U.S. and it also works in all these other countries. No, every single country has different standards, different government approvals. It's very, it's very ... what's the right word? Tower-of-Babel-ish. That's not the right word. Balkanized. It's very balkanized. So I'm sure smarter people than us will figure this out, but that's why when we say Apple TV is a hobby; that's why we use that phrase.

Source: All Things D.

Apple TV unit sales definitely fall into a hobby category. Cook disclosed that Apple has sold about 5.5 million units over the past 18 months, with roughly half of that number this year. That's not insignificant, but it's still nothing compared with the 65.7 million iPods, 144.4 million iPhones, and 59.6 million iPads sold over the past six quarters.

Third-generation Apple TV. Source: Apple.

Third-generation Apple TV. Source: Apple.

Obviously, Jobs didn't answer the "when" part of the question, but he lays out all the various obstacles to entering the market. Apple's inevitable foray needs to be innovative and different; it would be pointless to just make another big fancy screen to plug into that doesn't address these problems.

Steve Jobs' Apple TV wish list
Parsing through Jobs' words, here's what it sounds like he might have wanted in the device and what that might look like:

  • Few to no wires: This would be challenge. Having a limited number of input ports sounds like near-suicide, because it effectively asks users to abandon all of their DVD players, gaming consoles, and other set-top boxes, which most aren't likely to be willing to do. Apple has to include support for third-party devices, as much as it may pain it to do so.

  • One remote: This one is easy. The iPhone is already a universal remote. Apple could easily include a dedicated universal touchscreen remote for non-iPhone owners.

  • A consistent interface for all functions: Getting content is key, and Apple could use one interface if it were to integrate it all directly, as it currently does with Netflix and YouTube. It could also release standardized application programming interfaces, or APIs, for third-party developers to use on its platform.

  • Shifting power away from cable operators to manufacturers: This one is particularly difficult. Apple was able to wrangle power away from wireless carriers and own most of the mobile experience. Apple would need to similarly be the primary relationship here, with cable operators becoming like any other content service like Hulu or Netflix, taking a back seat much like how wireless subscribers' relationships with carriers are now secondary. Heck, maybe it could become the primary content provider also, just as it is with iTunes and the App Store.

  • International content availability: With the rise of smart TVs and the Internet as a primary content provider, international hurdles may be easier to overcome.

Presumably, Jobs had addressed all or most of these issues when he "cracked it." The rest of the world and the TV industry await Apple's response with bated breath.

The market isn't even pricing the Apple TV potential into current prices, so should you buy Apple? The Apple TV is an opportunity as well as a risk; this brand-new research report lays it all out there for you. If the Apple TV succeeds in overcoming its international hurdles, it will be another way Apple is prepared for world domination. Looking for companies other than Apple? Here are another three American companies set to dominate the world by tapping into emerging-market growth. Get your copy now; the report is absolutely free.

At the time thisarticle was published Fool contributorEvan Niuowns shares of Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Netflix, Google, and Apple and has sold shares of Sony short.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Google, and Apple and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.