Tim Cook: Apple TV Is No Longer Just a Hobby


Apple generated more than $1 billion in Apple TV revenue in 2013 counting hardware and content sales, Apple CEO Tim Cook said at its annual shareholders meeting last week. It's "a little more difficult to call [the Apple TV] a hobby these days," Cook explained. Just as Apple announced the category would no longer be dubbed a hubby, rumors surrounding an updated Apple TV set top box are appropriately ramping up.

Apple TV. Source: Apple's website.

The latest Apple TV rumors
Extrapolating from several rumors from Bloomberg, Financial Times, and the well-connected Apple journalist Jim Dalrymple, Apple may introduce a refreshed Apple TV as early as April, with a launch later in the year. Further, based on Apple's recent move to offer a $25 iTunes gift card to those who buy Apple TVs suggests that the company may be clearing inventory in anticipation of a newer model.

The refreshed Apple TV will include support for video games as well as finally bring the App Store to the $99 streaming media device for the first time, according to the Financial Times.

Enough to move the bottom line?
One billion dollars may be enough for Apple to take the business seriously, but it is not enough for investors to get excited about the category. In Apple's fiscal 2013 alone, the company reported $171 million in revenue. At just $1 billion, the Apple TV accounts for just 0.6% of Apple's total revenue.

Or here's another way to put it: Assuming Apple's average selling price for the Apple TV is $90 (Apple likely leaves room for retailer margins, so the average selling price is probably less than the $99 price tag), fiscal 2013 Apple TV unit revenue may have been only $680 million (based on an estimate from Asymco's Horace Dediu that pegged fiscal 2013 Apple TV unit sales at sold 7.6 million). In comparison, Apple's iPhone business alone brought in about $90 million in Apple's fiscal 2013.

But Apple may be understating its Apple TV business. Dediu guesses that this $1 billion figure does not include iTunes purchases and instead only includes distribution revenues from channel placement. Further, the Apple TV could have intangible value as a device that significantly strengthens the overall interdependent Apple ecosystem.

What's the takeaway for investors? The Apple TV business is small but important. Overall, it's good to see Apple taking the segment more seriously.

Finally, it's worth pondering: Could greater interest in the category mean Apple may be preparing for an eventual launch of a physical television?

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The article Tim Cook: Apple TV Is No Longer Just a Hobby originally appeared on Fool.com.

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