Apple TV Needs a Refresh ... Now

The set-top box market is booming. In fact, Apple's set-top box TV sales soared 80%, year over year, in the company's most recent quarter, according to estimates from Apple analyst Horace Dediu of Asymco. Even more, the playing field is still wide open, with only an estimated 35 million set-top boxes sold globally so far. But despite the obvious opportunity in the market, Apple has been moving at a snail's pace with its television plans. And now with Amazon stepping up to the plate with an offering that is clearly better, is the e-commerce giant snapping up opportunity that was supposed to belong to Apple?

Apple TV. Image source: Apple.

Amazon's disruptive move
It's been more than two years since the last Apple TV set-top box refresh. That's about nearly twice the average time it usually takes Apple to unveil a new version of the streaming media device. And the last update was fairly minor, with the major selling point being 1080p versus the older version's 720p -- a difference I could care less about (hence my 720p Apple TV model in my living room).

But even for those who did upgrade, Amazon's new Fire TV is irrefutably a better alternative at the same $99 price the Apple TV and the Roku retail at.

Fire TV. Image source: Amazon website.

While loyal Apple costumers were sitting around and waiting for Apple's next big TV move, Amazon took upon itself the liberty to provide some of the features Apple TV users have craved for years. Beyond the typical streaming of TV shows and movies found on competing set-top boxes, Amazon's Fire TV also offers an add-on gaming controller for $39 to be coupled with games for the box, essentially promoting the Fire TV to gaming console status for casual gamers. And the biggest selling point of all? The ability to search using your voice -- I would speculate that most set-top box users today would agree such a feature would be incredibly useful.

From hobby to business
Should Apple investors lower their expectations for the company's opportunity in this new and fast-growing market?

Piper Jaffray's longtime Apple analyst Gene Munster is a bit worried.

"We still view a launch of an Apple Television in 2014 as likely," he wrote to investors Tuesday (via Fortune), "but note that each month that passes without credible feedback from the supply chain reduces our confidence."

Apple TV's AirPlay feature. Image source: Apple.

But given the consistently high loyalty of Apple's customer base and the stickiness of its ecosystem, Apple could save itself from the threat of Amazon stealing its incremental opportunity simply by bringing its new version of the Apple TV to market quickly.

Persistent rumors have suggested that Apple will, indeed, be bringing the much-improved set-top box to market this year. Some speculation even suggests we'll see the device as early as April. Apple CEO Tim Cook fanned these rumors into flames earlier this year when he said at the company's annual shareholder meeting that he no longer considers Apple TV a hobby.

But if Apple doesn't move soon, investors might want to begin to discount their expectations for Apple's opportunity in the living room. Fortunately, Apple TV is a small business for the company, so it wouldn't alter the thesis for Apple stock much. But this shouldn't prevent investors from taking the Fire TV and Apple's failure to refresh its set-top box seriously, because the opportunity down the road is far bigger than the existing size of the market today.

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Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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