I recall the arguments when Cable TV was first getting started which concluded no one would ever be stupid enough to pay for something they can get for free. Well there are clearly a good chunk of us who are terminally stupid because cable was a success although I think many of us probably wish it hadn’t been.
With Cable you are typically locked in to what the cable company wants to use for hardware and the programming the cable company wants to provide. Most of the hardware truly sucks and generally, if you want to see a DVR done badly, all you have to do is get your Cable or Satellite Company to send you one.
There are a number of companies coming out with alternatives and Apple is likely to set the pace, largely because they can do more than spell “marketing” but all of the initial offerings are flawed suggesting generation 2, or 3 will be when you’ll want to check them out.
Apple: Limited Product, Unlimited Marketing
Of the four platforms recently launched, Apple TV is the most limited although it may be the easiest to use. Apple has had problems with subscription content (which is how you pay for your cable programming now) and we believe one of the reasons this product has taken a while to come to market is that content deals have been very hard to come by. And long term for a product like this, content is probably the major defining factor.
Like most Apple products, the iTV is attractive, well packaged, and it will be wrapped with solid demand generation marketing. If successful, the revenue potential for iTV dwarfs that for the trendier iPhone because the available market is potentially much larger. The iPhone’s price alone, at least initially, will hold down volumes.
As with all Apple products, the offering appears very easy to use and should be equal to or better than some of the best existing products in this regard.
The off-air solution, being able to behave like a DVR and pull content as it is played, isn’t yet implemented (but may show up with Leopard) and currently that is still where most of what people actually want to watch is located.
Exposures will likely come with interoperability problems. Home servers and home NAS devices, at least for now, don’t appear compatible and you are tied back to a desktop PC (preferably a Mac) running iTunes.
Apple marketing should be able to gloss over a number of these shortcomings early on, but to be successful they will have to be addressed eventually because the competing offerings are maturing very quickly. Apple TV will legitimize the class through their marketing efforts but other choices may turn out to be vastly better in use by year-end so Apple will need to improve this initial offering very quickly. This product does point to Apple’s historic strength, they don’t have the most features but what they do have is well marketed and not intimidating. It worked for the iPod and it could work here.
AMD LIVE Ready and Active TV Technology
While not the simplest name, this offering (which is licensed to third parties and launched in Europe) is far more complete than Apple TV but AMD has less control over the finished product. This platform embraces both Internet TV and traditional over-the-air broadcasts with support for tuners both standard and high definition.
User interface is easy to use and intuitive but hardware is likely to follow the more traditional set-top box designs which will make them more attractively priced than the Apple TV but less attractive to look at in the living room.
If content is king, the AMD offering, at least on paper, may have the greatest advantage initially because it appears to have looped in vastly more internet TV suppliers (including YouTube), studios, and partners. Right now however, initially it will probably be more easily found in Europe while US product is likely months off.
While the content is great, the complexity of multiple services, (some of which will have a variety of fee schedules) could be painfully complex making this offering more difficult to sell even though it may actually provide one of the better values.
This puts the AMD offering as the most opposite to Apple’s, harder to use and not as attractive or as well marketed but with massive amounts of content including over-the-air broadcast support and no lock-in to any one content provider or hardware company. Call it maximum flexibility with the possibility that one of the licensing vendors will create an ease-of-use experience and market it so that its technical advantages over Apple TV could result in stronger sales numbers.
Cisco: Cable Bypass Box
Cisco has been improving strongly in the CE space with their Linksys branded products and they are apparently targeting Apple with their own offering rumored to be due out in September. There are two likely reasons for the delay, it lets Apple both legitimize the market and do real world tests which can then be factored into what they bring to market, and September begins the holiday buying season and a new product seen as the hot thing then will drive much higher volume than a product whose faults are well known and may not appear as trendy.
Cisco is far weaker than Apple with regard to their marketing capability and this delayed launch should allow them to both come out with a stronger offering and best benefit from the wave of excitement Apple has created. Their Scientific Atlanta division is currently number two in the existing set-top box market and they know how to build products in this class very inexpensively and are likely to embrace on-line, disk based (DVD), and over-the-air media sources (DVR).
While the final configuration of the product is not known and probably isn’t entirely final anyway, if they are able to match Apple with ease-of-use, and they have that potential, and are able to eclipse Apple with features while matching with price or providing a better value, they could take this segment; they certainly have both the scale and the technology to do that. The question is whether can they market what they have and for that, as well as the actual product details, we’ll have to wait until September.
Microsoft: Potential Game Changer
Microsoft has been playing in this space for some time but one of the reasons you see so much competitive activity is Microsoft’s offerings have been long on promise but short on experience. They have Media Center PCs, unfortunately these have been perceived as both too complex and too expensive for those trying to simply get programming on their TV. In addition, they have artificial limitations such as the inability to network play DVDs which, had they not existed, could have made the products successful in high-end niches now occupied largely by proprietary offerings.
Microsoft recently switched to positioning their Xbox 360 in this space and in terms of penetration, clearly has the lead against products that haven’t actually been launched yet. However, the Xbox is perceived as a game platform not a TV platform and that will make it more difficult to sell even though it can download content, take content off a home PC (particularly a remote media center) and can display that content in high definition.
The Xbox 360 is subsidized, can play DVDs, and with a $200 accessory can play HD-DVDs and that last feature is expected to be unique to this offering for a while (if not forever). It is also easy to use although if you don’t want to use it for gaming there are clearly parts that will get in the way of simply viewing programming.
Internet content is light and even though the Xbox has access to high definition and standard definition TV and Movie programming over the web, choices right now are low unless you can connect to a PC which has a tuner.
A third product from Microsoft is due to market shortly, the Home Server. This could provide the central repository that the other solutions lack (though some may be able to use a Universal Plug and Play NAS device. If you could put your ripped DVDs (or a DVD carousel), downloaded movies, and recorded TV programs on this and then use the Xbox 360 to watch them all over the house, the result could be very interesting and arguably the best in class.
But getting all of this to work would be daunting and the user experience probably won’t meet market requirements (which means if only your kids can figure out how to use it you won’t buy it).
Calling the Fight
The cable companies could respond and since they are the entrenched vendor, if they and/or the AT&T figure out how to get most of this to work, they can probably cap this emerging aftermarket set-top box movement at a niche. Fortunately these big companies move very slowly so that is unlikely. Of the players mentioned, Microsoft has the most capability and has the most product in the market, Apple initially will have the best marketed and should be the easiest to use (and could repeat the iPod success with just that much), AMD is going the technology route but is heavily dependent on partners, and Cisco is mostly speculation and will be last to market (though they are the one I’d likely bet on were I to choose).
My advice is to wait until you see what Cisco has to offer. By then the other products will have matured a bit and you’ll have some strong choices available and probably better prices, plus September really isn’t that long to wait.
The views expressed here are solely those of the author and do not reflect the beliefs of Digital Trends.