Apple TV demand may drive Samsung-sapping sales
Cook, consumers keenly interested in iTelly
The idea that Apple is working on some kind of smart TV refuses to die, the notion regularly refreshed by rumour and the occasional soundbite from senior company executives. CEO Tim Cook only last week expressed his “intense interest” in the evolution of the TV in a nudge, nudge, wink, wink interview with US TV channel NBC.
The latest contribution to this ‘will it, won’t it’ debate comes from Katy Huberty of Morgan Stanley, a financial services firm. The gist of Huberty’s report is that a significant number of US families are very interested indeed in owning an Apple-branded television.
Specifically, 11 per cent of Huberty’s 1568 survey sample - folk who claimed they head their household - identified themselves as “extremely interested” in buying an Apple gogglebox. A further 36 per cent said they would be “somewhat interested”.
Ignoring the latter - figure they like the idea, but may yet decide the product is too pricey or doesn’t do as much as they’d like it to do - and you’re looking at a potential market of 13 million sets in the States alone. If the others decide to buy too, that could add a further 43 million sets to Apple’s telly tally.
It goes without saying, people who already own Apple kit are more likely to want an Apple-branded TV too. However, rather a lot of respondents - 56 per cent - indicated they were willing to pay more for it than they had for their current set.
While only ten per cent said they’d cough up more than $2000 (£1240), 46 per cent said a price of $1000 (£620) or more would be acceptable. The average price paid for respondents’ current sets is, the survey reveals, $884 (£548).
That suggests not only a real interest not only in an Apple TV, but also an assumption that such a product will do sufficiently more than those of rival suppliers to justify a price premium.
Let’s say Apple prices its TV at $999, a nice, round number of the kind favoured by Apple. That’s $13-43 billion the company could reasonably anticipate making in sales revenue out of the product, Huberty concludes. And that’s in the US - you could probably double the total for global sales.
Of course, it’s easy to express interest in a non-existent but exciting product concept, rather harder to put down your credit card for one when you also have real bills to pay. But while the world TV market is undoubtedly in decline - sales fell during Q3 2012 by seven per cent year on year, the market’s fourth consecutive quarterly fall - US sales are “steady, if not exciting”, says NPD DisplaySearch, a market watcher.
Some 58 million TVs shipped in Q3 2012. Most estimates put 2012’s total telly sales at around 210 million units. Not all of those are smart TVs, of course, but if Huberty's responses were to translate into real sales it would give Apple a share of between 6.2 per cent and 20.5 per cent, guaranteeing it a place in the list of top-five vendors and potentially putting it second only to Samsung, according to Q3 2012 market share figures from DisplaySearch.
Currently, Samsung (28.5 per cent) is followed by LG (14.0 per cent), Sony (7.0 per cent), Sharp (6.5 per cent) and Panasonic (6.2 per cent). Most, if not all, of these companies’ TV divisions are losing money, and both Sharp and Panasonic are particularly troubled.
Sharp has taken $121 million from Qualcomm, and is said to be talking to Dell and Intel for more. Apple has also been rumoured to be a suitor, not least since Sharp’s IGZO LCD technology was once suggested as the basis for Apple’s TV development work. It could buy into an ailing Japanese giant, but maybe the Mac maker would be better off waiting for one or more of these firms to fall. That’s certainly more its style.
Apple does appear to be playing a waiting game. With the market in the doldrums, it can afford to wait while it gets its proposition right - perhaps by winning content deals first - or for the market conditions to begin to improve. Disrupting a market - or being perceived to disrupt a market - is much easier to do when the established brands are in difficulty.
None of this, of course, shows that Apple is developing a TV set, only that, if it releases one, there will be buyers and there will be a fair few of them. For any manufacturer, knowing you have customers willing to cough up money for a product is a powerful commercial incentive. That's cash that Tim Cook is also extremely interested in. ®
COMMENTS
Re: A quick shareprice boost is all
Was going to make a similar comment. The Apple TV is nothing more than a rumour right now, but I can't help thinking that the reporting that this rumour is getting has more to do with Apple's current share price than any new information.
One indisputable fact is that AAPL has deflated sharply lately, but there are a lot of investors and funds who are long on the share. These people desperately need that share price to be way over today's $520 price when their option contracts mature. Analysts, who constantly peddle the upbeat news about Apple, and how "$900 is around the corner" (actual headline) are the most corrupt of them all. Sure, they mightn't personally hold the share they're pumping, but other parts of their employer do hold it.
Apple remains a phenomenally successful company, regardless of its market cap, but the majority of that success has been driven by one product line, and that product relies on heavy subsidy by mobile operators. This is the key to Apple's huge margins: frighten the mobile operators into paying them. (The operators don't pay the full retail price, but they pay a lot more than the $99 that the customer sees).
This game is about to unwind though, and it's not just because this is the first Holiday period with two competitors to Apple (GalaxyS3 and Nokia 920) both offering demonstrably superior products. The biggest factor may have gone unnoticed. In the USA, T-Mobile just agreed to carry iPhone... but: they also announced that they will no longer subsidise ANY handsets, and will instead lower their monthly tariffs. If this works, the other US operators will follow, and Apple's game will be up. They will be forced to either lose sales or cut prices.
11% of main purchasers are very interested in buying a TV they know abso-fucking-lutely nothing about, so long as it's got the right badge? No wonder their extraordinarily average phones sell so well...
A quick shareprice boost is all
AAPL has sunk recently. Tim can't have that so a few quick interviews and nosetaps about some vapourware TV product is a cheap way to get idiot investors back on board and re-inflate that AAPL bubble.
I don't believe Apple will make an actual TV set because of the issue of content provision. If it were to have a RF antenna socket, the consumer could watch free-to-air broadcast TV and not pay Apple for the privilege of doing so, which would surely be unthinkable.
But likewise, there's no way to lock it down to a cable provider or satellite source because so many national regulators forbid this. Note, for example, the way Sky don't sell a telly that will only receive Sky.
And TV-purely-via-internet is simply not yet viable due to bandwidth and QoS restraints.
No, Apple won't be making a TV any time soon.
Re: pay more just coz its from crapple?
The Apple TV STB doesn't actually have that nice a user interface. Compared to, say, a WD TV Live or a Samsung of Panasonic connected TV it's a bit clunky. I have to wonder if people are fooled just because it's got lots of black and a sleek remote control with very few buttons. The Netflix app is a great benchmark since it exists on a lot of platforms and the Apple TV version is by far the most unhelpful one I've used, lacking simple things like automatically following on to the next episode instead requiring 4 or 5 button presses to get there.
Re: A quick shareprice boost is all
I agree - although note, it doesn't really matter if they released a TV that couldn't do what most TVs could do, and where Internet-only TV doesn't yet make sense for most people. They could still do it, and get all the praise for being "first" (never mind that Internet playing is pretty much standard on TVs, and the reason TVs aren't Internet only is because it doesn't make sense).
It doesn't matter if initial sales are poor just like the first iphones, and it takes years to grow - people will still declare it an amazing success as long as it sells one million in 76 days, and ignore that it's only years later (and when they finally add in the functionality that other TVs have) that sales actually become mainstream. At which point, they can reap the profits, as well as being falsely credited for being first, or popularising something - even though any other company doing it now would be written off as a flop.
You're right, it doesn't make sense - but with the RDF, these rules unfortunately don't apply.
