Shortly before he died in 2011, Steve Jobs uttered four exciting words to his biographer, regarding Apple’s plans to revolutionize the television experience: "I finally cracked it."
Since his death, everyone’s been guessing what exactly “it” was—or is. Year after year, analysts continue to believe Apple will build a physical television set, but as CEO Tim Cook says repeatedly, Apple already has a television solution. It’s called Apple TV.
Originally designated as a “hobby” project called “iTV” when it debuted in 2006, Apple’s set-top streaming media center hasn't changed much since its second generation model debuted in 2010. But the next update, likely due later this year, might just turn out to be the television experience Jobs had envisioned.
The current-gen Apple TV functions like most set-top boxes: It streams movies, TV shows and music from providers like Netflix, HBO, ESPN, and even Flickr and Vevo. But if Apple’s $99 black box is going to distinguish itself from countless similar streaming offerings—especially Google’s $35 Chromecast—Apple needs to take a page from a different pioneer in order to offer something truly different.
Taking A Page From Netflix
How did Netflix's streaming service get so successful? It didn't just offer instant gratification—it offered low risk instant gratification.
For a monthly membership fee, Netflix customers get a no-hassle to browse through movies or TV shows. Unlike other online movie services that force customers to pay for each movie or program they rent, even if they don't like it, Netflix subscribers can start watching a movie, change their mind, and start watching something else—without paying twice for it.
Netflix doesn’t always boast the most popular or critically-acclaimed movies, though its selection is improving as the company signs more streaming deals with studios and distributors. But customers love Netflix anyway because they can watch as much as they want without repeatedly taking out their wallets. And that’s the key.
How iTunes Can Transform The Apple TV
Apple doesn’t own Netflix, but it does have its own secret weapon: iTunes.
People already use iTunes, the most popular media player in the world, to store their music, movies and TV shows, but iTunes also houses the biggest multimedia vendor in the world—the iTunes Store.
That isn't to say it's intuitive to use. Both iTunes and the iTunes Store are available on the Apple TV, but the iTunes Store is divided into three separate apps for “Movies,” “TV Shows” and “Music.” This fragmentation is both unnecessary and confusing, especially since Netflix has been able to consolidate its offerings in an easy-to-use manner.
But Apple has a bigger problem to fix. And that’s its pricing structure.
Let’s say you want to watch a newly-released movie on your Apple TV. Currently, new movies from the iTunes Store cost at least $20 to own or $4.99 to rent. But if you rent a movie, you have 30 days to watch it, and once you start watching it, you only have 24 hours to finish it. Compared to Netflix, which allows you to watch as many movies as you want—as many times as you want—at a much more reasonable price ($7.99 a month), the iTunes Store is downright medieval.
Of course, that sort of pricing structure made sense back in the days of Borders and FYE, when DVDs sold in stores for about $20. But those stores went out of business for a reason: We aren’t living in that age anymore. With torrent files and P2P services, people can download movies or TV shows in minutes, for free, and own them forever. It's mostly not at all legal, but it is difficult to stop without policing the Internet to a degree that just about everyone but Hollywood executives finds distasteful.
The iTunes Store's 99-cent songs proved an excellent deterrent to online music piracy when it they debuted in 2003. Apple needs to push ahead with a similarly revolutionary pricing structure for streaming media. It needs to embrace the Netflix model to make the iTunes Store—and, by proxy, the Apple TV—a winner in the streaming age.
How It Could All Work
Imagine this: For $10-12 a month, your Apple TV gives you total access to the entire iTunes Store. You get all the new movies and TV shows right after they air, and you can watch them as many times as you want. No more rental rules and restrictions. You still have the option to purchase these titles and keep them in your personal iTunes library, but your monthly fee just lets you stream those titles whenever you want.
If this were main feature of the next Apple TV, would you pay for it?
That would be a great start. But the next-gen Apple TV also needs improved, simplified software and the ability to connect to more platforms. The key to all of it, however, is search.
The biggest problem with the Apple TV—and possibly the reason why there’s no available Apple TV API or software development kit for developers yet—is there’s no way to efficiently search everything that's available on your Apple TV. Currently, if you're looking for a particular movie or TV show, you have to search every applications separately, which is a big time-waster.
Apple has the technology in hand to fix this, not least thanks to its 2012 acquisition of the app search engine Chomp. But Apple could also easily take a page from Microsoft’s Xbox One and enable voice search functionality with the aid of Siri. It could even take things a step further and start offering cross-service recommendations to users, much the way Netflix does for its customers.
Apple TV also needs to expand its media offerings. While it offers 40 different "applications," the platform is still essentially closed. Opening it up via an “App Store” for the Apple TV could lead to a flowering of entertainment options for users, similar to the way the iOS App Store surprised users with what you can do with an iPhone or iPad.
The Unveiling And Release Strategy
A new Apple TV, with a revamped iTunes Store and overhauled search system, might be unveiled in March or April, but it sounds like Apple will wait until September or October to release the new hardware. That's a good thing, because it can definitely use a long window like that—not just to build anticipation for the system, but also to ratchet up the pressure on reluctant movie studios and pay-TV distributors.
Here’s the problem: Apple has been reportedly trying to close deals with these companies for almost two years now, so far without success. Apple faced similar resistance among music studios wanted to introduce the iTunes Store—particularly with Sony Music, was the final holdout among the five major record labels.
In the same way Sony stubbornly refused Steve Jobs’ initial offer to join the iTunes Store, pay TV distributors know they have the same kind of leverage against Apple—they own the rights, after all. Today's negotiations with cable providers are further complicated by Comcast's bid for Time Warner Cable, which would create a single pay-TV behemoth that would undoubtedly rather call the shots than dance to Apple's tune.
But that’s why Apple might be willing to introduce the new Apple TV service before all of the deals are signed and sealed. If Apple introduces the service and it’s an immediate hit, that'll put pressure on the remaining holdouts to get in while the getting is good. And it could be at least seven months between the unveiling and release dates for the Apple TV, which is a long time for any resistant company to refuse an offer from Apple.
Booting Up The Next Apple TV
The next Apple TV might not be the ultimate TV experience at first. According to the Wall Street Journal, cable-company resistance might force Apple to settle for offering only the five most recent episodes of current-season shows and blocking users’ ability to fast forward through those programs for three days after they air. (Apple originally asked for full seasons of TV shows as well as live programming.)
But any deal is a move in the right direction for the Apple TV, which has remained static for so long. As Netflix demonstrated, it's not necessary to offer every movie or show on Earth to succeed. The most important factor is a financial model that makes sense to people and respects their desires as consumers.
Apple already owns a broad multimedia platform, connections with all of the “right” movie and TV companies, and a piece of hardware to fit it all. With improved search and a revamp of its archaic rental model for movies and TV shows, Apple could finally inch closer to the living room experience Steve Jobs once dreamed about.