Why iTV is going to be Big and important to Apple’s Ecosystem
Apple’s New iTV and FoxConn
News hit today that Foxconn is in preparation for building the Apple iTV. iTV will be a big revenue driver for Apple but more important then that, it will strengthen the Apple ecosystem in significant ways.
I suspect we’ll see iTV launched in late 2012 or possibly the first half of 2013 based on noise levels out there today. Once it ships, it will become yet another significant driver of revenue and profit for the Apple juggernaut. Apple loyalists will run to replace their current TV sets with the new Apple TV. Why? Because iTV is going to be MUCH more then just a TV set.
iTV Will Be More then just a TV Set
I expect Apple’s new television set to provide functionality that lets you not just watch live tv but do all the following:
- Stream movies via Netflix, Amazon, Apple services
- Play music via iTunes, Pandora and more
- Utilize the current & new app ecosystem. Expect new apps made specifically for iTV interface
- Gaming will be big on iTV. Look for a built in gaming engine with game controllers. Download your games off iTunes and play them right on the TV. No console necessary
- Photo Sharing. View photos directly from your iPhoto Library to music in full HD Glory
- Communication. Built in iSight camera means Skype, iChat and more.
- Revolutionary way to interact with iTV. Remember Steve Jobs “I cracked it” referring to television. Maybe this means Siri, motion control and something else. We’ll see.
- Maybe one more thing even I have not yet imagined…
The Apple Ecosystem
Once Apple TV sets start to proliferate in the homes (living rooms, bedrooms, home theaters, basements, etc) the ecosystem begins to get even more powerful and the moat grows wider. Loyal customers continue to invest in more media assets as well as apps inside the system. You can use your purchased/downloaded assets across many screens easily inside Apple’s world ( i.e. iPods, iPhones, iPads, iTV).
I don’t see the rapid upgrade cycle that other devices like iPhone or iPad enjoy today though. TV sets usually have lifespans of 5 to 15 years. Apple TV will be software upgradeable so a lot of new features can be obtained in this manner. However, in typical Apple fashion they will continue to one up the hardware each year and eventually give buyers a compelling catalyst to replace an older set. That might be faster hardware, nicer looking design, new features, new size screens or a big catalyst someday will be OLED (Organic Light Emmitting Display).
World Domination or just Living Room Domination?
The domination of the living room is going to be big news for Apple. You’ll have the forward halo effect from small devices pushing consumers to purchase larger products like Mac’s or the new iTV. Once iTV launched you have the backward halo as well which may make some first time TV buyers enter the Apple ecosystem via the iTV and then move from that product down the product line to iPhones, Macs and iPads.
iTV to be yet another Tent Pole for Apple
In summary, the new iTV is going to be another tent pole product for Apple and its ever growing loyal customer base. It strengthens the product and iTunes ecosystem which increases customer loyalty.
Apple trades for under 9 times Enterprise Value / TTM Free Cash Flow. A compelling entry price for anyone with a holding period longer then just a few weeks or months.