Apple's Next Evolution

Written By Brian Hicks

Posted March 22, 2007

"We switched round and round till half past dawn,

There were fifty seven channels and nothing on."

–Bruce Springsteen, 1992

By the time the Boss and his band first performed that song 15 years ago, the world of television had radically changed. Those old rabbit-eared three-channel sets had long since gone the way of the dinosaurs. An evolved and fifty-seven-headed behemoth now ruled the airwaves.

A new business model–cable TV–had forever altered the television landscape. Freedom of choice had triumphed over scarcity, and the three major networks have been on the run ever since.

There may really have been nothing on any of those fifty-seven channels, but the market didn’t care–it wanted its MTV and was willing to pay for it.

But the 57 channels of Springsteen’s lament were only beginning. Recent Nielson data show that the average US home now receives a record 104 television channels, eight more than a year ago.

It’s a hungry market that even now only seems to get hungrier.

In fact, according to Nielsen, the average US home now has more televisions than people, with 2.8 sets providing entertainment to only 2.5 consumers.

Welcome to TV Nation.

But if Steve Jobs and Apple Computer (AAPL: NASDAQ) are right, even more choice is about to be unleashed into that familiar black box.

Earlier this week, Apple announced that it is shipping Apple TV, a wireless set-top box that will allow its users to connect their TVs to the stored content on their computers.

That means that the likes of YouTube can now be connected to the boob tube, making on-line content watchable on the big screen.

Originally unveiled in January at the Consumer Electronics Show in Vegas, Apple TV is the company’s new ticket to growing profits. Priced at $299.00, the set-top box will allow users to play all of their favorite content, including iTunes, movies, TV shows, podcasts and photos from their PCs or Macs, on any TV in their house.

The device is equipped with a 40 GB hard drive that can store up to 50 hours of video, 9,000 songs, 25,000 photos or a combination of each.

Users will be able to purchase content from the iTunes Store. The seamless integration between the two will enable Apple TV users to choose from over 400 movies, 350 TV shows, 5,000 music videos, 100,000 podcasts and 20,000 audio books.

It represents another monumental evolution in the world of TV, one that could ultimately put cable TV on the run along with the entire home DVD market, not unlike the way music downloads have crimped CD sales.

For Apple, that can only mean one thing–bigger bottom lines.

In fact, according to a research report released this week by Jonathon Hoopes of ThinkEquity, the opportunity for Apple’s TV product could be anywhere from $5.3 billion to $11.4 billion, with room for even more.

"We believe," Hoopes said, "that Apple TV could add over $10 billion to Apple’s market capitalization once investors get a better understanding of where Apple intends to take this platform." Hoopes upped his price target on the stock to $120 as a result of the new roll out.

So how many of these new devices will Apple sell this year? Quite a few, according to the analysts.

Sushil Wagle of J&W Seligman told Dow Jones Newswires earlier this week that he’s looking for first-year sales between 1 and 1.5 million, while Deutsche Bank’s Chris Whitmore and Piper Jaffray’s Gene Munster are both calling for Apple to sell 2 million units in 2007.

In the end, though, the Apple TV rollout means that there will be even more variety available on that black box that drew Springsteen’s ire in 1992. Whether or not any of it is any good is another story–one for the markets to decide.

The IPhone might have stolen the show in Vegas, but Apple TV was the real story to leave sin city that week.

Anybody seen the remote?

Wishing you happiness, health, and wealth,


Steve Christ, Editor

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