Assessing the Smart TV Opportunity
There has been increasing chatter about a new TV being developed by Apple.
My opinion on the subject was summarized in the post called Tele Vision. I contend that a TV cannot be smart until the content it delivers becomes smart. The logical conclusion is that the value chain needs re-integration so that the component which is not good enough (the content) can be improved along the dimensions that users value. And it cannot be improved unless the direction it needs to go into is aligned with the direction of the disruptive innovator. I won’t repeat the theory here, but it suffices to say that whatever will change television will do so by re-defining the core product not just the tools we use to consume it.
But today I wanted to address another question: how do we value the opportunity? In a back-of-the-envelope manner, can we tell if this business is big enough to try to fix.
The answer depends a lot on the business model of the disruptive entrant. The entry could depend on software or advertising or hardware or distribution, and each would have a different valuation.
Lots of talk recently about Apple coming out with a TV, that Jobs cracked the nut and they will be out in 2013.
Sounds really cool getting your TV over the Internet. But some people have worried what the cable companies will do.
They provide TV and also the Internet. To a lot of people. They are not likely to just let Apple take away their TV revenue.
Asymco hit the nail on the head earlier in a post called Tele-vision. He ended that post with this observation:
So as far as having a vision of tele-vision, the answer is not to graft technology onto an archaic value network, but to build a new value network around new technology.
I’ve mentioned that Apple hates other people controlling their future. They do not like being hampered in their own goals because of the goals of other companies.
Much of their disruption in the wireless market comes from the fact they maintain control of their phones in ways no other maker does. The forward progress of the iPhone is solely determined by Apple and not Verizon, Sprint or ATT.
In fact, some of the best technology Apple has do not even need the cell networks, if WiFi is available.
So, how does Apple get around the cable companies, disrupting their model and preventing them from hurting Apple? They need to new way to deliver the Internet to people anywhere.
I think they are working on just that. Having their own wireless network will not only get them around the cell phone makers but also be able to provide the Internet to anywhere.
I’ve written that it could be something like White-fi.
Just imagine such a thing.
It would sure explain why Apple has such a large cash horde. They would need to spend that in order to create a nationwide or global network.
A network that used the same protocols in all countries. A network that would supply high speed wireless calls and high speed Internet to anyone anywhere in the world. No need for cable. No need for the wireless carriers.
I even bet they are willing to work with Microsoft and other high tech companies to make the protocols open, knowing that only a few companies are capable of providing worldwide coverage and support. Only Apple has a retail presence in so much of the world.
Sure, people could still buy an cell phone from ATT, the Internet from Comcast , a TV from Samsung and continue to pay for that luxury and complication. Or they could just buy everything from Apple – where they all just work together – and pay Apple.
That is how Apple will disrupt everything – provide a way for the Internet to be decoupled from the phone and cable companies – and connect it to the high tech comanoies.