How The Apple TV Will Change The Industry

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In 2001, Apple (Nasdaq:AAPL) introduced the iPod, a digital music player that most considered the new standard for the digital music industry. At one point, Apple enjoyed a nearly 70% market share in the digital music space. To borrow a popular cliche, the iPod was a game changer.

In 2007, Apple introduced the iPhone, marking its entrance into the mobile phone market. By 2012, the iPhone had a 53.3% market share. One out of every two cell phone users was making calls on an iPhone. In the highly competitive cell phone world, the iPhone was and is a game changer.

In 2010, Apple introduced the iPad, a product that many said brought the tablet into the mainstream. Many have copied the iPad, but Apple is still the leader in the space. The latest figures show that Apple holds a 69.6% market share in the global tablet space. Once again, a game changer.

What's next? Consumers, investors and techies are all waiting for the next game-changing device. Some complain that since the iPod was essentially replaced by the iPhone, and the iPhone and iPad have only received incremental updates, it's time for Apple to blow the market away with something new. That something may be the upcoming iTV (not to be confused with the Apple TV, a device already on the market).

Is This iTV Real?
Maybe. The term "iTV" is based on a rumor, and even the existence of a TV in the works is not confirmed. The only "sort-of" confirmation comes from Apple CEO Tim Cook. In a recent interview, he said, "When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years. It's an area of intense interest. I can't say more than that."

If it is real, however, Apple may have a found a market ripe for another Apple game-changing product. Remember the dark days of the music business? When music became digital, it was easily passed around to anybody who wanted it. Money doesn't grow on trees, but thanks to sites such as Napster, music did. If you went to Napster's site, you could download any music you wanted free. Why purchase it anymore?

The problem of piracy was plaguing the record labels. Sales were down, and the problem was set to get worse. The industry was in disarray, and nobody knew what to do about it. In came Apple. Through iTunes, Apple broke up the traditional album into separate tracks. No longer did customers have to purchase an entire album. They could purchase a single track and download it to their iPod. Apple, according to some, saved the music business.

Today, television is having similar growing pains. "I'm fed up and I can't take it anymore" is the battle cry of consumers who not only hate commercials, but even more, hate paying for hundreds of channels while only watching a dozen or so.

Forbes reports that 82% of consumers aged 18 to 24 prefer to watch programming online instead of through television. Apple's iTV (if it existed) could combine the social aspect of YouTube and other web content portals with the fresh, high-quality content of broadcast television. Apple, then, would likely change the TV industry the way it did the music industry.

As Forbes asks, "What if consumers could interact with the content?" What if online television-based communities existed where customers could "like" content? What if Facetime was integrated into the TV in a way that friends could watch a football game together? Can you imagine Apple-inspired virtual Super Bowl parties?

What if those high-dollar cable "packages" became a distant memory and customers only paid for the channels they wanted? To borrow another widely used cliche, the possibilities are endless and Apple knows it.

SEE: A Primer On Investing In The Tech Industry

There Are Roadblocks
It is truly a utopian-sounding story. All the things we hate about TV are fixed thanks to Apple. It could happen, but the TV industry has been reluctant to change. Content providers are not interested (yet) in changing the way they do business. Looking at how Apple changed the music business, those making money off TV do not want Apple swooping in and taking their profits. To say that it is a foregone conclusion that Apple's next big innovation is the iTV is far from certain. Much like goings-on in Washington, once money and power become part of the equation, a great idea is often stripped down to good or just OK.

The Bottom Line
Would you buy an iTV? A recent survey found that consumers would be willing to pay about 20% more for a TV that has the Apple logo on it. That is good news for Apple. Whether iTV will be a full-blown TV, a replacement for your current set-top box, or nothing at all, remains to be seen. The public is waiting for Apple to be a market disrupter once again. One thing is certain: Apple has a wad of cash larger than some small countries. If anybody can do it, it's Apple!

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