It's Official: Apple TV Is No Longer a Hobby

Image source: Apple.

Apple's Tim Cook has been saying this for quite a while. For the longest time, Apple referred to its set-top streaming device as a "hobby," but that label stopped being appropriate a long time ago in terms of financial results. Almost three years ago, Cook began calling TV an area of "intense interest" for Apple, language he would repeat many times in following years.

In early 2014 at the annual shareholders meeting, Cook noted that Apple TV had generated $1 billion in revenue in 2013, including content sales, saying at the time that it was "difficult to call it a hobby these days." In an interview with Charlie Rose later that year, Cook said that Apple TV "far exceeded the hobby label" since it now has 20 million users.

However, as the Apple TV business and user base was growing, it didn't seem that Apple was putting all that much effort into the device strategically. Apple TV went over three years without seeing any meaningful hardware or software updates. With the new models that were announced last week, Apple is ready to start really trying.

Apple TV is finally a true platformFirst and foremost, Apple is a platform company. Its sleek, premium-priced products are merely gateways into its numerous platforms. In order for most platforms to thrive, they need a wide array of third-party content, which is where innovation can flourish. This is why Apple TV hasn't felt like much of a platform until now. Sure, Apple was adding new TV channel apps periodically, slowly bolstering the availability of various third-party services, but it was a slow progression.

Now that Apple is opening up Apple TV to third-party developers through the App Store, the platform now has a legitimate chance of taking off in entirely new ways. Of course, rivals have already gone down this path with limited success, so to a certain extent Apple is just playing catch-up here. But that shouldn't discount the fact that there are immense opportunities for Apple to tap.

It's also not as if Google has had a very cohesive vision here. The first Google TV was a total failure and attempts to revamp the platform weren't very successful either. The search giant finally ditched the Google TV brand altogether and regrouped under Android TV, which was announced last year and devices launched this year. The $35 Chromecast is appealing thanks to its low price, but it's also completely independent of Android TV.

It's about timeThe new Apple TV comes at a time when Apple's position in the streaming media device has been deteriorating. As mentioned, the Apple TV hardware was stagnating while rivals were assaulting the market with low-cost devices. Market researcher Parks Associates estimated that Apple fell to the No. 4 spot in 2013, as's $39 Fire Stick took off.

But Apple is also quite literally asking a lot, seeing as the new models are priced between $149 and $199. That's quite a premium compared to the typical $99 or less that competing devices cost. The only other streaming device in that ballpark is NVIDIA's SHIELD, which costs $200 and naturally emphasizes gaming. Apple's pricing strategy underscores its lofty ambitions for the streaming media device market.

Apple has never regularly disclosed Apple TV results, although Cook has provided the occasional updates. But making matters even more opaque, Apple TV is reported within Apple's "other products" segment -- which also includes the Apple Watch results that everyone is dying to get their hands on. If the new Apple TV does start to sell well, it'll just make it that much murkier to know how Apple Watch is doing.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns and recommends, Apple, Google (A shares), and Google (C shares). The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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