The current Apple TV set-top box gets the job done just fine. Image source: Apple.
It's time to call it. The mythical Apple TV set is dead. Well, it's dead to the extent that it was ever alive to begin with. While Apple has never officially acknowledged that it was interested in jumping into the hyper competitive TV market (how often does Apple tell you directly that it's working on something?), there has been plenty of evidence over the years that the Mac maker seriously considered it.
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According to The Wall Street Journal, the company has abandoned its plans to build a high-definition TV set. To be clear, Apple did think long and hard about making such a product, reportedly researching the idea for almost 10 years. Technically, the project wasn't killed, but let's be realistic. Apple isn't making a TV.
R.I.P. Apple TV set. We hardly knew thee.When Apple enters a market to disrupt the status quo, it needs a breakthrough innovation that differentiates itself while giving it stronger pricing power than incumbents. These innovations typically come in the form of interface paradigm shifts, like the iPhone's capacitive touchscreen.
However, the TV market is notorious for slim margins and rapid commoditization since TVs are inherently little more than large displays. There's simply not a lot of room to innovate or differentiate on the platform level. TV user interfaces absolutely have room for improvement, but there are some unavoidable limitations with trying to create a truly revolutionary TV interface.
Apple supposedly researched a wide range of display technologies that could potentially allow it to stand apart, and the company also considered adding FaceTime capabilities to the product. But video calling on a TV isn't a "killer app." It's not like people rush out to buy Microsoft's Xbox One primarily so they can Skype with friends and family.
Lacking any powerful differentiators and considering the high level of risk, Apple shelved the plans over a year ago, so says the WSJ.
Carl Icahn sees 85% upsideIncidentally, the report came out just hours after activist investor Carl Icahn published his latest open letter to Apple. Every few months, Icahn pens a letter to Tim Cook to applaud Apple's ongoing aggressive capital returns and to continue to speculate about Apple entering new markets. In February, Icahn believed that Apple could build a $37.5 billion TV business in just 2 years.
Icahn now believes that Apple will enter not one, but two new markets in the coming years: the TV market and the car market. For the latter, Icahn thinks the Apple Car will be launched by 2020, in line with prior rumors. For this reason, he does not include any estimates in his model, which only goes through fiscal 2017. For what it's worth, Icahn now pegs Apple's valuation at $240 per share.
Saying "no" is one of Apple's greatest strengthsApple has said numerous times that TV remains an "area of intense interest" and that it feels that it can contribute to the space. But the thing is that Apple can accomplish those strategic goals and reap the benefits without getting too deeply into the hardware side. Consumers are now willing to buy set-top boxes beyond the ones that cable operators provide, a stark contrast to how the market was just five years ago as Steve Jobs observed.
That increased propensity opens up the door for opportunities to innovate, and that's precisely what Apple is doing. The company is expected to release a new Apple TV set-top box next month at WWDC and is reportedly putting together its own slimmed-down subscription TV package. Who needs an Apple TV set?
The article Sorry, Carl Icahn, But Apple Isn't Making a TV originally appeared on Fool.com.
Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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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