Apple (News - Alert) CEO Tim Cook has ignited rumors again that Apple will launch its own connected HDTV with an interview noting a thirst for reimagining the television arena. That could play out in different ways, but manufacturing a TV set is not an area where actual market dynamics don’t play to Apple’s favor. Price sensitivity and a long average replacement cycle for TV sets (nine years) are not conducive to Apple’s usual high-end, high-volume approach to the mass market. But Morgan Stanley analyst Katy Huberty said that she believes others in the smart TV game are leaving business on the table for Apple to take a bite out of.
For one, smart TVs may be gaining in penetration, but that doesn’t mean consumers are actually using them. According to a new survey from AlphaWise, those who own connected televisions actually spend less time accessing Internet content through their TV than those who use a set-top box (STB) to do so. The survey also found that connected TVs are still a bit of a rare bird: Only 18 percent of homes have a smart TV. And, the kicker is the fact that there’s also a clear need for education and awareness: A full 13 percent of respondents said they didn't know whether their TV is even considered "smart."
"This suggests that smart TVs currently available on the market do not offer easy-to-use software to integrate Internet content into users' TV experience," noted Huberty in a note on the survey.
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If there were ever a company to revolutionize the user interface, she reasoned, it would be Apple. And indeed, the survey found that 11 percent of respondents said they would be "extremely interested" in purchasing an "iTV" from Apple, while 36 percent said they are "somewhat interested."
The 11 percent translates to more than 13 million units sold in the U.S., while the 36 percent would mean an incremental 43 million units if everyone rushed out and bought one. But the total could actually be more. The average home has 2.8 televisions, and 14 percent of respondents said they would consider replacing all of their TVs with iTVs. About nine percent said they could replace most of their sets.
As for that nine-year average replacement cycle for TVs? Survey respondents on average are about halfway through, and are thinking about buying a new set in 4.8 years. But Apple could sweeten the replacement deal with any number of strategies, stretching from apps to accessories to deals with pay-TV operators to subsidize the things.
“The life cycle of TVs is significantly higher than any other industry Apple currently competes in: desktops and notebooks have a roughly four-year useful life, tablets – three, and phones – two,” Huberty writes. “If Apple were able to ignite the market and shorten the TV life cycle from nine to six years, the total addressable market would expand by 50 percent.”
Of course, price points would be a considerable gating factor and this is where the bullishness should break down. About half (46 percent) said that they would pay around $1000, which is a low price point even for existing smart TVs from LG and Samsung. When upped to $2,000+ as a price tag (News - Alert), the number drops precipitously to just 10 percent of respondents willing to pony up the cash.
In fact, the average comfortable price point would be just $1,060 for the "iTV," which is about 20 percent more than the $884 paid for the current average (non-smart) television set. And that’s far less than the average connected TV. Only the young--ages 18 to 29—said they would invest more, noting that they would be willing to pay a 32 percent premium for an Apple connected HDTV.Tara Seals has over thirteen years of experience as a journalist. Her areas of expertise cover the waterfront of the service provider segment, especially mobile networks, devices and applications; and video infrastructure, content and broadcast models.
Edited by Brooke Neuman