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Apple's TV Prospects Generate CES Buzz

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Apple is the only company that consistently gets big buzz out of the International Consumer Electronics Show in Las Vegas -- without even attending.

This year will be no different.

Connected TVs -- TVs that connect to and can access content from the Internet -- will be a big part of CES this year. And just about everyone in tech expects Apple at some point to launch such a television -- an iTV -- that easily consumes and shares with other Apple devices content served from the company's media-storing iCloud.

"I do expect Apple to make an attempt," says Apple co-founder Steve Wozniak, "since I expect the living room to remain a center for family entertainment, and that touches on all areas of consumer products that Apple is already making."

Apple declined to comment on its television plans, but the potential iTV is getting lots of chatter from others going into CES, which begins Jan. 10.

An Apple television foray makes sense. People could use any Apple device to buy TV shows, movies, music or games through iTunes and then play their purchases across all Apple's products -- including a full-blown television in their living room.

But a major roadblock for Apple along the way has been securing content needed to make an iTV succeed. The problems Apple is having securing content deals were described in an interview with a person who worked in the Apple TV group and verified by two television industry sources. All declined to be identified because of the confidential nature of the talks.

They say Apple has been unable to cut deals that would let it offer first-tier TV network programs for an la carte iTunes TV service. That's seen as a key element to launching a revolutionary iTV.

Since there also is no evidence Apple has ordered production of panels for TVs, an iTV is at least a year away, according to analyst Paul Gagnon at DisplaySearch, a firm that tracks the television supply chain.

But that hasn't stopped talk of iTV, nor has it slowed the touting of rival Internet TV plans. Top TV makers such as Samsung, LG and Sony also are looking to shake up the living room, as are tech giants Google and Microsoft.

At stake is a growing world market for Internet-linked TVs that's forecast to nearly double from $68 billion in 2011 to $122 billion in 2016, according to industry tracker IMS Research.

TV makers, in particular, are wary of Apple for good reason: Apple could bite off a hefty chunk of the market. Barclays Capital analyst Ben Reitzes estimates an Apple entry into TV in 2013 could bag it $19 billion in sales.

"Those TV companies could face a dilemma not unlike what Apple's iPhone did to mobile phone makers RIM, Motorola and Nokia," says IMS Research analyst Veronica Thayer.

While Apple has movie deals and some TV shows for its Apple TV set-top box, the key piece for an iTV is securing popular cable network content from the likes of Comcast's NBCUniversal, News Corp.'s Fox, Disney and others, according to the source who worked at Apple.

For now, those networks seem perfectly happy with steady income from millions of cable TV subscribers paying high monthly fees. Internet-connected TVs threaten to disrupt these businesses.

The networks may, however, be more willing to forge deals with technology companies in the future. Cable providers will "lose control in the next five years as more and more content moves online and onto streaming," says Creative Strategies analyst Tim Bajarin.

What's an iTV?

Apple is said to be looking at a 42-inch or larger LCD TV with built-in Wi-Fi. Inside the locked-down studio of Jonathan Ive, senior vice president of industrial design at Apple, there's a slick 50-inch TV, according to the source who worked at Apple.

An iTV also is expected to sport different forms of control from a typical TV remote. Says IMS Research analyst Paul Erickson, "If Apple builds a TV, I would expect them to use Siri or some voice (recognition) app to differentiate." Apple unveiled Siri as a voice-activated personal assistant on its iPhone 4S.

Also, an iTV could pack a computer chip that could run Apple's operating system and give the device access to tons of apps.

Apple's AirPlay, already in the Apple TV set-top box, would allow wireless connectivity with iPads, iPhones and iPods, and the devices could be linked by AirPlay to the iTV for game play and TV interaction.

And Apple's iCloud storage, launched last year, could house all the content independent of any of the devices, making it a buy-once, use-anywhere service for all of Apple's gizmos.

But Apple needs enticing entertainment for its iTV and may be casting a wide net. "I believe that Apple may be talking with the cable operators and the pay TV operators -- DirecTV would be a great one," says IMS Research analyst Anna Hunt. There would have to be something in it for DirecTV, though. "Why would DirecTV want to jeopardize their TV packages and give something la carte to Apple and undermine what they offer customers?"

Whatever the deals, they won't likely be cheap. Says Gartner analyst Mike McGuire, "How much is Apple going to pay up for this? The content guys can't risk their existing licensing deals."

Only one thing's certain: The rest of the industry is watching Apple for cues, and coming up with their own plans:

Samsung, LG

Samsung, the world's largest TV maker, has a "smart TV" strategy similar to what's expected from iTV, with cloud-delivered services to Samsung TVs, phones and tablets. But it has sidestepped trying to reinvent the TV marketplace. "You don't have time to reconstruct the ecosystem and the business model," says Eric Anderson, Samsung's vice president of content and product solutions.

Samsung is a leader, with about 1,000 TV apps to deliver digital entertainment. "A lot of people are developing (apps for) iPad first. But from a smart TV space, they're all coming to us. This space is moving so darn fast, and it's driven by the consumers' needs," says Anderson.

At CES, Samsung may show voice and motion technology to interact with its TVs, similar to Microsoft's Kinect. But Anderson said a rumored link with Google's Android-based Google TV is not coming.

He says Apple's potential TV plan is "top of mind," and he sees it as a positive sign that the TV market will change more quickly. "It starts and stops, though, with content," says Anderson. "We drink this Kool-Aid as well."

LG does not have a devices-and-cloud strategy like Apple's or Samsung's but sees that as the way things are headed. On the cloud, "We want to be able to provide that service to our customers," says Tim Alessi, director of new product development. He says 60% of LG's line of TVs will be Internet-connected.

The strong suit for LG is simplicity of user interface, he says. "This UI is a little simpler to follow. Google's is a little cluttered. Samsung's is a little cluttered and overwhelming."

Next year, LG TVs will add built-in motion and voice navigation, keeping up with Microsoft's Kinect and Apple's Siri.

"Apple's done some amazing things with (user interface) and ease of use, so we'll certainly keep an eye on what comes out of there," says Alessi.

Sony and Google

Sony is the only TV maker to back Google TV. The company has TVs and Blu-ray players that use a game-console-like controller to navigate the Internet, search for TV programs and access apps. Sony declined to say whether Google TV updates will be shown in its lineup at CES.

Google TV has come under criticism since its launch for having a clunky user interface and meager app offerings, among other issues, but that has not hindered sales of Sony TVs incorporating it. "They're among the best-selling TVs we have. Media has done a real good job of beating it up," says Brian Siegel, Sony TV vice president.

Siegel admits there are "lots of opportunities" for improvement, but points out that having Google's search capability built into the TV provides "good insight" as to how consumer behavior is going to change in the living room.

Meanwhile, Sony's PlayStation Network -- more than 55 million PlayStation 3s have been sold -- has for years had on-demand movies and TV episodes piped through the game consoles. It now offers Netflix, CinemaNow, Hulu and Vudu, as well as live sports from MLB.TV and NHL GameCenter Live.

Microsoft

Like Samsung, Microsoft isn't out to reinvent the television marketplace.

But to court holiday shoppers, it added to Xbox 360 content from Verizon FiOS, the Epix movie channel and Vudu's movie app on top of entertainment it already offered from ESPN, Netflix, Hulu Plus and others. Microsoft has sold more than 57 million Xbox 360 game consoles, with 35 million connected online via Xbox Live.

The company's Kinect controller, which allows voice and motion navigation of Xbox, is changing the way people interact with TVs. "We're bringing the voice capability to the entertainment experience in a way that it wasn't before," says Ross Honey, Microsoft's general manager of content acquisition and strategy. "It's tied in with all the apps."

For the holiday season, Xbox 360 also got Kinect updates and a software makeover that makes it look like Windows Phone 7.5 smartphones and what is expected in tablets. The uniform appearance across TVs and gadgets positions it much like what's expected of Apple.

Microsoft's flurry of holiday-timed announcements didn't leave much thunder for CES, and it now says it will bow out of keynote presentations and a booth presence at CES next year.

But it's clear that Apple has got Microsoft's attention.

"We do not discount what they are going to do in the space -- they are going to come on strong," says Honey.

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