Is Apple Preparing An Assault On Living Rooms?

What happens when big isn’t quite big enough? Gene Munster, a Piper Jaffray analyst, thinks he knows the answer: you make it bigger. Bigger counts in one place in particular: the living room television. Munster believes that this is Apple’s next target. But can a company that has made its name on small handle something so big?

Our story begins with Apple TV.

Apple TV

Apple produced the Apple TV as a sort of side project (or so they say). It is a box that essentially gives its users access to the iTunes store. It’s somewhat like Netflix, except without the live streaming and with an enormous library of content. Instead of paying a flat-rate monthly fee, people pay for only the content they want.

It sounded like a great idea. Unfortunately for Apple, it never caught on. The company has acknowledged that the product hasn’t been as successful as it would have liked, but they still keep the product updated every once in awhile. But why bother, especially with the likes of the iPhone, iPod Touch, and, most importantly, the iPad? Apple has its products in the hands of millions already. Apple doesn’t need to go to be on the television, right?

Maybe Apple does — at the end of the day, most people want to sit down, relax, and enjoy entertainment on an HDTV.

Apple TV was supposed to address this issue by taking the existing television and turning it into something much more, but it didn’t succeed. This would be a sign for most companies to stay away. But Apple might not be afraid (as was the case with the Newton and iPad), according to Munster.

Munster thinks that Apple has put aside a secret $3.9 billion investment that has one purpose: secure displays for a new type of product. This product might be one that is set to invade the living room. But this isn’t another Apple TV. This is something far bigger.

Apple’s All-In-One Display

What Apple has allegedly done with that $3.9 billion is pre-purchased large-form displays — Munster has said up to 50 inches — for the creation of an Apple-branded HDTV that has Internet connectivity, integration with iTunes, and computer-related functionality. Furthermore, he believes that Apple is investing in manufacturing plants and securing necessary components to create LCD displays.

This would mean that Apple could have plans to take the television industry by storm. It would be an all-out assault against every display manufacturer and, possibly, pay TV provider. Munster believes Apple is getting serious:

While Apple’s commitment to the living room remains a ‘hobby,’ we continue to believe the company will enter the TV market with a full focus, as an all-in-one Apple television could move the needle when connected TVs proliferate.

Munster believes that Apple will have these HDTVs in the market by 2012, and he believes that Apple could sell 1.4 million units and bring in an additional $2.5 billion (2 percent overall) in revenue. He also expects that the revenue from such a product would increase to $4 billion in 2013 and $6 billion in 2014.

The thought of Apple actually producing an all-in-one television display to me, at least initially, seemed a bit awkward. After all, the company already has Apple TV, which has managed paltry sales at best. Also, this isn’t considered Apple’s core business.

Or is it?

After giving this some more thought, I realized that this is Apple’s core business. Apple is a supplier of digital entertainment hardware and software for both first- and third-parties.

Apple’s All-In-One Display Would Make Sense

An all-in-one Apple television display would be the perfect solution to offer consumers, especially in a time when Americans are spending more time than ever on their couch watching television. Toss in Internet connectivity, the diversity of the iTunes Store, and the Apple brand, and you have yourself a winner.

Apple could benefit heavily from this. An all-in-one Apple display could lead to more hardware sales. Considering that Apple typically charges high premiums for its products, I’m sure that this would be the same case for an Apple-branded display. Consumers would know that they are purchasing a high quality brand because it is Apple, and this would result in a massive boost to Apple’s bottom line. It’s a money maker.

Another reason Apple would be interested is that this could take Apple’s iTunes store and turn it into something even more important. It could be the spot where Hollywood wants to go to distribute their content, if enough people buy into an Apple television. It solves a slew of problems that many in Hollywood have been complaining about for years. More money!

Furthermore, it gives Apple more control over the digital entertainment realm. It would compete directly with the likes of Amazon, Netflix, Blockbuster, Redbox, and others, and Apple could provide a better experience.

A unique possibility is that Apple could bring its App Store to this display. This would give developers another opportunity to create and sell applications specific to the television, similar to how Google TV was supposed to work. It would be an example of Apple taking advantage of their rich ecosystem of third-party content and developers.

And if the App Store makes an appearance, games are also likely to make appearance too. This would position Apple as a provider of gaming content for the television. This is traditionally a role handled by game systems like the Xbox 360, Wii, and PlayStation 3, but Apple could shut all of them out and create their own gaming platform built directly into the television. It could (if this Apple HDTV were to come true) be devastating to those console providers in the long-term if Apple’s television became popular enough.

Most importantly, the television industry could be another that Apple revolutionizes. Admittedly, there is far more competition than ever before in the television and display industries, and it would be a tough one to crack, but if there is one company that could break in, it would be Apple.

Consumers Would Benefit

Consumers would also benefit.

When considering the cost for things like Blu-ray, DVR, cable service, game consoles, cables, and more, the cost adds up. It is thousands of dollars to create a functional home theater — and potentially hundreds of dollars more per month to maintain it — not to mention movie and game purchases and rentals.

Apple’s all-in-one solution could change that. It could offer everything you need (and hopefully it would include HDMI ports).

But Munster took it a bit further by mentioning something called an iTunes TV Pass. It doesn’t exist now, but it is an intriguing idea that has been floated around before.

What if Apple turned into your sole provider of digital entertainment on the television? They already have the infrastructure in place to provide purchasing and rental options in movie and television show content. But what if Apple turned into the future cable provider? Users could pay a monthly price for an all-you-can-eat buffet of digital content. Maybe users can forgo the monthly fees altogether and only purchase the content that they want, on demand, whenever they want it.

This could be an easy way to get people connected to the Web, streaming content, and enjoying Hollywood’s creations. Just as the iPad has taken the complexity away form the modern-day computer, an Apple all-in-one television display could do the same for the television industry. No more complex TV guides, no more scheduling things to record, no more conflicts, and no more cable/satellite providers. It’s that simple.

There would be only a few differences in hardware (maybe Apple would offer a medium-sized television and a jumbo-sized television). Just like with the iPhone, iPad, and iPod Touch, Apple’s hardware is, for better of for worse, the same. You wouldn’t go over to Joe’s house and have to admire his mammoth-sized television, because you’d have the same one at home. Sure, this sounds like socialistic thinking, but it seems to work well for iPhone and iPad users. Consumers don’t mind having the same thing. And in some cases, it works very well (just like game consoles versus gaming PCs).

It is revolutionary thinking at play. And there is but one company that could pull this right now — because Google has obviously dropped the ball, Amazon doesn’t seem like a candidate, and Microsoft… meh. It’s almost as if Apple can do no wrong.

But make no mistake about it: this would be a level of ambition that even Apple would have to consider taking seriously. The television industry is incredibly competitive. It’s crazy… but it’s certainly possible.