People who use competing products just don't get the loyalty of
Guerilla warfare
If you ever get stuck in an Apple trivia contest, try this one on to stump your opponent: Which went on sale first, the iPhone or Apple TV? If you guessed that this was a trick question and it's the Apple TV, you'd be right.In the ensuing 6 years, the blockbuster iPhone sold more than 300 million iPhones sold while the Apple TV managed just 13 million. Still, the numbers aren't terrible. Sales eclipsed 5.3 million in the past fiscal year, more units than competitor Roku has sold in its history. Recent comments by CEO Tim Cook suggest this year's sales are up another 20-30%.
And quietly, the product has gotten more and more useful over time. From its roots as a
What Apple TV doesn't yet offer is some reason for tens of millions of people to buy one, but the company is working on a couple. First, there are apparently discussions under way with
Apple has been rumored to be doing everything from building a television to rolling out its own cable service for some time, so a set-top box for Time Warner might not seem inspired. But viewed as a small step toward a bigger place in the living room, it fits with the strange journey of Apple TV. Normally, the Cupertino giant makes a big splashy product intro, and its products become an overnight hit (iPod, iPad) or they become irrelevant (remember Ping or the Mac Cube?). Apple TV has just hung around and quietly become a billion-dollar hardware and software business without much fanfare.
Game on?
But if the other shoe drops, expect that quiet approach to change in a major way. As Microsoft and Sony both announced their gaming consoles in recent months, much was made of how the former spent a great deal of time talking up the TV features of its product while the latter didn't (despite very solid functionality in that regard on Sony's PS3). Some even breathlessly proclaimed Microsoft's new box an "Apple killer." But here's the odd thing: The gaming consoles each sold fewer than 10 million units a year on average over the last generation. With prices of $399-499 and a real shift in gaming both upscale (to PCs) and downscale (to smartphones), the odds of the new consoles even doing that well seem remote.
Apple TV already seems like it could eclipse 10 million units in 2014, especially if Apple offers more movie content in more countries (something it has tended to do over time) and iTunes Radio goes live. And if Apple enables game playing on the device? What's the limit then for a $99 game console with inexpensive, addictive, high-quality games? You know, the kind that are eating up all kinds of time on iPhones and iPads, like Candy Crush Saga (which is a $200+ million-a-year- business on its own).
Hardcore gamers dismiss these kind of casual games, but they are the kind of easy-to-play entertainment that has expanded the gaming universe to hundreds of millions of people who would never consider buying an Xbox One or a PS4. Apple recently started a developer program to allow for gaming controllers designed to work with iPhone and iPad, but it's not hard to imagine that being extended to Apple TV as well, which runs the same underlying software as the mobile devices.
And lest anyone doubt the graphical quality of the best iPhone games, check out CSR Racing, which would hold up just fine on most folks HDTVs. Like Candy Crush, CSR Racing is already cloud-enabled so you can pick it up on whichever device is handy and resume wherever you left off. That kind of functionality is the sine qua non of everything Apple is trying to do with iCloud right now. While iCloud is hardly perfect, it's already the magic that allows you to download an app on your iPhone and have it appear on your iPad nearly instantly.
Taking it on the road
The next step for Apple is to get all that magic to occur when you're on the go as well, driving in your car. To do this safely requires the cooperation of auto manufacturers who can integrate a simplified version of iOS into the built-in screen of the vehicle and allow you to navigate it simply, mostly with Siri and voice commands. What 300 million fiercely loyal customers gets you is the ability to sign up a dozen automakers to support an initiative like this: Honda/Acura, Nissan/Infiniti, Mercedes, Hyundai/Kia, Volvo, Chevy, Jaguar, Ferrari and Opel.
What iOS in the Car gets Apple is a further closing of the loop by which you and your data are tied together across Apple devices everywhere from your computer to your tablet to your phone to your TV set top box to your "smartwatch." If it's difficult to consider swapping out an iPhone for a Galaxy S4 today given how the iPhone integrates with some other Apple device you might have, imagine what it would be like if you had a half dozen. That's why Cook wants to double down on Apple being the primary vendor of iPhones as opposed to third parties: So Apple can lock you in. The thing is, most loyalists don't mind, so long as Apple keeps them comfortable on the couch. Or as they cruise down the highway.
For the rest of this series, check out:
Part 1: Apple Grabs A High-Fashion Exec, But Its Next Big Moves Are Very Mainstream
Part 2: The Easy Profit Game Ends In Smartphones, So Apple Plays A New One
Also on Forbes:
Follow me on Twitter. Find the rest of my Forbes posts here.