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September 29, 2007

The Demise Of Apple TV/iFlop

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Credit: Apple.com

We've mentioned some of the flaws with the Apple TV before at TVSnob, but we've never gone so far as to call it a flop.

Forbes.com has gone that far however, renaming Apple TV the iFlop. After promising the Apple TV would revolutionize television, the TV has only sold about 250000 units, one quarter that of iPhone sales which have been made in less than half the time at a price that is double that of the TV. Forbes pointed out that no official numbers have been released regarding Apple TV sales, in contrast to the releases of sales numbers for Apple's hotsellers, the iPhone and various types of iPods. He also seemed much more casual about the product at a conference two months after the March release of the TV calling the Apple TV development "a hobby".

So what has led to such a poor reception for the Apple TV?

1. Hollywood has not been willing to give up control of their business by being "iTunized" by a powerful company such as Apple. When the Apple TV debuted in March, only Disney and Paramount had jumped on the bandwagon to offer not only TV shows, but also movies over the iTunes platform for prices ranging from $10-15. The four other major Hollywood studios, 20th Century Fox, Universal, Warner Bros., and Sony all refused to such price cuts when DVDs regularly sell for a minimum of $20 elsewhere. All in all, Apple made a poor decision in trying to wield their power to dictate prices.

2. Apple is revered for their product design. The company is absolutely masterful in integrating form and function. Most of the time. Not so with the Apple TV. First of all, the Apple TV doesn't have the ability to record shows. This convenience is critical and shows in the success of products such as TiVo. Also, when first released the Apple TV didn't accept content from platforms such as YouTube although Jobs later changed this.

3. To keep the price of the Apple TV at around the $300 mark, Apple had to cut costs somewhere and that somewhere is all the hardware inside the box. Older chips and smaller hard drives were the end result. Forbes.com reported via research firm iSuppli that even with cheaper, and weaker components, the costs of manufacturing an Apple TV still sit at about $237. That leaves only a 20% gross profit margin to be split between Apple and retailers selling the TV. Once sales didn't take off, the low margins for retailers meant the TVs ended up at the back of the store in a corner somewhere, effectively ending any change of turning the sales numbers around.

4. Finally, worsening relations between Apple and Hollywood continue to make the situation worse and eliminate any chances for a future revolutionary TV product from Apple. Near the end of last month NBC and Apple went splitsville as NBC wanted to increase its TV show download prices on iTunes by $3. Once again Apple tried to dictate prices, and eventually cut NBC from iTunes altogether after the network announced it would be pulling its shows off iTunes at the end of the year. Not a week later, NBC partnered with Amazon.com.

Via Forbes

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Posted by Justin Davey at September 29, 2007 11:49 AM

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