Why iOS Could Make Apple TV Succeed

Apple might be cooking up a do-over with its TV set-top box using a key ingredient: the iOS platform powering the iPad, iPhone and iPod Touch. It might just work.

Both The New York Times and Engadget recently published independent reports claiming that Apple would upgrade its set-top box with an iOS-based software overhaul. There’s a possibility the upgrade could also involve an expensive piece of hardware — $100, according to Engadget.

Apple declined to comment on the rumor, but Wired.com did discover on LinkedIn a few new hires on Apple’s interfacedesign team who have backgrounds in home entertainment and TV broadcasting, which might hint that something major is in the works.

It seems likely and feasible that Apple will expand the iOS platform to the Apple TV. Apple frequently refers to the Apple TV as a “hobby,” because it has been a modest performer. The video-entertainment industry has been a challenging environment for the company to swing a home run, because it’s packed with competitors offering a multitude of methods to watch TV and movies. Also, cable providers often subsidize set-top boxes, which sometimes include a DVR.

But iOS could be the weapon that enables Apple to invade home entertainment. Here are five reasons an iOS-based Apple TV could be a hit.

The Connected Living Room

As Altimeter analyst Michael Gartenberg said, “The TV remains one of the last disconnected devices in the household, and everyone is trying to figure it out.?

A large number of TVs include built-in internet connectivity, and Google recently announced its plans to share its Google TV software platform with TV manufacturers. While this strategy sounds promising, Apple’s iOS could still succeed with the same strategy that allows the iPhone to compete with Android phones ? an elegant operating system tightly integrated with other Apple hardware versus a one-size-fits-all platform from Google, which will undoubtedly take a long time to refine.

While TV makers have been busy pimping out expensive 3-D televisions, Apple has been gradually iterating an extremely successful platform allowing customers to easily expand their devices with downloadable apps, while enabling third-party software developers to make money.

Huge User Base

The iOS user base includes more than 100 million users. It’s likely that Apple would include a cheap basic remote with a new Apple TV while upselling the device to the gigantic audience of iOS customers. In this scenario, people who own an iPhone, iPad or iPod Touch would receive special benefits and more-seamless control when using an Apple TV.

From a strategic perspective, Apple would be pinning its “hobby” device on its blockbuster products, and that would be a wise move.

TV Apps? Yes, Please

In addition to a huge customer base, the iOS platform already has more than 200,000 apps. It wouldn’t be easy to repurpose apps made for the iPhone or iPad to display nicely on a big-screen HDTV, but a number of apps would provide interesting utility for television and living-room entertainment systems.

Imagine getting internet-streaming radio, video conferencing or the Hulu app playing on a TV. Plus, an Apple TV App Store could introduce new apps to calibrate the picture of your television, adjust your sound levels, turn an iPhone into a a slick, touch-based universal remote, and more.

Thanks to the introduction of Apple’s iAd mobile-advertising platform combined with the already large iOS user base, third-party developers would have strong incentive to produce apps to make Apple’s TV product unique and innovative like the iPhone.

Motion-Based Gaming

Gaming would be even be more interesting. Apple is already in a good position to more directly compete with console makers, and expanding iOS gaming to the TV would be a compelling move. Independent game developers would likely price games considerably lower than console games. We’d also see a host of innovative games made for all types of customers: children, teenagers, adults and even grandmothers ? as opposed to the tired 3-D shooters aimed at nerdy Xbox 360 or PS3 players. Plus, the iPhone 4, which includes a gyroscope, is already better than Nintendo’s Wii controller.

In 2009, iOS already grabbed 5 percent of the videogame software market, quadruple the number in 2008. That seems like a small chunk, but it’s substantial when you consider that gaming is only a partial purpose of iOS, and that the platform is only two years old. Imagine how much that number could grow if iOS extended its reach to television gaming.

Alternatives to Cable

Apple is rumored to be preparing a cloud-based iTunes for streaming media, which could provide an attractive alternative to pricey cable subscriptions. Also, iOS apps such as Hulu+, the ABC TV app and Netflix offer additional flexibility for internet-savvy customers who are looking for ways to reduce or even eliminate their monthly cable bills.

We’re already seeing a slow decline in the money spent on cable TV and a growing interest in internet TV. According to research from Centris, digital-cable spending dropped from $79 a month in the third quarter of 2008 to $70 per month in the third quarter of 2009. Meanwhile, more and more TV content is becoming freely available online: Avner Ronen, CEO of internet TV startup Boxee, estimates that 60 percent of broadcast TV is available free online, along with 10 percent of cable TV.

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