Apple TV Pre-Reprecussions

8 Sep

If you’ve followed my prior posts about what’s wrong with xBox, how game console ecosystems aren’t working and how to fix them, what the hardware in a 2014 / 2015 Apple TV will be capable of, and how strong Apple’s advantages in its silicon and developer ecosystem are, you know that I believe it’s more than games at stake with Apple TV. Not just console makers, but also cable companies, ISPs, and television manufacturers are in for a world of hurt as Apple App-ifies television channels, cable-bundles, games and other services with a device that defies all existing television business models.

Apple TV will be the first television-attached general purpose networked computer with a permissionless content ecosystem built specifically around how people interact with television screens. This is a very big deal, because software eats the world of television only when there are enough people who can afford easy-to-use hardware and enough creators capable of keeping up with a growing demand for content.

This is the first of a few posts about Apple TV and its repercussions. This one is about the expected Apple TV product and why an App Store changes everything, not just games and concludes with my take on Apple TV killing consoles.

The Apple TV Product

If the rumored hardware specs and pricing are correct, they don’t differ too much from my own guesses except for:

  • A8 System-on-Chip (SoC) processor. Using a clock-, RAM- and GPU-boosted A8 instead of the A8x or newer A9 and thereby having one fewer CPU core is slightly surprising. This may just be confirmation of prior rumors that they were holding the already designed product in the wings for a year while waiting for other business & content deals to close. As much as I love huge texture fill rates and mass quantities of GPU cores, Apple does not fight on specs – if it is on-paper less powerful than an A9 it will not detract from Apple TV gaming – if anything it tees up next year’s hardware update easily.
  • No 4K support. This was always a bit of a stretch goal technically and I only suggested it because supporting hi-resolution screens and having the best resolution trailers is very Apple. The current HDMI version 1.4 hardware only supports 4K video at 24Hz refresh rates, which is horrible beyond words on televisions and monitors (though it works fine in digital movie theaters). The HDMI 2.0 spec which supports 4K@60Hz refresh was finalized just two years ago, so that ink is barely dry by hardware standards. I think they could have done HDMI 2.0 this year, but it’s not a huge loss and again tees up next year’s upgrade.
  • Siri and a new remote supporting universal voice-based search, what I had hoped for but wasn’t expecting. The Apple TV remote and 10-foot UI were already best of breed, but as I said last year, a microphone and Siri button on the remote is killer. Having tried perhaps every form of television input device ever shipped (and many that never did), I can honestly say remote-based voice search simplifies 10-foot UI dramatically and is magical. Voice search was the single stand-out delightful feature of Amazon’s FireTV, and was frustrating there only by the lack of universal/cross-provider search. Voice search on XBox One has never worked with my television or movie content, and initiating interactions with “trigger words” yelled across the room followed by additional yelling towards the television simply doesn’t feel natural.
  • Motion-sensing and a touch-pad on the new remote I did not expect. Traditional 10-foot UI’s, even with added voice recognition, remain inconsistent for entering voice-difficult text – things like network passwords, email addresses, or the names of people and places are still hard and awkward. I’m tentatively excited by additional inputs and sensors on the remote because I hope Apple has at least one cool text-entry trick up its sleeve which it will make available to all apps (text entry in console games is utterly inconsistent, it doesn’t ever seem to be provided by the operating systems). If the remote manages to enable some existing games with touch-based input or new types of games centered around gestures or motion as input, that will obviously be an interesting opening for existing and new games tuned to the remote. In general I have not been impressed with adaptations of touch-based games to 10-foot UI and one-button remotes (or touch adaptations to gamepads). Games and their preferred input mechanism tend to be well coupled.
  • Infrared transmitter (IR) on the remote. Presumably to take over power and volume controls so you can use the single Apple TV remote and discard the horrible one that came with your Samsung TV.
  • Storage capacity & pricing. I thought two models 16GB/32GB at $149/$249 vs the rumors of 8GB/16GB at $149/$199 or a single model 16GB at $149. I was more concerned about storage space for large games, but iOS 9 App Thinning and On-Demand Resource caching, alleviate my concerns, though they do require developer effort. On-demand partitioned resource delivery from a CDN is a great example of a transparent system service that stagnant operating systems and consoles have failed to give developers and customers – have fun instead on XBox One and Playstation 4 manually removing and moving your games and saves around using a difficult 10-foot UI. Similar fun managing your apps and settings on Windows (or Mac).
  • No word on an Apple-designed bluetooth gamepad. The rumors suggest gamepads are left to third parties and the MFi program, which would make them uncommon among consumers and more difficult for developers to depend on when targeting Apple TV. If so, this suggests Apple may be continuing to skate around a direct confrontation with existing consoles. This could be because they want to avoid direct comparisons or they believe gamepad-based games on Apple TV will compare unfavorably to similar console titles on the current Apple TV hardware. Or it could be because console publishers are giving them grief about console revenue cannibalization? I’ll be contrarian and say I still expect to see an Apple gamepad on September 9 – a beautifully designed gamepad that costs $15 to produce and sells for $79 seems too Apple-like to pass up, and gamepads are a not just a well-established input mechanism for games on television, both for users and developers, but also very good input devices.

An App Store Changes Everything

The world has had 8 years to internalize how valuable an open, (virtually) permissionless App Store is for Apple’s mobile product ecosystem, how it has created a virtuous cycle (like the Windows ecosystem long ago) helping grow and being grown by its vast developer community. And yet no television devices have copied even a fraction of its blueprint nor seems to understand the interrelated features of its success. There are set-top-boxes and consoles where applications have to pay the owner/operator for placement, reminiscent of carriers controlling phones in the pre-smartphone era. There are open platforms with expensive paid tools and poor software development kits (SDKs) that can’t attract developers even when they are paid to bring port their apps. There are open platform micro-consoles and HDMI dongles with great SDKs but inadequate processing power for interesting applications, no payment infrastructure for content developers, and no distribution plan or marketing budget. Consoles have come close, but their poor UI and high-priced, subsidized hardware business model which requires controlled distribution to prop up pricing are boat anchors. Consoles barely foster proper independent game development, afraid of the implications to big publishers. They offer janky tools and SDKs to controlled groups of elite developers, stalling innovation and preventing open support communities from forming. Console setup doesn’t demand a payment instrument, so developers can’t always depend on the digital marketplace or in-app purchases or subscriptions. Consoles make setting up accounts and payments very hard, have high-friction stores with inadequate payment types, and make business as well as UI distinctions between games and things like video streaming services or applications. None of this happens in the Apple App Store. (It’s worth noting that almost none of this happens in Valve’s Steam, either).

Not just games and new kinds of TV apps that developers will dream up, but for all content we traditionally have watched on channels or buy in cable bundles. It will all become App-ified. Use your Comcast or DirecTV set-top-box to add HBO service to your account – one of mine asks me to call customer service to confirm, the other one has no option at all, though I can do it via the website, and it takes 12hrs to take effect. This is for the services these operators have already approved – if an independent movie or television producer creates a small-budget show what are the chances that it could appear on some unused channel slot on your Comcast or DirecTV program guide? Zero. Not so with Apple TV – if you’ve got the rights, build an app and charge what you want for it. Permissionless innovation allowed and encouraged here.

But Wait, Aren’t TVs Being Killed By Mobile?

App-ifying television sure sounds great, but isn’t television a zombie? Many tech folks see the millions of televisions around us as dumb glass which mobile devices in our pockets will eliminate or just drive blindly. Lots of trends support this theory – increasing time spent on mobile devices, less television watching and video game playing, declining television advertising, slow replacement cycles for televisions, to name a few. But I say look more closely. Mobile is killing television in a different way than you think. Technology from the mobile supply chain is taking over television and peripherals, making them cheaper, faster to iterate, and giving them better, simpler, more stable software. Mobile is killing television by unleashing hordes of mobile developers and powerful SDKs onto television where previously no software could run. There are 4,000,000,000 square feet of LCD glass shipping worldwide each year, about 2/3rds of it televisions. It’s worth thinking about how we interact with television screens and to consider what set of jobs televisions are hired to do. What might TVs continue to do or even do more of, even as they lose some of their traditional jobs and attention to mobile devices? What additional features could help them do more jobs and be better at some traditional jobs, even better at jobs done in concert with mobile devices?

Three Jobs Television Screens Are Hired For

The primal job consumers hire televisions for is watching television, movies, and sports. Although time spent in front of televisions watching “passive” entertainment is declining, especially among younger americans who have shifted to different entertainment or to other devices for video entertainment, there is still a lot of reality, sitcom, news, live events like sports, DVR, and DVD-/BluRAY-watching happening in front of televisions and it is controlled with remotes. One remote controlling power, volume, and inputs. Perhaps the same remote or another (or several!) for a cable set-top-box, for DVD or BluRay, for TiVO, for DirectTV. Lots of complex remotes with too many inscrutable buttons. Many different, complex, and inconsistent 10-foot User Interfaces. Apple TV’s simple UI and new bluetooth remote with voice search (and bluetooth beacon which can trigger apps in your phone as you come near) will radically improve consumers’ experience with what has traditionally been a very frustrating task: changing channels and finding content. Apple’s base subscription service will apparently include local channels, and the metaphor shifts from channels and having to map shows to brands to channels to simply named brand containers: ABC, CBS, etc nationally, KIRO, KING, etc locally, HBO, FOOD, etc from premium services. Elements of de-coupling channel numbers from brands to simplify discovery has been happening in various set-top-boxes from Roku, DirecTV, TiVO, XFinity, and even already in Apple TV, but adding in local channels will make a tremendous difference for typical consumers. After initial setup, I suspect most Apple TV users will never use their old TV remote to change inputs again. Ever. Apple is entering the television market through its most popular activity – watching – using the most magical version of a boring and before-now hated television remote control that consumers will ever have experienced.

Another important job that consumers hire televisions to do is gaming, to the tune of $50bn per year worldwide in console hardware, software, and subscriptions. We buy a video game console and attach it to one of our television’s inputs, use the TV remote to turn on power, choose the game input, and control sound. We then shift to a gamepad to navigate the 10-foot user interface “dashboard” and to play games. By including an App Store on Apple TV and making games a category of navigable content just like movies and television shows, a lot of the small frustrations that parents, spouses, and roommates have with gaming on a shared television screen – how do I change inputs? why is the screen blank? – are eliminated. Because Apple TV games are purchased, installed, and launched just like on smart phones, without inserting disks or navigating an unfamiliar store, games and other apps will be more approachable for more users who have experienced mobile app stores. If some games can be controlled with the new remote, or if there is an accessory “standard” format gamepad that is commonly (10-15%) purchased for gaming, this will bring more users to gaming on television in the near term. Microsoft attempted to enter and shape the television market through this other popular activity – playing video games – and also invested in a terrific input device, the XBox Controller. But it never shipped a simple standard remote to ease the watching/volume/playing discord, nor did it simplify its UI for watchers or casual gamers. In 2014 It tried to bypass the television remote with Kinect gestures and voice, and it tried to become the root UI for the job of watching television without negotiating content licenses by including an HDMI-pass-through, but these features do not work magically and the device’s price and branding has limited its mass adoption.

The last major job that we hire televisions for is, broadly speaking, signage. Restaurants, bars, grocery stores, building lobbies, elevators, bus-stops, schools, in the lounges and reception areas of every public and private place where people congregate or wait, from airports to subways to the line to get your driver’s license, there are screens. Typically viewers don’t interact directly with these kinds of screens, there is no remote or input or even UI for us as users, we just watch. But there is a vast industry of vendor-specific custom hardware, custom software, advertising, control, and maintenance which use computers – mostly small form-factor PCs running Windows or Linux and embedded systems controlled by PCs over the IP network – to drive digital signage with static, video and dynamic “custom application” content. Many of these signage screens plan to incorporate NFC, beacons, cameras, and other sensors in future versions. Apple TV, a low-power draw $149 device with solid security, with kiosk-mode UI, enterprise, and “fleet management” features plus a gigantic developer ecosystem for creating custom applications and best-of-breed built-in video and audio capabilities; it completely changes the economics of signage. Even if Apple pays zero attention to features for this market, it will become the dominant device in use, and a great opportunity for iOS developers.

So, Does Apple TV Kill Consoles?

In a word, no, but it’s complicated. The Apple TV is another “peace dividend of the smartphone wars“, and not just its hardware. Sure it is inexpensive to build and draws little power because of the investments in silicon that Apple could make due to the iPhone and the global mobile supply chain. But iOS’s  simplicity and ease-of-use, it’s audio & video capabilities, its digital store, identity management, payment infrastructure, and security all come from investments in both desktop and iPhone software driven by the smartphone wars. The tools, apps, and gigantic developer community are the result of the war, too – developers have become an extension of Apple’s mobile supply chain, ready to apply themselves to new Apple product categories like Watch and Apple TV.

Apple TV will draw more people to gaming on televisions, so “television-based gaming” as a category will grow due to Apple TV in the near term. Consoles will continue to meet a very clear consumer demand for higher-end gaming using gamepads, though many independent game developers and even high-end publishers will abandon lagging consoles over time for the less restrictive Apple TV market as the Apple TV silicon matures, and for PC gaming on Steam (and with luck on Windows). If Apple introduces a gamepad or has a strong attach rate for third-party MFi gamepads, I expect a lot of current console buyers will within a few years find Apple TV’s performance, price-point and more appealing catalog of gamepad content their choice over the next Microsoft or Sony consoles, if those even get built.

In the next 3-5 years existing consoles will either die off or hold a smaller niche, leave the majority segment of “television-based gaming” to Apple TV and other smartphone-hardware-based devices. Why? Because of price-elasticity; the lower unit volumes they are capable of at their $300-$500 price point (a 12-36mo lag of the high-end PC gaming hardware supply-chain) and because they are anchored to the console business model, which tries to control developers, content, and prices. Content developers shift to permissionless markets with higher volumes every time.

No, consoles are killing themselves by not taking advantage of the mobile supply chain – hardware, software, and developers.

One Response to “Apple TV Pre-Reprecussions”

  1. dr.no September 8, 2015 at 6:54 pm #

    10W TDP processor with 350 GFLOPS can’t be compared to 100W 2TFLOP Consoles.
    basically game studies will recycle their XBox 360 level games into IOS and call it a day while their superstars work on PBR and VR tech.

    Consoles problem is not scale, it is appeal to general public. Commodification won’t solve that. 40 years olds talking trash with 13 years gets old real quick.
    Games were only created because nerds get excluded from real world can’t
    glossed over and try to market as some kind of panacea now that Nerds have
    moved on to VR.

    ATV needs a revolutionary input device (PrimeSense) which really means
    cameras and other sensors.

    Televisions problem is demographic. transition to HDTV and greed to overprice
    content just force people to look for alternative. iphone was the perfect
    addictive device which came at the right time for the millennials.
    This is why milennials are being bad mouth by some many in corporate marketing circles.
    Government has already indicated they can make more money off TV frequencies
    to sell to cellular companies than continuing the current mechanism.
    So Broadcasters have to move to IP based TV as soon as possible.
    My OTA channels get so much interference from Wifi, 4G, 10 mile wind and even airplanes and it is only getting worse.

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