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Is Apple Prepared to Enter $100 Billion TV Market?

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With its Apple TV line, Cupertino never found the success it captured with its other products. The iPod, iPhone, and iPad scored big with rabid fans, but Apple's compact media center never really caught on beyond a niche market. Lacking consistent support and a significant marketing push, the Apple TV truly lived up to Steve Jobs' lesser "hobby" classification.

And now -- having already spent months negotiating with stubborn studios -- the company is said to be on the cusp of launching a full-blown Apple TV set.

During a trip through Asia, Ticonderoga Securities analyst Brian White wrote to investors that he saw "signs" that Apple will be introducing the set. White, however, remained mum on what exactly he saw that leads him to believe an Apple television is in the company's imminent future.

The analyst wrote, "The combination of Apple's powerful ecosystem, industrial design savvy, powerful brand and ability to reinvent product categories could make Apple a powerful force in the TV world over the next few years."

I'm not so sure, Brian.

While Apple seemingly has no problem whipping up a public frenzy for new products, the Apple TV proved to be the exception. Sure, as I mentioned before, it didn't have the marketing push like the iPhone or iPad -- but would it have helped?

Even with the upgraded model introduced in September, Apple had difficulty signing studios on board for its $0.99 rental plan. Fox and Disney gave the thumbs up, but CBS, NBC, and Warner Bros. balked. Warner CEO Barry Meyer said, "We just don't think the value proposition is a good one for us." This falls in line with the vast number of studios that had a problem with the Google TV, continue to give Netflix grief over streaming rights, and ran Hulu into the ground.

The other problem lies with the average American viewer. Reflected in a study conducted by the ad agency Hill Holiday, the Apple TV -- along with Google TV and Boxee Box -- doesn't fall in line with the typical viewing habits of average TV viewers: passive, brainless, and non-committal.

Of course, there are exceptions. Set-top boxes like TiVo and Roku are changing many users' viewing habits. And considering that Netflix video streaming dominates peak broadband traffic, it appears we're taking back control of content from greedy studios.

However, at the same time, most Americans have no plans to cut the cable cord.

Now, this purported Apple TV set will most likely work in conjunction with existing cable lines -- similar to Google TV. But how well did that catch on with the public? Not very. And given the headaches caused by dealing with studio heads wondering what's in it for them, will Apple even think it's worth it?

Actually, let's ask Steve Jobs, who spoke of why the Apple TV remains a hobby last June:

The problem with innovation in the television industry is the go-to market strategy. The television industry fundamentally has a subsidized business model that gives everybody a set-top box for free, or for $10 a month. And that pretty much squashes any opportunity for innovation, because nobody's willing to buy a set-top box. Ask Tivo, ask Replay TV, ask Roku, ask Vudu, ask us, ask Google in a few months.

Sony's tried, Panasonic's tried, a lot of people tried. And they all failed.

The only way that's ever going to change is if you can really go back to square one, tear up the set top box, redesign it from scratch with a consistent UI across all these different functions, and get it to consumers in a way that they're willing to pay for it. And right now there's no way to do that.

Although those words were spoken nearly a year ago, it still doesn't sound like a road Apple's willing to go down just yet.

(See also: What Will Be Apple's Next Big Thing? and The Biggest Problem for Apple TV and Friends)

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POSITION:  No positions in stocks mentioned.

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