Apple television mockup by 9to5Mac.

“It will have the simplest user interface you could imagine. I finally cracked it.” These are the exact words of Apple’s late co-founder Steve Jobs, as revealed in the just released authorized biography by Walter Isaacson. In his own admission prior to his death earlier this month, Jobs was working on “an integrated television set that is completely easy to use”, a solution which would be “seamlessly synced with all of your devices and with iCloud”. The quote served as the basis for Piper Jaffray’s resident Apple analyst Gene Munster, the most outspoken proponent of an Apple-branded television set. Munster wrote in a note to clients that Apple is already building prototype TV sets, according to a Fortune blog post:

A significant hurdle to a full-fledged Apple (AAPL) television set (as opposed to the Apple TV set-top box), Munster writes, is combining live television with shows previously captured on iCloud. “Perhaps this code is precisely what Jobs believed he has ‘cracked,’” Munter suggests, adding that Apple could use the new Siri voice activated system “to bolster its TV offering and simplify the chore of inputting information like show titles, or actor names, into a TV.”

If it eventually becomes a reality, the analyst speculates, the rumored product could cost up to $2,000, which is at least double the asking price for a typical 40-inch television product. In addition, Apple’s will likely require users to sign up for an iTunes TV Pass subscription service in order to enjoy bulk television programming, costing anywhere between $50 and $90 a month. It’s unclear whether the strategy stands a chance at a time when Internet providers are capping bandwidth. All told, the Apple television sounds like a pricey proposition…

Meanwhile, premium TV brands are working their way down to the sub-$1,000 mark, but that really hasn’t stopped Apple from succeeding in the past. Its iPhone wasn’t (and still is not) the cheapest smartphone on the market. The entry point for iPad is still set at $499 even with the growing number of competitors undercutting Apple’s gizmo, most notably Amazon with its $199 Kindle Fire seven-inch tablet. As a result, iPad’s market share fell to 68 percent in the third quarter.

Why would you want to pay more for a big screen television set with the shining Apple logo? Ticonderoga Securities analyst Brian White told BGR that Apple’s television product could delight with “unmatched aesthetics and an unrivaled user experience” stemming from tight integration with Apple’s ecosystem, namely iTunes and iCloud. White added:

In our view, features such as Siri, FaceTime, the App Store, iTunes and gaming are a natural fit for a full blown Apple TV, combined with potential new features and technologies in the future.

If enough early adopters take the plunge, Munster estimates the Apple TV project could add $2.5 billion annually to the company’s fortunes in 2012, or two percent of the company’s projected revenue in the calendar year 2012. The estimate is based on assumed sales of 1.2 million Apple television units in the flat panel TV market estimated at 220 million shipments in 2012. Taiwan-based Topology Research Institute projected (subscription required) that global shipments of Smart TV sets, which are based on the Intel Atom platform, will rise to 25.18 million units in 2011 from 7.04 million units in 2010. The platform is said to account for 10.4 percent of the overall TV market in 2011.

The market for flat panel LCD TVs plummeted in the first half of this year due to economic uncertainties causing buyers to postpone purchasing decisions. DisplaySearch values the LCD TV market at about $100 billion this year and $102 billion in 2012. Let’s not forget Google which is rolling out scheduled YouTube channels next year and spending hundreds of millions of dollars to bolster premium content as they gear up to roll out an improved Google TV software to the makers of set-top boxes. Additionally, Google-owned Motorola Mobility is a major maker of standalone set-top boxes, presenting Google with an opportunity to more easily penetrate the highly fragmented television market still lacking a clear leader in sight, prompting Steve Jobs in 2009 to characterize it as being “balkanized”.

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