The iPhone and the Apple TV were born together. Sharing the same stage at Macworld 2007, both products were an attempt to extend the reach of products they already had, the iPhone growing on the iPod and the ROKR, and the Apple TV growing on the Mac Mini and iTunes. The spotlight at the event was primarily on the iPhone, as they were banking on it to extend their market reach and to bring multi-touch into the mainstream, but the Apple TV was a sleeper product that they hoped would take over the small but growing industry of Internet TV.

Two years later, the iPhone has exploded into the best selling phone of any cell phone, with high critical acclaim and an App Store that is revolutionizing application distribution, and the Apple TV has, well, been sleeping. Sales numbers haven’t been revealed, and the Apple TV remains the hobby that Steve Jobs called it after it flopped. Rabid fanboys have defended the Apple TV, saying that Apple did a great job on it, and its an excellent product if you learn to appreciate it. The problem is, consumers aren’t going to pay 230 dollars for a product they have to "learn to appreciate."

So what’s the problem with the Apple TV? It’s simple: it doesn’t do anything that consumers can’t already do. Movie Rentals? Everyone with cable or satellite can do that with the same titles at the same price. TV Shows? Everyone can watch TV Shows, and most can record them, for free, which sure beats paying 1.99 per show (or 2.99 for HD). Music? Music Channels are aplenty on cable and satellite, and one can easily burn a CD of their own music to play. Purchasing Movies? Everyone has a DVD player, and they would much rather use the DVDs they already have or rent one at Blockbuster than to start their collection from scratch. Youtube? Well, you got me there, but I don’t see Apple TVs selling like hot-cakes because you can watch Youtube pixellated on a flat screen TV as opposed to your computer. The point is that the Apple TV has nothing unique or innovative that makes it worth the asking price for the average consumer, and with the economy the way it is, the Apple TV has the lowest bang for the buck of any Apple product.

Now don’t start bashing me for hating on the Apple TV: I am a proud owner of an Apple TV, and have loved every bit of it. As a filmmaker, there is no better way to showcase my films to friends than the Apple TV. As a person who has been blacklisted from all the movie rental stores in town for forgetting to return the rentals, and who hates navigating and troubleshooting the clunky DVR rental system that is included with my cable, the Apple TV fits the bill perfectly for me. Unfortunately, it doesn’t fit the bill for most people, and the potential Apple has to make this a killer product is through the roof.

The question remains: what should Apple do to fix it? 

First of all, they need to change the focus again. Its not Movies, Movies, Movies as Steve Jobs declared last MacWorld. Its TV Shows, TV Shows, TV Shows! The number one thing that consumers use their TV for is TV Shows, period. Movies are not the primary focus of a TV. Apple needs to figure out a way, through live TV, ad-supported content, and great consumer choice to make the Apple TV a worthy alternative to cable or satellite. People are NOT, I repeat, NOT going to shell out 2-3 dollars per TV Show. This is stupid, moronic thinking. Perhaps Apple could offer a way to deliver standard channels for a monthly fee per channel. Instead of packages, people could pay a certain amount of money per month, per channel, allowing them complete control as to what is on their TV, and what’s not.

Next, the Apple TV needs one of these two things. Either they establish a movie catalogue as large as the one of Netflix, or they include a built in DVD player. They cannot expect to take over DVDs if they can’t offer as many titles, and if they don’t offer as many titles, in one of those two ways, they can not expect to sell Apple TVs. If they really want to be an advocate of consumer choice, they could offer a DVD player and a large catalogue, but that isn’t very much like Apple.

As far as the iTunes movies work, they need to change the way the rentals work. Something along the lines of 7 days to watch the movie as many times as you want before it expires, similar to the way a physical video rental service works, would be much better than the confusing model they have today. Also, all movies should be available for rent and purchase from the second they hit the store. I’m aware that its primarily the studios to blame, but its not as though Steve is setting the best example himself.

Also, the Apple TV needs a new remote. The white one that gets lost in your lap must go by the wayside. I think a multitouch universal remote would fit the bill perfectly, and although it would be fairly expensive, it would be worth it. iPhone and iPod Touch users could use their devices to control the Apple TV as well as the music they can already control. More on the advantages below.

Also, the Apple TV could benefit greatly from an App Store. Developers could add apps for online services such as Hulu, and could create games that could be controlled by the universal remote. Imagine controlling a car racing game with the universal remote as the steering wheel for your big screen. The possibilities are tantalizing. Couple this App Store with a better graphics card (nVIDIA anyone?), and you may have a recipe for success.

Finally, the price. If the Apple TV was a viable alternative to cable and satellite, consumers would be willing to pay more upfront. I could envision a 249 starting price with a 299 and a 349 option, the only difference between the models being hard drive size and graphics.

Apple created the Apple II and the Lisa before it found success in the Macintosh. The iPod was a niche product until PC support was added, which allowed it to take over the music industry. The iPhone started at 599 and did fairly well, but it wasn’t until Apple created iPhone 3G for 199 did it take over the cell phone market. Hopefully it will have taken Apple the first Apple TV to take over the living room as well.

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