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What drives the incessant speculation about Apple (NASDAQ:AAPL) launching its own television? In a word: desperation. It's been nearly 4 years since the introduction of the iPad, Apple's last important invention and investors in Apple are now worried that innovation at Apple has run its course.

What's the biggest difference between Apple's putative iTV and the iPod, iPhone and iPad. The latter three products all addressed consumer needs that most people including consumers, but also technologists had no real idea existed. The iTV in contrast is a creation of the investment community - it hasn't actually been designed by Wall Street, but it may as well have been.

Another way of looking at things is that before the respective launches of the iPod, iPhone and iPad there was very little in the way of anticipation that these products were going to be made by Apple. That's the flipside of creating revolutionary new products that no one thinks they need before they exist.

Only the TV market is big enough to move the needle

The iTV speculation does have at least one thing in its favor: it's at least plausible. Unlike gimmicks such as Google (NASDAQ:GOOG) Glass or Apple's rumored iWatch, the TV market is huge, both the hardware side and the content side.

Global sales of TV sets totaled $250 billion this year, so it's easy to see why Apple investors are licking their chops at the prospect of Apple taking significant market share in this sector. If Apple were to replicate the dominance of the iPod (unlikely, obviously), with its 70% market share in music players it would mean an additional $175 billion in revenue; for the iPad, an additional $75 billion in revenue; and $50 billion revenue if it could only replicate the current market share of the iPhone. That would make the iTV at a minimum, bigger than the iPod, iMac or iPad in terms of revenue.

So why don't I think Apple can make a desirable TV set that everyone will feel compelled to rush out and buy?

Consider what Apple can bring to the table in terms of better hardware or better user interface.

Glasses free 3D TV's are the only revolutionary hardware

We have already had 3D Televisions and they were a complete flop. Ultra high definition TVs haven't so far excited much consumer interest, not surprising since the benefits of these television sets only appear if you sit very close to them or if they are huge - over 80 inches in size. SA author Alex Cho in a characteristically bold and thought provoking article suggested that Apple's iTV would take the form of a glasses free 3D UHD TV. If this could actually be made to work it would indeed be revolutionary (It would also justify the use of 4k technology, since the way glasses free 3D TV sets work with more than one person watching is to send multiple images to different people - effectively "dividing the pixels up" between the different viewers).

However, there are still quite serious technical obstacles to overcome before these devices are ready for market. The main problem is that when viewers move, they move outside the viewing cone, so the TV set needs a way of tracking them and retargeting them in real time. This requires sets of cameras and huge amounts of processing power. An additional problem, which is even more fundamental, is that the 3D effect no longer works if the viewers head tilts towards the horizontal too much.

Televisions are already appliances

As far as a better user interface - the software side of things - I really doubt anyone can improve on the current television: you switch them on, you press a button to change channel, another one to pause, and to record. And so on. It's about as straightforward to use as it can get. There is no need for Apple to release a television set - on usability grounds at least - anymore than they need to make toasters, ovens, microwaves, fridges, kettles, washing machines, well you get the idea.

Yet Apple's main competitive strength and the secret to their current success is in making products easier to use - devices that are hassle free, that just work. For computing devices that ability shouldn't be underestimated. Recently I got a Nexus 7, in many ways Android's flagship tablet, and it was riddled with bugs and annoyances: to start there is a huge number of Google's own services that it wants to inform you about, or wants you to join. There's the multiple touch problem on the keyboard and I haven't even mentioned the time it wouldn't get past the load screen...

The worst way Apple could spend its cash pile

The only way Apple could give its iTV device a fighting chance would be if it completely disrupted the content side of television. That means an owner of an iTV needs to be able to watch most of the currently broadcast television programmes - including sports, entertainment, news and drama as well as access a large fraction of past TV programs and films. And they should only pay for what they want to watch, on a subscription basis.

So a pick 'n' mix of the best of broadcast television plus a Super Netflix (NASDAQ:NFLX). In Alex Cho's article that I referred to above, he estimated that if Apple were to spend as much as Comcast (NASDAQ:CMCSA) does on content rights, which is $20 billion per year, then Apple would have a sufficient quantity of content. However, that's just the content spending of one cable company and doesn't include older films and TV programs - not on demand at any rate, which Netflix and Amazon Instant Video offer, nor does it include popular foreign television programming like Downton Abbey or the Danish TV series The Killing.

So even after spending $20 billion a year Apple would be a long way from offering an iTunes like quantity of film and television programming content on a subscription basis. Just to buy up past film and television content - a super Netflix - would require vast amounts of money. Disney (NYSE:DIS), which is just one content owner, paid $7.4 billion for Pixar and another $4 billion for LucasArts. Multiply those purchases by dozens of other film studios and then do the same for all the television content and Apple would likely have to spend its entire cash pile.

Conclusion

With $170 billion in annual revenue, Apple has now become a victim of the Law of Large Numbers. The personal computing device market, which includes iMacs, iPods, iPhones and iPads has become saturated. Apple must look to growth in fresh industries, however only business lines that promise to be in the tens of billions of dollars in revenue can move the needle. The television market is the only plausible area with such substantial revenue potential but unfortunately for Apple longs there is no pressing consumer need that Apple can fulfil through releasing a new gadget. The only thing that might interest consumers - plentiful content - would require a bet at the company level of investment in film and television rights.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: There Won't Be An Apple TV