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As the visionary of our generation it isn’t very often that Steve Jobs gets it wrong but he sure was missing on a few key points during the All Things Digital interview. It might be argued that he was purposefully ambiguous with his statements in order to illustrate the structural weaknesses of the cable television industry but I’m going to take him at his word and refute the following claims:

1-Jobs said that cable operators “give everybody a set top box for free, or for $10 a month. That pretty much squashes any opportunity for innovation because nobody’s willing to buy a set top box.” Not true. Steve used Tivo (NASDAQ:TIVO) as an example but he failed to mention that Tivo’s technology became irrelevant the moment cable included DVRs to their service. The better example of a set top box would be a gaming console like XBox or Playstation. Or even a DVD/Blu-ray player. Those boxes have different user interfaces, different remote controls, and users even have to switch the input on the television to view the screen. Consumers certainly haven’t shunned these products. In fact, we pay hundreds of dollars for each console and then we pay $10-$40 per game/DVD/Blu-ray. Steve’s statement was wrong. Consumers will pay and there is room for innovation with a set top box.

Steve would have been right had he had told us that the problems with Apple (NASDAQ:AAPL) TV are speed and content. Downloading a movie via iTunes to view on Apple TV is a painfully slow process. The streaming technology employed by Netflix (NASDAQ:NFLX) is far superior. As far as content is concerned, everyone is waiting to use mobile apps on the big screen television just like we do on the iPhone and iPad. Playing App Store games on the big screen with the iPhone or iPad as a remote control wouldn’t cause consumers to pay a premium for a set top box? Come on Steve. The App Store is the key to the future of the living room. Accessing a network television app that provides an a la carte menu of shows will destroy the cable companies. Gaming apps will destroy the traditional gaming consoles. News apps will destroy websites. Digital distribution of tailored content is a better model. Yes Steve, people will pay for the right kind of set top box.

2-Jobs said that it’s difficult to partner with a cable company because

you run into another problem. Which is: there isn’t a cable operator that’s national...every single country has different standards, different government approvals, it’s very...Tower of Babelish.

Steve is barking up the wrong tree. To bring innovation to the television industry you need to bypass the cable companies. The potential to become king of the living room is a once per generation opportunity and should be more than just a hobby for Apple. The acceleration of technological evolution is something Apple needs to adapt to. Releasing one new product every three years is no longer good enough. The App Store is exploding and Apple has an opportunity to build hardware that utilizes this revolutionary distribution platform. Jobs was recently criticized for the Apple commercial that touted the iPad as a revolutionary product. The real revolution is the App Store. Apple needs to exploit this phenomenon.

3-When discussing the obstacles of the cable TV industry Jobs remarked, “I’m sure smarter people than us will figure this out, but that’s why we say Apple TV is a hobby, that’s why we use that phrase.” Come on Steve. I know a lot of what you said in that interview was tongue in cheek but there is no denying Apple is in the driver's seat to innovate the next big thing. It’s time for iTunes to integrate the LaLa streaming technology into music and video which will finally enable Apple TV to provide a user experience worth paying for. Steve needs to rise to the occasion and release an enhanced, cloud based iTunes with new hardware that can stream television shows, movies, and apps onto the television screen. Then we’ll see if consumers will pay for a set top box.

Perhaps even Steve Jobs is underestimating the power of the App Store. Intelligent investors who understand this unique opportunity know that each new product released by Apple becomes its flagship as consumers flock to take advantage of the revolutionary idistribution of the App Store. Back in October 2009 released our report that the App Store changes Apple’s mission and in November 2008 we released our report that the App Store was Apple’s greatest idea yet. The time has come for Steve Jobs to fully embrace new hardware that effectively leverages app use. If he can’t do it, maybe the master of business operations, COO Tim Cook is better suited to lead Apple into this new frontier.

The opportunity to leverage the App Store is too massive. Those who assume that Steve Jobs is the only one who can lead Apple are wrong. Leveraging the App Store is more about operations than it is about innovation. The innovation has already happened. Freeing up Steve Jobs from his CEO responsibilities wouldn’t be as bad as it sounds. As Chairman of the Board and Chief of Innovation Steve can start working towards the next real revolution while Apple management maximizes the current one. The App Store and its current offering of hardware will take Apple stock to $500 with or without Steve Jobs; the market share growth trend is firmly in place. Steve should be working full time on the next wave. Everyone needs a wake up call every once in a while, even the visionary himself.

Disclosure: Long aapl