Report: New Apple TV to Cost $99, Subscription Service Needed to Go With It

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Includes: AAPL, NFLX
by: Dan Rayburn

Last week Engadget reported that Apple (NASDAQ:AAPL) is working on its next-generation Apple TV, described as an "iPhone without a screen" saying it will retail for only $99. The report says the device will have capacity for 16GB of storage via flash memory and will support 1080p streaming. While any Apple device priced at $99 will sell well, if Apple offers a monthly subscription service similar to Netflix (NASDAQ:NFLX), then this truly could be a game changer for the industry.

Clearly the big difference with this new Apple TV is the fact that Apple is going to focus on delivering movies via streaming for rental or via some kind of subscription service, rather than consumers purchasing the content for download. With only 16GB of storage, the new Apple TV can't hold many movies but can act as the streaming gateway between iTunes and your TV. This also makes sense since Apple has already said it plans to bring a lot of its content into the cloud when the new data center in North Carolina opens later this year.

If Apple does not offer some kind of subscription based service, the device will sell well if priced at $99, but will not truly be a game changer. Just renting one movie at a time is not a big deal and won't draw in a new group of consumers. From a hardware perspective, the original Apple TV wasn't lacking any functionality, it was simply too expensive and didn't have any kind of content service consumers wanted. But in the three and half years since the Apple TV was released, we've seen Apple launch each of its new devices with some kind of content lineup.

The hardware specs for the new Apple TV is not the big story, instead, it's how Apple plans to package its content lineup in the iTunes store for the device and what content owners will let them do. Apple can't make any money from a $99 device, so we all know there is going to have to be some kind of content based service offering and my guess is that it will involve some kind of subscription service.

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