The New Apple TV's Missed Opportunities

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About: Apple Inc. (AAPL), Includes: MSFT, NVDA, SNE
by: Mark Hibben
Summary

Apple introduced the new Apple TV at its September event as well as a new operating system, tvOS, and an app ecosystem.

Unfortunately, tvOS lacks much of the functionality of iOS, and is focused on content delivery and games almost exclusively.

Given more compelling Android TV hardware such as Nvidia's Shield console, the new Apple TV faces an uphill struggle in the marketplace.

Like many Apple (NASDAQ:AAPL) investors and fans, I was looking forward to the next iteration of Apple TV and was initially impressed by what was shown at the September event. Then I started delving into tvOS, the operating system for the new TV. I found that tvOS lacks much of the functionality of iOS that users take for granted. The future of TV may be apps, but the future of those apps is very limited in tvOS. This calls into question the competitiveness of the new Apple TV in what is becoming an increasingly crowded market.

A Hobbled OS

When I started looking at the developer documentation, I was shocked by how much iOS functionality had been excised to create tvOS. The documentation for tvOS is available to anyone, not just developers, so I'm not giving away any proprietary information. Among the APIs removed were many covering basic iOS functions as well as some of the most important enhancements to iOS in recent years:

  • AddressBook and Contacts: Contact storage and management.
  • HealthKit: Health tracking and monitoring for iOS and Watch OS devices.
  • HomeKit: Connection and control of HomeKit compliant home devices such as dimmers, smoke alarms and thermostats.
  • MessageUI: Message and mail functionality.
  • MultipeerConnectivity: Necessary for Handoff and Continuity features that allow you to start something on one iOS or Mac OS device and then transition easily to another.
  • SafariServices: Provides a Web browser framework.
  • Social: Supports social networking apps and allows integrating social networking accounts in an app.
  • WatchKit: Provides a way for iOS devices to interface with Apple Watch.
  • WebKit: Provides basic web page rendering for apps and third party browsers.

This is by no means a complete list of what was removed. What is left in tvOS is mostly focused on games and streaming content.

A Hobbled Interface

It could be argued that much of the functionality that was removed would be impractical to implement using the very limited form of user interface available through the new Apple TV remote. The new remote incorporates a trackpad as well as a few basic buttons for selection and navigation.

Of course, the basic problem with a track pad is that finger motion has to be visually correlated with the position on the display screen. This problem got solved a long time ago with the moving on-screen cursor. But Apple simply will not allow an on-screen cursor to infect its precious little iOS, claiming that this is somehow too difficult for TV watchers to contend with.

I've used both Windows PCs and Mac OS X PCs for years in home theater systems, and I never found the on-screen cursor difficult. In fact, I grew to prefer the Mac OS X system because I could use it with the Magic Track Pad, which was just perfect for navigating from across the room.

For the new Apple TV, Apple offers what amounts to a very coarse form of cursor, as app and media icons that visually expand when selected. It's basically the same form of visual feed back mechanism as the cursor but dumbed down to movement between large blocks of the screen.

For the old Apple TV, this worked fine, but for a new TV that supposedly supports true app functionality, it's a crippling limitation. The new Apple TV remote includes a microphone to access Siri, but Siri's functionality seems, once again, focused on navigating and viewing content.

Casual Gaming Only

Apple didn't remove any game related APIs, especially Metal, which provides for OS layer acceleration of graphics functions. Developers of iOS games will be able to port their games to tvOS will minimal effort. For fans of iOS games, the new Apple TV will provide a way to enjoy their favorite games without having to use Airplay from an iOS device. This will be an important selling point for those already heavily invested in the iOS ecosystem.

It's not going to win over any converts from Android, consoles, or PC gaming, however. As good as the hardware is (an A8 SOC), it's not even close to the latest consoles from Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE). In fact, the hardware seriously lags Nvidia's (NASDAQ:NVDA) Shield Console, which has a superior graphics engine that can support 4K TV and runs the Android TV operating system.

Perhaps PCs and consoles can not really be thought of as the "competition" for the new Apple TV, as they're in a different price category, but Android TV devices, of which Shield is the best, are competition. Shield is the same price ($200), has much more capable hardware in the form of the Nvidia Tegra X1 processor, and has access to Android TV apps and games.

Apple and Android TV operate on very similar user interface principles, so Apple doesn't really give much up to Android TV in that regard. I don't doubt that tvOS will be much more refined than Android TV. But Android TV was introduced more than a year ago, and will be starting its second iteration when Android M comes out later this year. This should count in Android's favor.

It Could Have Been a Contender

The new Apple TV faces stiff competition in the living room, from higher priced consoles, and from comparably priced Android consoles. What could have set Apple TV apart would have been the ability to access a wider range of iOS apps. I would have wanted to see consumers have the ability to access messages, email, even browse the web from their couches. I may be a little biased here. My television viewing experience, like many who have cut the cable, has already evolved into a PC-like experience, translated to a bigger screen.

With ingenuity, tvOS developers may find ways around the many missing APIs, but it's clear that Apple wants to channel apps into content delivery and games. This appears to be more a marketing decision than a technology driven one. If Apple had endowed the new Apple TV with a full suite of iOS APIs, and a reasonable cursor driven navigation approach, it would have, perish the thought, become competitive with Mac OS X. Not merely competitive, but a much lower cost alternative.

So it appears that tvOS has been hobbled, and iOS as well, by concern about cannibalizing Mac OS X. At this juncture, given the massive importance of iOS as a growth area, this is completely misguided. As I've discussed many a time, the convergence between touch and desktop operating systems is continuing whether Apple likes it or not.

I expect the new Apple TV to sell very modestly, in the range of a few million units per quarter. The value proposition just isn't there, especially outside of the iOS ecosystem.

Disclosure: I am/we are long AAPL. 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.