Apple’s iTV & The Case of the Missing DVR

When Apple uncharacteristically showed an early preview of its tentatively named iTV set top box, analysts of all stripes jumped to share their take on what the box is, what it will be able to do, and how it might change the landscape of TV. Here's part one of the more entertaining bits of rampant speculation, which asked:

Where's the DVR?

The first wave of analysts compared the iTV to existing DVR products, including the including the Tivo and Microsoft's Media Center, which is a Windows PC running Tivo-like DVR software.

For the uninitiated, a DVR is basically a VCR that records digitally to a hard drive rather than a cassette tape. DVRs also offer smart, automated recording features, and allow users to watch a program while it is recording. With multiple tuners, a DVR can even record two different programs that air at the same time.

Despite the fact that nothing in Apple's demonstration or the released specs even hinted at recording TV, all the analysts wanted to know just how Apple planned to shove a DVR into this tiny box. Inconceivable!

The DVR mystery was quite a puzzle. For starters, there's no tuner, no video inputs, and no Firewire on the iTV. Considering that Apple invented Firewire, and that US FCC regulations require cable boxes to supply Firewire, it would seem reasonable that if the iTV were intended for recording TV, the idea of putting a Firewire port on the box would have occurred to Apple.

Poor Tivo

Apple apparently realizes that the DVR market is already well represented, fairly mature, and entirely profitless. Users might love their Tivos, but the company that makes them lost nearly $50 million this year as it struggles to shore up Tivo sales with experimental new popup advertising tests.

As I noted in Why iTunes Works, advertising supports failed business plans in much the same way that Band-Aids support broken bones; they don’t help at all, they just cause more pain and complication. In the case of Tivo, many people buy it to avoid sitting through ads. Oops!

Tivo competes in the market with other smaller brands--none of which are commercial successes--as well as the free, open source MythTV project. Quite obviously, there is little room left for anyone to hoping to take over the commodity DVR world by simply popping out another box that does nothing unique.

MS-DVR

Microsoft experienced its own DVR failure with Ultimate TV, and its separate Web TV (aka MSN TV) disaster fared no better. The problem with the DVR market is that there’s little money to be made selling the hardware, and consumers are also reluctant to pay for subscriptions to programming schedules. Where’s the revenue?

Microsoft's more recent game plan revolves around its Media Center PC, which isn't exactly setting any sales records on fire either. Because Microsoft only controls the software end of the Media Center PC, it is at the mercy of its hardware partners such as HP. Does that strategy sound familiar?

While Microsoft has consistently improved Media Center software, that's only half of the picture for consumers, who have to choose between competing hardware makers.

Microsoft doesn't sell Media Center as an upgrade for existing PCs, so consumers are forced to commit to buying a whole new, fairly high end PC.

Much like its WMA platform, Microsoft's stab into the DVR world offers too little integration and too much complexity. It's also too expensive and demands too much commitment from users. Predictably, it's also selling about as well as Microsoft's WMA gear.

Is Steve Balmer the genius behind this stuff, or are these Bill Gates' ideas? Or is Google just hiring all the brains, leaving Microsoft unable to hire anyone with vision or basic business sense?

Oh Eye Sea You Ar! One Two

Of course, Apple doesn't need to introduce DVR capabilities to the Mac. Elgato Systems already ships a highly regarded DVR software package, and ...also already uses the name EyeTV.

Apple doesn't need to reinvent the DVR, it just needs a unique name for its product. It seems pretty obvious that Apple's iTV isn't designed to replicate the functionality offered by Elgato.

DVRs are all about recording, time-shifting, and cataloging broadcast TV. In order to get a toehold into that market, Apple would either need to partner with a huge range of cable or satellite companies, or compete directly for sales against the bundled systems provided by DirectTV, EchoStar, and other pay TV services.

That would put Apple in the unpleasant, IBM circa 1991 position of trying to sell OS/2 to PC users who already had Windows pre-installed on their PC. Sounds like a loser strategy! And for what, so Apple could join a profitless segment of the market? Apple has many other better ways to add value for users, which I'll get into later.

Worldwide Appeal

Further, in order to create a worldwide product, Apple would have to build an array of hardware to work with different standards of cable and satellite across Asia, Europe and the Americas. Apple's retail initiatives demand high volume, worldwide products; a TV recorder would decidedly be a departure from that game plan.

Neither the Mac nor the iPod requires a range of SKUs to be sold around the world. Even Mac OS X comes will all its languages in one box. This same worldwide product principle factors into why Apple hasn't yet released a mobile phone, as I described in An iPhone Worth Talking About.

Broadcast TV is similarly a fractured global market better addressed by smaller hardware makers who specialize in DVR recording devices such as Elgato’s EyeTV and Miglia’s EvolutionTV.

The next bit of iTV mystery concerns USB and what else lurks inside the box. I’ll take a look in an article tomorrow.

Next Article: Apple’s iTV: Clues in USB

This Series

Tech: Apple’s iTV

What do you think? I really like to hear from readers. Leave a comment or email me with your ideas.