With the new Apple TV, Apple Decides the Living Room Can Wait

Yesterday Apple launched a half-dozen new products, including a new Apple TV. Apple is no longer a computer company; they even changed their name from Apple Computer to Apple, Inc. in recognition of this. But while they're very clearly a mobile devices company, the question that's been lingering about Apple since they launched their lackluster first-gen Apple TV is whether they are a living room company too. With the new device, we have an answer to that question: "no."

The new Apple TV is very clearly better than the old one, but as to whether Apple is making a concerted push into your living room, the answer is still "not yet," or at least "not in earnest." First of all, let's take a look at the new and improved features:

• AirPlay. Re-dubbed from "AirTunes," AirPlay allows you to stream music, photos, and now video straight to the Apple TV from your iPad, iPhone, or Mac.
• Netflix. It's a pleasant surprise that Apple would include a direct competitor to the iTunes store, given that Netflix subscribers will almost always watch a movie for "free" (included with their monthly subscription) than pay ala carte in iTunes.
• Size and energy use. It's smaller and uses less energy. I find the latter appealing, but the former isn't a big deal as it's going to go alongside much larger components.

Now let's list some things Apple left on the table:

• iOS. From Apple's renaming of their iPhone OS to simply "iOS," many assumed that the operating system would power the next iteration of Apple TV (similar to how Google TV will be powered by Android), which would allow the diminutive box to do more (like run third-party applications). But no.
• Storage. Yes, that's right, in order to get the price down, Apple has removed all storage from the device (presumably there is some memory for buffering), and so everything must come from the cloud. Considering the previous model included 160GB of storage, this is a significant step back if you'd like to use your set-top box as a media server for files you own.
• 1080p. You've got a 1080p display, so what if you want to watch movies at full resolution? No soup for you. The new Apple TV maxes out at 720p, just like the old one.
• A new user interface. They're now using the same A4 processor that's found in the iPad, but they didn't feel the need to refresh the GUI nor give it any new format capabilities (if you have DiVX or Xvid content, you won't be able to play it on Apple TV).

Despite these omissions, the new Apple TV, unlike the old Apple TV, is a compelling product at an aggressive pricepoint. Case in point: competitor Boxee announced that it will launch for $199, which to me indicates it won't survive in a market crowded with devices from giants like Apple and Google. Which is not to say that Boxee can't survive as a company -- their software could end up on either or both of these devices, and they may even be a go-to indie source. But priced at $99, Apple TV will become fairly ubiquitous despite its missing features. Meanwhile, streaming box company Roku slashed their prices to $60 (for SD) and $70 (for HD), and Amazon has announced $0.99 TV show purchases (yes, purchases, not rentals, although that depends on your definition of ownership when you purchase DRM'd files).

In summary, the new Apple TV isn't all that it was rumored to be. Apple could one day try to take over your living room, which they'd do by making elegant TVs, better remote controls (or just deeply-integrated iPads and iPhones), and a full-featured set-top box. I suspect their research shows that the margins in living room electronics aren't as high as they'd like, which would be one main reason for their restraint. Another reason would be their reliance on studios for content with which to stock iTunes -- the same studios that also want to sell TV shows and movies via competing channels, thus making licensing agreements difficult (if Apple is going to replace your set-top box, they'll need better content deals). But whatever the reason, the new Apple TV does nothing to change Steve Jobs' characterization of the device as a "hobby" for Apple. And of course, it does nothing to change things for indies, who still need to employ third-parties to get content into iTunes.