Selling iOS Ecosystem Through Established TV Brands Could Be Profitable Strategy for Apple, TV Makers

The long-rumored Apple TV might be more profitable as an iOS platform available to TV manufacturers, posited NPD DisplaySearch analyst Paul Gray in a blog post Friday. Gray cited comments on opening APIs to developers by Apple CEO Tim Cook last week at All Things Digital’s D11 conference in Rancho Palos Verdes, Calif. Cook said Apple will “open up more in the future, but not to the degree that we put the customer at risk of having a bad experience."

Gray suggested the much-hyped and yet-introduced iWatch could be the trade name for Apple’s TV platform, “and not a watch at all.” He said Cook’s hinting that Apple may open its ecosystem could pave the way for a TV product. But the business case for an Apple TV set is “far from clear,” Gray said, due to the high retail price an Apple-branded TV would command, low margins and the “logistic complexity of high-end TV sets compared to the small high-value boxes at which Apple excels."

An iOS-compatible TV, though, would give a boost to TV manufacturers “struggling to find relevance and uniqueness in their smart TV platforms,” Gray said. Apple could reap a licensing fee, and agreements would bolster iTunes’ position in future content negotiations based on a larger installed base. Apple could still guard the user experience, working with select brands that would focus on manufacturing and logistics, he said. Apple already has relationships with LG and Sharp for displays. It would also give Apple a way to compete with rival Samsung in the TV market, he said, saying Google’s TV hardware strategy seems “stuck in neutral.”

The strategy wouldn’t be foreign to Apple, Gray noted, citing Apple’s early foray into audio equipment with the iPod HiFi, a product the company dropped in 2007. Apple “correctly discerned that the differentiation lay in the iPod, not the speakers,” he said, and now Apple stores sell hi-fi products compatible with Apple devices from manufactures including Bowers & Wilkins, Jawbone, Bang & Olufsen, iHome, Libratone and Philips. Audio companies have “strengthened the value of iPhones’ audio capabilities” and Apple has “gained more from encouraging a diverse world of audio systems than going it alone,” Gray said.

Apple once had a lock on docking audio products built around the 30-pin iPod connector, but that hold is “weakening rapidly” as connectors have changed and wireless streaming is replacing physical connections, Gray said. Universal integrated wireless streaming technologies including Bluetooth and Miracast mean accessory makers no longer have to choose between Android and Apple compatibility, he said. Apple’s problem today is “how to keep its platform big, while avoiding competing with itself,” Gray said, saying Apple has become the default choice for developers for mobile devices, but it also needs to continue to drive iOS device sales. With the smartphone market now moving to entry-level price points that could be “all too attractive” to existing customers, TV could be the next logical hardware opportunity for Apple and its developers, Gray said. Apple didn’t comment.