DiogeneX

It must be silly season.

Over the weekend, clamor about a future Apple Television kicked up again. No doubt fueled by rumors of channel checks indicating that a new unicorn was near.

As much as I’d like to replace my off-brand 32” HDTV with something shiny from Apple, I do not believe Apple will launch a television. At least, not yet.

Some have pointed to the stranglehold that regional cable monopolies possess — at least in the U.S. Or the warehousing issue. Or the fact that people don’t buy televisions every year.

But each of those arguments focuses far from the real intractable issue of TV: the content owners’ veto. Content owners, similar to their counterparts in the music industry, are mortified by new business models that threaten their control over content distribution. In fact, we repeatedly see their insouciance to consumer happiness in their dealings with Hulu and Netflix.

Content owners care about two things: audience and money. And, frankly, it’s really just money, since audience equals money in the advertising business. But that’s an aside.

So what can Apple do?

My take is that Apple’s strategy is already in over 2 million households: the gen 2 AppleTV. Yes, the current device is hardly indicative of a product that can, much less will, transform the television industry. But, I would argue that unlocking AppleTV’s potential rests in recycling three elements of the iOS ecosystem: apps, iAds and subscriptions.

Apps, in particular games, give Apple an opportunity to extend their hugely successful mobile development platform into the living room. Low-priced apps, immediately downloadable, connected via GameCenter, controllable with iOS handheld devices just make sense. Nintendo, Sony and Microsoft should be nervous.

iAds offer content owners and brand advertisers an opportunity to replicate fragments of the TV ad business on a new TV connected platform. This is not an element that Nintendo, Sony, or Tivo, among many other pretenders to the set-top-box throne have been able to offer. Further, given each AppleTV’s link to a customer’s iTunes account, advertisers have a potentially powerful means of engaging with customers in a way that Nielsen has never been able to deliver — even if the system is opt-in.

Subscriptions are interesting. With DVD sales declining, premium content providers (like HBO) are facing a future without a major revenue source. Like it or not, the trends are not in their favor, so a company that can deliver a large installed base (numbered in the 10s of millions of units), consumers who’ve demonstrated a propensity to buy content, and a platform for seamless subscriptions will be hard to resist. Especially, if that company can dangle attractive upfront payments made from a large cash horde.

Overall, I look at Apple’s iOS ecosystem as one that can be transplanted, piecemeal, into the living room without requiring Apple to make a TV set. In fact, the current AppleTV is very close to an ideal Trojan horse product. What it lacks today is a “feature” that makes consumers feel compelled to buy it. That killer feature is apps. Further, drop the price to $49 and it becomes so cheap that it becomes a no-brainer to buy two.

As iPhone was a proof of concept that gave Apple the confidence that the market was ready for iPad, I expect a similar pattern from AppleTV to the Apple TV.

Android has overtaken Symbian smartphone operating system market share. Apple’s lead in tablets is plummeting (or not). These days news about mobile market share is rampant, and seemingly everyone wants to add their voice to the chorus of pundits discussing the numbers.

But let’s set aside questions of how market share is calculated to ask a simple question: why does market share matter?

Historically, in the case of PC operating systems, large market share attracted developers who built software exclusively for the dominant platform. That software, in turn, created further lock-in as users grew accustomed to the workflows and proprietary data formats that emerged. Typified by Microsoft’s “embrace and extend” strategy, market leadership yielded a nearly permanent advantage, which suffocated competing platforms and deprived customers of choice. (“Microsoft Trying to Dominate the Internet”)

Essentially, the historical advantage of dominant market share has been the ability to raise (discriminately) the switching cost of competing platforms.

Today’s mobile market is a collision of the wisdom and mistakes of the last 30 years of computing. Handset OEMs, OS vendors and carriers are rushing to open app stores. Tensions have flared over “open” access to mobile development platforms. And atypical competitors are entering the market in search of growth and profits. 

The gold rush mentality is hardly surprising: most of the players assume that we’re at the beginning of the PC era redux. But I think they’re wrong.

The table stakes applications (Facebook, Twitter, Kindle, etc.) are available on most of the leading mobile platforms. If not available specifically as native applications, these services as often accessible as web applications. For apps beyond the main set, a reasonably informed consumer can find ready substitutes.

The data format worries of the PC era are now largely irrelevant, largely as a result of the web and outcomes of Microsoft’s Interoperability Commitments.

App stores have created a unique complication for developers. Despite dozens of app stores, only a handful (OK, really only one) has proven to monetize well. For independent third-party application developers, those most often driving software innovation on these platforms, share-heavy platforms have yet to pay off.

Further, the arrival of carrier billing and commercial payment powerhouses (Visa, Mastercard, Amazon, PayPal, etc.) onto mobile platforms promises to further erode the easy-payment advantage enjoyed by Apple’s iOS.

I could go on, but it’s apparent that there’s a level of parity in today’s mobile market that limits the likelihood of creating a permanent advantage. 

Unfortunately, that parity is temporary. Over time, the breathtaking competition of the mobile industry will subside and those companies that have figured out how to make money will survive.

The lesson of the PC era has been misremembered; it was always to earn the disproportionate share of industry profits. Market share, in and of itself, does not matter.