There Is No Major Impact On The Industry From Apple Selling 1M Apple TV Units
This morning Apple announced that sales of their $99 Apple TV would hit 1M units this week. While that’s a nice round number to reach, it’s not meaningful in the bigger picture and analysts who are quoted saying things like, “one million is a real benchmark” really don’t understand the impact of devices on the over-the-top market.
Sales numbers for devices are pointless without talking about usage. I personally have two Apple TV’s at home and rarely use them at all. In fact, I only use them when I want to test something or need to review certain functionality of the device. So how often are people using the Apple TV device and how much content are they consuming through it? Apple won’t say. It’s nice of them to give out overall iTunes sales figures of movies and TV shows, but they won’t say what percentage of those are via the Apple TV.
Microsoft says that 42% of Xbox LIVE Gold members in the U.S. watch more than 30 hours of digitally distributed television and movies a month. Roku, who is due to reach 1M units sold by the end of this month said in September that the average Roku customer uses their device 43 hours a month. Those are the kinds of numbers we should care about, sales penetration and usage.
And even the devices that do have a big footprint in the market like the Xbox 360 and PS3, both Microsoft and Sony won’t tell us how many movies or TV shows they have sold or rented via their online services. Why? Because the numbers are still so small. I love devices, but we have to set the right expectations on the impact they can have in the market and far too many want to imply their impact is greater than they are. Even Netflix, who streams more video online than anyone says that the vast majority of the usage of their streaming service is to the PC today, not devices.
The Xbox 360 is the number one selling device in the home, connected to the TV and broadband and has sold 21.9M consoles in North America. That one device by itself has not made any content owner rich and has not changed the over-the-top video landscape in any drastic way. So why is Apple selling 1M devices considered such a big deal? It’s not. Even if Apple sells 1M units a quarter in 2011 and end the year with 5M total devices in the market, that will be less than 15% of what the Xbox 360 or PS3 will have.
And considering Apple is renting content for $0.99 on the Apple TV, there’s just not a lot of revenue to be had. Lets assume that the average Apple TV user buys one video per week, for the entire course of the year. That’s a content market size of only $52M a year today. And even if we assume Apple reaches the 5M sales number by the end of 2011, those same assumptions means the market size is only a quarter of a million dollars which is still not a big deal.
No matter how you run the numbers, they simply aren’t big and it’s one of the reasons why the studios are still fighting digital. They don’t see the potential revenue yet and they won’t for some time to come. Until we have mass-market penetration and usage of the devices, the studios won’t have an incentive to give consumers the kind of content they want. I wish they would see the light and help foster the adoption of digital now, but that’s simply the way the studios think.
We see a lot of posts talking about devices, but how often do you see people talk about the sales numbers and usage of the devices? Most who are giving out quotes about these devices don’t even know how many have been sold and haven’t used the majority of the platforms they are talking about. Of course everyone always wants to talk about Apple TV, because it’s from Apple, yet there are far more important devices on the market, offering more content than Apple, which have a larger install base than the Apple TV.
- Xbox 360: number sold as of Nov. 2010: 21.9M in NA, 45M worldwide (source: NPD)
- PS3: number sold as of Sept. 2010: 16.6M in NA, 41.6M worldwide (source: Sony)
- Roku: expect to reach 1M sold by end of 2010 (source: Roku)
- Netgear Roku: number sold to date, too early to know
- Apple TV: number sold as of December 2010: 1M (source: Apple)
- Sony Netbox: number sold to date, too early to know
- Boxee: number sold to date, too early to know
- Logitech Revue Box, Sony Internet TV: number sold to date, too early to know
- WD TV Live/Live Hub: number sold to date, no data released. I estimate less than 2M combined
- TiVo: number sold to date: I estimate 750K TiVo HD units (source: estimate based on TiVo’s subscriber #s of 1.4M)
- Broadband enabled TVs: iSuppli predicts almost 23M by 2013, TDG predicts 43M by 2014, DisplaySearch predicts 31M by 2013, Samsung predicts 20M by 2012
- Broadband enabled Blu-ray players: as of October 2010, the total installed base of Blu-ray Disc playback devices in the U.S. was 21.1M. What percentage of those are “broadband enabled” is not known.
I constantly see people writing about devices, like this article yesterday, saying Amazon’s Video On Demand service is available on the Xbox 360, even though it isn’t. There is so much misinformation coming from the media and analysts on what these devices and platforms can or can’t do, now just imagine what it’s like for a customer who’s trying to figure out which device to buy. Lots of confusion.
In addition to setting the right expectations, analysts and bloggers also need to stop comparing hardware devices like Apple TV to platforms like Google TV. One has nothing do with the other and they don’t compete at all, today. Apple sells a $99 piece of hardware, Google does not sell any hardware. Google is a platform, Apple TV is a device. Stop comparing the two. Of course to be successful you need the device, the platform and the content to all work together, but right now, almost nobody has all three working together in volume, except for the Xbox 360 and PS3.
The good news is that the quality of the video on these devices is getting better, the content being offered grows each year and content platforms like Netflix, VUDU, Zune Video, PlayStation Network, MLB, NHL, Hulu Plus and others are helping to create awareness and adoption. But with that awareness comes the problem with massive fragmentation and no standards.
Instead of so many analysts commenting on how many units of any device has been sold, I’d like to see them commenting on what the financial impact is on the industry from the usage of these devices. Who’s making money from the adoption? How much money are they making? When will devices truly start impacting content licensing models? Can device manufactures survive and make money selling boxes if they don’t get traction with licensing their platform? These are the kinds of questions we should be discussing and the topics we should be trying to run numbers on so we know the real impact devices have on the market. Just talking sales figures, by themselves, is really pointless.