Apple makes the most successful tech products in the industry. They’ve released one hit after another, from smartphones to smartwatches. But one product that’s noticeably absent is a smart TV. Which is sort’ve strange considering Steve Jobs essentially founded PIXAR, a movie company. But it would make sense that Jobs would want to create the perfect television to watch PIXAR movies. But entering that industry just never made sense.
Alright now let’s start off with one of the most important reasons why Apple won’t make a smart TV. And that is, the upgrade cycle is extremely slow. So-called “industry experts” recommend upgrading your TV every seven to eight years. But the reality is, most people don’t replace their TV unless it breaks, or until there’s a big shift in display technology. Like upgrading from DLP to Plasma, then LCD, then LED, then OLED. But these shifts take place about every decade, and even then, most customers aren’t bothered to upgrade until their TVs finally break. And that’s actually a pretty unique trait in the tech industry, where customers typically clamour for the latest gadget. In fact, I’d go so far as to say TV purchasing habits are more similar to home appliances than tech products. If you move out and need a new microwave or fridge, you’ll buy one. But you won’t be waiting in anticipation for a new version to be released.
Instead, you’ll use the one you already have until you’re eventually forced to replace it. That’s almost exactly how people treat televisions, which is a huge problem for Apple. They want to compete in industries with fast upgrade cycles. Like computers, tablets, and smartphones. It’s much more difficult to use the same computer or phone for ten years than the same TV.
So, Apple would be forced to find new customers every year to keep sales high, which is an uphill battle and much more difficult than simply selling upgraded products to existing users. But there’s another financial challenge to the TV industry.
Apple is used to margins of about 35% on hardware. And that’s actually quite good compared to other tech companies. But televisions are notoriously low-margin products, at about 10-20%. So, when you combine low sales volume with low-profit margins, you get an industry that simply isn’t worth Apple’s effort. But let’s say hypothetically Apple did create a high-priced smart TV that delivered their desired 35% margin, what exactly would make their model so special to command a substantially higher price?
A TV isn’t like a computer, phone or tablet. It doesn’t rely on an advanced operating system or constant user interaction. It’s just something you stare at while enjoying the content. And while you can add a great software interface and an app ecosystem, that wouldn’t be nearly enough to justify a significantly higher asking price.
The number one feature television customers care about, is the quality of the display panel. The contrast ratio, refresh rate, brightness, pixel density. All of these things take centre stage in customer’s minds. And to be honest, it isn’t Apple’s area of expertise. Although they do design some great displays for their products, the manufacturing is always handled by a third party like Samsung or LG. And these companies also happen to have a stronghold on the smart TV market.
So, an Apple television would essentially be a Samsung panel in a slightly improved enclosure with some extra software features. And those marginal improvements simply aren’t enough. Apple already made this mistake with the HomePod. It had the best sound quality of any smart speaker, a stunning design, and great integration with other Apple products. But even that wasn’t enough to justify its $350 price tag and it was eventually discontinued. This brings Apple to the next challenge, differentiation.
How would Apple make their TV stand out from all the rest?
When it comes to design, the stand has become the only visual element that’s noticeably different between models. Smart TVs all look virtually the same when mounted, so customers likely wouldn’t even care about an incremental design improvement. As I mentioned earlier, Apple could improve the operating system quite a bit and add an app ecosystem which would be valuable. They could also create a remote that’s more advanced and intuitive. And they could integrate other Apple products seamlessly. Those would be the headlining features of Apple’s television that would differentiate it from others.
But the thing is, almost all those improvements are software-based. With the only hardware being a remote. So, it turns out that Apple doesn’t need to make a TV at all. The software is what adds value for customers, not the display panel, stand, or power cable. And it just so happens that software is Apple’s area of expertise. And something they can do better than Samsung or LG. But the best part is that the software is cheap. There are no manufacturing costs, investment in laboratories or fabrication, and no huge boxes to ship or store in warehouses. That’s why Apple focused on creating TV software, instead of creating the TV itself. People already had televisions, so it’s much easier to sell them a $150 box of software that transforms their TV experience, rather than a completely new three- or four-thousand-dollar television.
And that box of software is Apple TV. Which solves all of the problems I mentioned earlier. The product itself is tiny. So, it’s cheap to manufacture and ship. It doesn’t need lots of expensive components, so Apple can ensure a high profit margin. When it comes to upgradability, it’s fairly easy to entice users to upgrade a $150 box with valuable new features. Especially when you control the most important piece of hardware every TV need, the remote. Apple has already updated the Apple TV remote before, and they’re likely to do it again soon. They’ve also introduced new features like faster processors, 4K support, and Dolby technology. And if Apple ever adds Spacial Audio to a future model, they’ll be giving users a reason to upgrade again.