Five Reasons Apple Will Delay its First TV
If you think Apple's (NASDAQ: AAPL) first TV will be ready for a March 2012 release, think again.
But “delay” may not be the right word, as Apple would have to set a release date before any adjustment could be considered an official delay. In any case, there are many reasons why the company's long-awaited television set will not be released anytime soon. Here are the top five:
5. It's Still Just a Rumor
Rumors are born overnight; products are not. Even if the majority of the Apple TV rumors proved to be true, it would still be very difficult for Apple to release a new television set in just a couple of months. For that to be the case, it would mean that Apple has been in the process of making TVs for a long, long time – far longer than any of the rumors suggest. While that is wholly possible, rumors are historically months (if not years) ahead of the products we ultimately use.
4. Steve Jobs Confirmed the Interface, Not the TV
Many have taken Steve Jobs' comments – in which he led Walter Isaacson (the author of his biography) to believe that he created the simplest user interface you could imagine – at face value. It's an easy thing to do; if Jobs isn't referring to a full TV set, then what does he mean? Could Apple really intend to bring iOS (or some TV-specific operating system) to non-Apple products? That is very unlikely. Apple isn't outsourcing iOS to other phone manufacturers (or Mac OS X, for that matter), so why would it pass around what could be the next evolution in TV software?
Still, without a formal confirmation, we don't yet know what Jobs meant by his comments. All we can do is sit and wait – and wonder why Isaacson didn't press for a more detailed explanation.
3. TV Sales Are Slowing Down
When Apple released the iPod, MP3 sales were so-so. They hadn't risen yet, but they definitely weren't falling. The same is true for the iPad, which arrived when tablets were still a new (and generally unappealing) breed of devices. While Apple came to the cell phone market with some big players – Motorola (NYSE: MMI), Nokia (NYSE: NOK), etc. – already in place, the Mac maker was the first to release a smartphone that could perform almost as many tasks as a computer. The web-surfing capabilities were groundbreaking, to say the least, and they were just the tip of the iceberg.
In the TV market, it's a whole other world. We are not on the cusp of the HD revolution – it has already come and gone. Three-dimensional TVs were not nearly as successful as Sony (NYSE: SNE) and other TV manufacturers anticipated. And now that everyone has a high-def TV (or an old clunker that still runs well), consumers don't need to keep buying new sets unless Best Buy (NYSE: BBY) has a big sale. Even then, TV sales are rather sluggish compared to expectations.
This means that if Apple were to come out with a new TV in March – a time of the year when consumers are less willing to spend $1,000+ on new electronics – the company would be at a significant disadvantage. That's not to say that Apple couldn't overcome this problem (it's not as if consumers balked about spending $500+ on a new iPad during the winter months). But while tablets are still relatively new and exciting products, TVs are, well…TVs. Apple's television could be the greatest thing in the world, and many consumers would still view it as an item to purchase in the fall, not in the spring.
2. Supplier Rumors Can't be Trusted
Remember the countless rumors of the iPhone 5? There were reports of exclusivity with one carrier, such as Sprint (NYSE: S). By the time fall arrived, you couldn't go more than a couple of days without hearing about when the iPhone 5 will be unveiled. In fact, there were so many reports of when Apple would make its big announcement(s) that Samsung decided to show off the Galaxy S II just before the iPhone 5 was expected to make its public debut.
And then the rumors continued, promising a groundbreaking iPhone 5. Despite what suppliers said, however, we didn't get an entirely new iPhone – we got the iPhone 4S instead.
1. Content? Where!?
Content – and the way it gets distributed – has been the number-one reason why analysts do not believe that Apple's first TV will arrive before Christmas 2012 (many do not expect it to arrive till 2013).
“That's why we think this Apple TV is going to take longer than people think,” Sterne Agee analyst Shaw Wu told Benzinga earlier this year. “The key to this is the content. The hardware/software, that's not the tough part. It's really getting the partnerships.”
Right now, we don't know if Apple will team up with Comcast (NASDAQ: CMCSA), Time Warner (NYSE: TWC) and other cable providers, or if the company will go its own route and attempt to create a brand-new cable service. Apple may be tempted to rely on Netflix (NASDAQ: NFLX) and Hulu, but those services are not yet strong enough to compete with full-fledged pay TV services.
Traders who expect an Apple TV delay might want to consider the following trades:
- The longer it takes for Apple to release a new TV, the longer Sony (NYSE: SNE), Panasonic (NYSE: PC), and Philips (NYSE: PHG) can attempt to salvage their slowing TV sales.
- Apple opened a new revenue stream for software developers with its cleverly branded “apps.” The company could do the same for content developers like Disney (NYSE: DIS) and Lionsgate (NYSE: LGF).
Traders who believe that the first Apple TV could arrive soon may want to consider this alternative:
- If the rumors are true, Apple is more likely to compete with the cable providers than team up with them. Thus, Comcast, Time Warner, DirecTV (NASDAQ: DTV), Dish Network (NASDAQ: DISH) and other pay TV companies could be in for a whole new world of competition. Keep an eye on these – there could be a short opportunity here.
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