At the end of October, Apple released the new fourth-generation Apple TV. The big news: support for apps.
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Today, more than 1.5 million apps are in the iTunes app store, and companies such as Candy Crush and WhatsApp have made billions. The launch of apps on the Apple TV begs a question: Is there a market for Apple TV apps?
Let's break the question into three parts:
1. How big is the market?
The Apple TV has been in production in one format or another since 2007 (it predates the iPhone, if you can believe that). In 2014, CEO Tim Cook announced that the Apple TV now accounts for $1 billion in Apple revenue per year. Apple, however, is not the only player in the over-the-top (OTT) set-top box market. The main competition for hardware is Amazon, Roku and Google. The general trend for OTT content is that people are cutting cords from cable companies faster than you can ask, "When does the next season of CSI start?"
Hardware, however, is only one part of the market analysis. The second driver for OTT is content coming from services such as Netflix, Hulu and Amazon Prime Instant Video. In particular, Netflix is showing that HBO is not the only leader in original content. As a reference point, Netflix will generate more original content in 2016 then HBO, ShowTime and Amazon combined. All these services require boxes (such as the Apple TV) to stream content. Netflix will double in membership over the next three years and all these members need is something to connect to their TV.
2. How big will the market become?
Netflix's growth brings up the next question: How big will the OTT market become? Consider this: The average top-end OTT box is about the same price as one month of cable service. Cut the cord and the next month get a top-end set-top box. After that, pick and choose what services you want without signing a two-year contract. Picking Netflix and Hulu will set you back around $20 per month (depending on what service you pick), and Amazon Video is free with your annual Amazon Prime account. That covers the content. The killing stroke comes with the inclusion of Apps. All the leaders for OTT do support apps (Roku has Roku OS 7, Amazon uses a modified version of Android, Google uses ChromeCast and Android TV and Apple uses tvOS) and apps for TV will have the same effect as apps for the phone. Your phone changed from a text/voice service to a pocket computer; TV will migrate very quickly from passive content to active interaction. Check out LEK's OTT TV trends analysis to see how big the OTT market will get.
Apps are a big part of the success for OTT, and one company will dominate the market for apps: Apple. Competitors -- Google, Roku and Amazon -- do support apps for their platforms, but the hardware and choice will prevent apps from differentiating their devices. Apps are the center of Apple TV. The quality of the Apple TV apps, such as Disney Infinity 3.0, Guitar Hero Live and fan favorites such as Crossy-Bird, is now console class. Also, Apple has brought Apple Pay to the TV, making it much easier to purchase products. Check out the Apple TV QVC channel app -- you can buy from your TV (no need to call in the next 30 minutes). The purchase experience is easy. It is clear that Apple has invested time into developing Apple TV as a consumer-first experience.
3. How hard is it to build an app for Apple TV?
The power of Apple TV is the operating system: tvOS. The new tvOS, a modified version of iOS, is wonderful news for developers. Essentially, the apps you create for the iPhone and iPad can now be extended to support tvOS, too.
This is a very smart move from Apple. The TV experience is different from a phone experience, but using a very similar operating system, language and development tools makes the leap from one platform to another a no-brainer. Developers may find that porting games from iOS 9 to tvOS will be almost trivial.
Development for tvOS occurs through Apple's XCode 7.1, a one-stop shop for building native Mac OS X, iOS, WatchOS and now tvOS apps. Xcode has been extended to support tvOS (there is now a tvOS simulator), but a seasoned iOS developer will find that creating apps for tvOS is very much the same as building and publishing apps for iOS. In other words, Apple has made it very easy to build, publish and profit from Apple TV apps.
The current iPhone market is close to 1 billion phones. The Apple TV market is only selling in the 100,000s. The low price point for the Apple TV, the richness of content and the great apps that are already available is an excellent start. Although you may build your business on creating apps for iPhone and Android devices, I'd certainly look at the Apple TV as a central part of the market for apps. Every house has a TV, and this is the market Apple wants to swallow up next.
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