Apple expected to push for greater living room presence

A new market analysis predicts that an update or overhaul to the Apple TV could arrive soon, perhaps with iTunes TV show subscriptions and DVR capabilities.

Gene Munster, senior research analyst with Piper Jaffray, said in a note Thursday that he believes a new Apple TV will arrive in the next several months. Beyond that, he believes the company will launch a "connected television" in 2011.

Munster suggests a new Apple TV would bolster iTunes video purchases with a subscription model. He cites the popularity of Hulu and Netflix Watch Instantly as a reason Apple should offer iTunes video subscriptions.

"Apple could leverage its deep library of content with many network and cable channel content owners to provide unlimited access to a sub-library of its TV shows for a standard monthly fee ($30 or $40 per month)," Munster writes. "Such a product would effectively replace a consumer's monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels."

Munster goes on to say that he believes the timing could be impacted by the negotiations Apple would need to conduct in order to have the rights to offer a subscription model. However, he predicts that when a deal is finalized, Apple would simultaneously release the offering with a new Apple TV, or updated Apple TV software, within the next year.

He predicts that Apple will become more aggressive in the living room, citing a number of factors, including:

• Apple executive Tim Cook said on a recent earnings call that the company would "continue to invest" in the Apple TV.
• Patents the Cupertino, Calif., company has filed regarding TV recording.
• A five-year, $500 million agreement with LG Electronics for supply of LCD screens.

An upgraded Apple TV with subscription capabilities, the analyst says, could access the device's untapped potential.

As for the "Apple Television," Munster believes that is a long-term goal for the company, within the next two to five years. He suggests such a device would have DVDR and home media center functionality built in to the set. Recorded shows, he predicts, could sync with other Apple devices, like Macs, iPhones and iPods, all wirelessly.

"The device would push apple further into the digital living room with interactive TV, music, movie and gaming features (with the iPhone or iPod touch as a game controller)," Munster states. "Such a device would command a premium among the competitive field of budget TVs."

Munster acknowledges that TV hardware is a "challenging business," but the analyst expects that Apple would "change the rules of the game," as it has done in the phone market.

Piper Jaffray has said before that it expects Apple to offer both a connected television, and Apple TV with DVR. A similar report was issued earlier this year, though Thursday's new analysis provides more recent examples to justify the prediction.