Published , by Asif Khan
Published , by Asif Khan
While Apple Inc. didn't attend CES 2019, the company made its presence in the world of consumer electronics felt on a very broad scale. The tech giant sent shockwaves across the entire show floor with the announcement that iTunes was coming to televisions not made by Apple.
It needs to be said, because members of the Apple cult have been going through a grieving process since the world's greatest salesman and entrepreneur left the building in 2011. The move to make iTunes available on a Samsung TV was the last straw for me. Apple Inc.'s (AAPL) best days are likely behind them. This decision to open the ecosystem to competitors' devices may be good for consumers, but it comes from a place of weakness for Apple.
Apple's board of directors decided in 2012, the year after Steve Jobs passed away, to institute a stock buyback and dividend payment capital return policy. This decision was the opposite of the management philosophy of Jobs and former Apple CFO Peter Oppenheimer who ran the company with no long-term debt and piles of cash.
Apple's balance sheet currently carries over $130 billion in cash net of the long-term debt. The board has authorized over $200 billion of stock buybacks and has very little to show for it. As iPhone revenues decline, shareholders are beginning to question if Apple has peaked. Tim Cook pointed to services revenue in a recent interview with Jim Cramer on CNBC.
According to several accounts of conversations with Steve Jobs, Apple was working on a television project at the time of his death. In the authorized biography of Steve Jobs, author Walter Isaacson described Jobs' interest in TV.
"He very much wanted to do for television sets what he had done for computers, music players, and phones: make them simple and elegant," Isaacson wrote. "'I'd like to create an integrated television set that is completely easy to use,' he told me. 'It would be seamlessly synced with all of your devices and with iCloud.' No longer would users have to fiddle with complex remotes for DVD players and cable channels. 'It will have the simplest user interface you could imagine. I finally cracked it.'"
Another one of Steve Jobs' closest friends Walt Mossberg has also spoken about a potential Apple TV project. On a phone call that took place on August 24, 2011, Mossberg and Jobs spoke about the former CEO's new role at the company.
“I’m writing this thing. And the phone rings. And it’s him,” Mossberg said. “I think he wanted to talk to me because he was feeling a little sentimental. And also because he wanted me to know that he wasn’t going away.
“He was going to still be involved. Their press release made some vague nod toward that. But he wanted me to know that he was going to be involved in big strategic things, and also that he was going to reserve one particular thing for himself.
“I said, ‘well, what’s that?’
“He said, ‘Well, it’s television ... I think we figured out a way to do it, and it’s going to be fantastic. I want you to come out, in a few months, and I want to show it to you.’
“He was really weak. Hearing nuances in speech was difficult. But he was really excited,” Mossberg said. “If you would have asked me five minutes after we hung up, I would have said he was going to reinvent the whole TV set. It would be Apple-esque, meaning it was high quality, and very easy to use. But he was thinking about more than hardware — that was clear, too.”
Steve Jobs passed away less than two months after that call with Walt Mossberg, and it appears that whatever had him so excited never came to fruition. Jobs always referred to the current Apple TV product as a hobby, leaving many fans to hope that there would be a true Apple take on television someday.
Tim Cook attended the Wall Street Journal's All Things D11 in 2013. In an interview with Kara Swisher and Walt Mossberg, Cook said, "There is a very grand vision for it," when pressed about Apple's plans for television. This was two years after Mossberg's last phone conversation with Steve Jobs, but Apple has yet to reinvent the TV. I wholeheartedly doubt that Cook's "grand vision" in 2013 included putting iTunes in a Samsung product.
Apple Inc. has filed a number of patents for what could potentially be brand-new takes on display technology. Most of them revolve around projector technology, including patents for a stereoscopic projector with a gesture-based user interface.
In the past, Apple had always disrupted product categories and industries by inventing or repurposing technology in a way that provided a simple UI accompanied by some sort of new way for humans to interact with the products. The iPod clickwheel, iPhone's multitouch, or even the mouse are all examples of how important human interface devices have been to Apple's ability to innovate in product categories.
It seems that whatever they had cooking at the R&D lab in Cupertino simply didn't cut it. The dream of an Apple take on a television product is pretty much dead. Companies file patents for products all the time that never see the light of day, but it certainly feels like Apple was working on something brand-new in the world of video displays before they made their move to other platforms at CES 2019.
Apple Inc. is usually late to enter product categories. They weren't the first MP3 player or smartphone to market, but they were able to innovate and improve enough on those devices that people were willing to pay a premium for that logo on the back. Many fans had hoped to see a full-fledged Apple TV that lived up to the company's reputation of disruption and innovation. We wanted to hear, "Today, Apple reinvents television."
I never believed that Apple would compete in the flat panel market. The margins are terrible, and the industry is full of competitors. What I found shocking about last week's announcement was that Apple is breaking down the walled garden that Steve Jobs built. It comes from a place of weakness as Apple's revenues are declining, but it also shows very little innovative thought. Netflix is at least ten years ahead of Apple in fostering platform agnostic partnerships, so the move to bring iTunes to competitors' TVs could be too little too late.
The company has enough money to market iTunes as a Netflix killer, but they find themselves in the position of trying to buy cool. They have added Carpool Karaoke and Oprah to their upcoming video content offerings, but have already failed with efforts like Planet of the Apps. Apple really appears to be struggling to change the negative narrative on Wall Street about the company. The decision to bring iTunes and Airplay to devices that are outside of the ecosystem is good for consumers, but I have to ask why now?
If they had a viable vision for TV, this would not be happening. This is a capitulative moment for Apple as they are readily encouraging their fans to buy products from outside of their halo of products. Perhaps iTunes as a service will take off and I will have egg on my face, but I am more inclined to believe that the tech giant is grasping for straws as they face a very rough period ahead. The decade-long multitouch smartphone cycle is coming to an end, and the company's largest revenue segment is shrinking. The situation is not one in which Apple is on the verge of bankruptcy, like they were in the late 1990s, but it is troubling to see the company known for innovation take such a cowardly step away from the product philosophy that lead to them becoming the first $1 trillion company in U.S. history.
This whole article probably sounds like a fanboy finally giving up on a dream, and that is fair. Sadly, the innovative spirit at Apple that was fostered by Jobs and Woz is hard to find in 2019. Last week's announcements were the last straw for me, and I am no longer bullish on the company's long-term prospects. The stock will likely flounder over the next decade, unless they are able to change the world again with a new, innovative product. The idea that Apple would put iTunes on a rival's device is beyond me and is contrary to Steve Jobs' product and service philosophy. but he's dead. Whatever he was talking about in 2011 might still be in a lab somewhere in Cupertino, and maybe someday we will get to see that one more thing. I am not holding my breath, as the company appears to be far more focused on what Wall Street thinks of them than ever before.