14 DAY TRIAL // Recently, Steve Jobs referred to the Apple TV as a 'hobby.' Apple is not known for taking random leaps with random product, quite the opposite and while Apple TV is definitely not a typical Apple product, it is definitely not a random product either. The little box has great potential and it is clear that Apple has some plan with it, but exactly what that plan is remains unclear.
Apple TV is an atypical Apple product in more ways than one. Not only does it have a pretty vague purpose that few people need, because of the lack of proper content for it, but it is also not very profitable for the company. Research firm iSuppli estimates that the components and materials used to make Apple TV cost $237. Since Apple sells it for $299, that would leave a gross profit of $62, or about 20%, before marketing costs are factored in. And this is a very optimistic estimate, for most of the components inside. If the actual prices are higher, Apple could very well be subsidizing the device.
Considering the margins that Apple has on its other products, the Apple TV stands out. With iPods, Apple made money on hardware and offered content as a means to sell the said hardware. In the case of the Apple TV, things seem to be happening the other way around. If Apple is making so little, if anything, from the hardware, it must have plans for the video content. But if this is the case, nothing shows it. The video content available on iTunes is sub-par in terms of quality and not true High Definition. Moreover, the selection of video content is not that big and relatively expensive for something that you have to download to watch once and then store if you want to watch again.
Apple must have some plan for the little box, but whatever that plan is, it is still some way off.