10 Sep 2015

iPad Pro and Apple TV: The Most Interesting Apple Products in Years

Yesterday, Apple unveiled two of their most interesting products in years. No, I'm not talking about the pink Apple Watch or the iPhone 6S. Rather, Apple finally made a concerted upmarket push into content creation and productivity with the iPad Pro. In addition, Apple also refreshed the Apple TV with a new interaction model and an SDK / app store which allows developers to build and distribute native apps. This obviously has implications for media and gaming, but it could also have a profound impact on advertising and commerce.

iPad Pro: Boon for Productivity Apps

Let's begin with the obvious: iPad Pro. Almost two years ago, I laid out my argument for an iPad Pro. Back then, pundits opined that a "hybrid tablet pivot" was unnecessary and that iPad sales would continue to grow. However, iPad sales then stalled because virtually all app innovation focused on content consumption, not creation. With fierce downmarket competition from Android tablets, increasing cannibalization from phablets and no room to move upmarket into productivity use cases, the iPad saw waning interest. Yesterday, Apple finally corrected all these issues in one fell swoop.

The iPad Pro takes a page out of Microsoft's playbook by focusing on the following: 1) A larger display for split-screen multi-tasking, and 2) A keyboard cover and stylus for more precise input. That said, the iPad Pro does not suffer from the issues that plagued the Surface Pro. Microsoft had the right ideas about hardware, but forcing legacy compatibility with desktop applications resulted in a compromised experience. Desktop applications were never a good fit for a touchscreen and a mouse input was never a good fit on a tablet. Apple avoided falling into the same trap by ensuring that the operating system remained iOS and not a combination of iOS and OS X. Instead, the new tools Apple has introduced are likely to spur true app innovation in the productivity segment and allow tablets to finally begin disrupting PCs in the enterprise.

Apple TV: Understanding the Potential of Apps and Commerce

Now we get to the more interesting announcement. The tentpole features for the new Apple TV appear to be its user interface and universal search. However, these features can easily be replicated. These features may certainly drive short-term adoption, but long-term it may be more interesting to study the potential of app innovation.

When the Apple Watch was announced last year, I was (and remain) skeptical of the app innovation on the wrist. This is because smartwatches neither introduced a new context for app usage, nor did they introduce a new interaction model. As a result, developers had to grapple with the constraints related to the form factor with few associated benefits. This is notably different in the case of Apple TV. First, the Apple TV introduces a new context: communal consumption in the living room (contrast this with personal consumption on smartphones and tablets). Combined with the new remote (which could eventually be absorbed into a smartphone), developers certainly appear to have new tools at their disposal to create novel experiences.

But what kind of app experiences should we expect? Apps on the TV will certainly not be as all-encompassing as they are on smartphones or tablets. Rather, there are specific areas that can be targeted in a living room context. Let's get the obvious ones out of the way first -- Media and games. Video streaming is self-explanatory, but the need to subscribe to each app / service individually is an issue that needs to be dealt with at some point. In any case, I believe that long-form content will be disrupted by services like YouTube and Twitch over time, which fits with this model. Games on the Apple TV are an obvious step as well. Many observers expect casual smartphone games to make their way onto Apple TV. That may well happen, but I believe that casual multiplayer games that embrace the communal nature of the living room will be the real winners on this platform.

But beyond these two categories, TV apps have the potential to transform commerce, but not in the way that Apple may have highlighted. Using a full-fledged shopping app on a TV screen is likely to be a niche use case at best. Why would users buy products on their TV when its likely to be much, much easier on their smartphone or tablet? Instead, TV can play a crucial role in bridging the gap between content, advertising and commerce. Picture this: User A streaming a TV show (with ads) on his TV --> He picks up his smartphone and and an app/service scans the TV stream and lists all the products that have appeared in the past few minutes (and align with the user's interests) --> Without interrupting his stream, he then makes a purchase or saves a product to view later. For a user, this completely removes any friction between product discovery and purchase. From an advertiser's perspective, this makes TV advertising truly measurable, something that still isn't possible today (even though TV continues to attract that largest chunk of global ad spend).

I'm certain that Google and Amazon are studying this closely and will look to implement and leverage this themselves. With their own streaming platforms, I could see "second screen commerce" making its way onto Google Now On Tap, Amazon's app and various third-party apps. But can Apple get out of its own way to allow this kind of innovation? Restrictions on data sharing between apps and devices has become Apple's "strategy tax" of late. I'm a big believer in using business models as a predictor of company decisions and Apple's business model relies on apps/services as a differentiator to monetize hardware. With prices between $150-$200 and a likely margin around $70, the Apple TV is unlikely to be particularly lucrative for Apple. Even if Apple were to willing to change its stance, would it do so for a product that may not be particularly significant to its bottom line? Google and Amazon certainly won't wait to find out.