Walter Isaacson, in his new biography of Steve Jobs, reveals that Apple is planning to introduce its own televisions, attempting to revolutionize that space in the same way it did mobile phones with the iPhone. He quotes Jobs as having said that he had finally cracked the technical issues of controlling such a TV, though giving no details. This has led to a lot of speculation, but it seems obvious to me that Jobs was referring to IOS 5’s new Siri personal assistance capability. We’ll control our Apple TVs by telling them what to do.

Apple has tried to do TVs before. A few years ago, inspired by the TV success of Gateway and then Dell, Apple had an OEM line of TV’s queued-up and ready to go only to be cancelled when Steve Jobs decided they weren’t good enough. The issue was always controlling the TVs, especially if they were part of a multi-vendor home theater system. We all know the nightmare of multiple remotes, which Apple back then tried and failed to cure.

But Siri is different since it requires no remote.  That means in a house like ours filled with little boys no more losing remotes controls, too.

There are two key issues here that make Siri ideal for this control function. First is what I’m calling do what I mean, not what I say. As an intelligent process backed-up by a ton of knowledge on the net, Siri can learn all the devices attached to your system then easily tell them not just what to do, but what you mean. So instead of a big sequence of button pushes, Siri will respond to your command “Get me Dr. Phil” by finding you the latest (or any other) episode of the TV shrink.

The other advantage of Siri (at least for Apple) is what I’d call bait and switch, which is to say that Siri can offer you Dr. Phil from a variety of sources, but the first one will probably be from Apple.

Bait and switch will be Apple’s way of disintermediating TV networks, cable systems, and ISPs, grabbing their TV, movie, and advertising revenue for itself.

Not to mention Google. Apple is hardly going to give up search revenue, either, and Google TV will look pathetic compared to this.

Now that big data center in North Carolina is starting to make more sense.

A reader from Israel first suggested this idea to me. Neither of us know diddly whether it is true, of course, but it makes sense to me.

So Apple’s television would be an iPhone 4S minus the display and telephone parts velcro’d to a big 1080p screen. Figure an extra $100 or so for the Apple bits on a TV that will be marketed initially toward the top of the market but will eventually be aimed, like the iPod, at everyone. Between hardware, content, and advertising there’s another $100 billion market to be conquered there, just for the U.S.  Then add extensive language support to Siri and conquer the TV world.

He cracked it alright.

Note — A reader asked why Apple would make expensieve HDTVs rather than cheaper set top boxes like the Apple TV? That’s a good question. And answering it further illuminates Apple’s probable strategy.

Apple may do both, but they’ll want to make high margins for the bits they actually make so it is better to be selling $2000 TVs than $100 set-top-boxes. 

Look at a likely Apple HDTV. It includes $100 in circuitry that wouldn’t normally be there, though $30 can probably be saved removing stuff that isn’t needed. They’ll push for a better screen for the size, so add $75 for that, and a better case costing an extra $50. So compared to the base TV in that size Apple is spending $195 more. But the TV sells for $1995 in an Apple store rather than $995 (net $800) at Best Buy. There is $200 in manufacturer margin in that $995 set but $1000 in total margin for the Apple set sold in an Apple Store.
Compare that to $50 in possible margin for a set top box. Apple has to sell only five percent as many TVs as set top boxes to make the same money. TVs have a bigger perceived impact on the market and of course Apple has greater end-to-end control. They’ll enter the market small but high-profit as they like to do, then spread down as production costs drop and development costs are amortized. They side-step a price war and eventually end up the dominant player because they’ll have more dry powder when they need it.