The One Killer Feature Apple TV Needs Is Still Missing

Apple CEO Tim Cook (Photo: Marcio Jose Sanchez/AP)

As the new Apple TV video streamer debuts today, it is still missing the one key feature it needs to become a must-have device: TV programs and movies all its own.

The new version of Apple's not-quite-a-hobby-anymore looks to be a major improvement over the existing hockey puck. It has a new remote control with a touchpad that will make Apple TV good for gaming, as well as voice control using Siri and an app store so other developers of games, video apps, and more can offer additional reasons to buy the device.

But most important, according to various reports, one most recently in Variety, Apple is currently exploring anew how it might boost Apple TV's prospects by entering the growing fray in original video programming. Earlier, there were persistent reports that Apple would offer a Internet-based bundle of existing TV programming. But it's believed that rights issues and a reluctance by programmers and networks to endanger their cash cows have stalled that service. "Original programming is the only solution to Apple's biggest problem in the video world--that is, that nobody wants to sell Apple content rights," says Forrester analyst James McQuivey.

Either way, it's clear that Apple has designs on its own bundle of programming, especially programming no one else has, to drive more interest in all its devices. And now Apple TV may loom more important in that effort than it has so far. A stronger Apple move into television and online video is long overdue, but instead of the television set many people had expected for years, it appears that for now Apple TV is the horse the company plans to continue riding.

The challenge for Apple is that its rivals have galloped ahead of Apple TV, which hasn't changed much in three years. Roku already offers voice control, for instance.  Microsoft's Xbox, which can stream video services, is already a long-established gaming console, of course. Amazon offers some original programming, though it's not clear how much that's driving sales of its FireTV streaming stick and Amazon is likely more interested in driving more people to buy its $99 Prime shopping membership that offers its shows free.

In any case, Apple TV is falling behind in more than just features. Recent data shows Apple TV falling to fourth in sales behind Roku as well as Google's Chromecast and Amazon's FireTV, though that's in part because of those devices' lower prices. Apple overall has sold the most--25 million according to Apple CEO Tim Cook--with Roku a likely No. 2 at 10 million sold. (Amazon and Google don't disclose sales figures.)

Given Apple TV's solid but unspectacular base, original programming would offer the last piece that help recharge it into the home hub that Apple appears to want it to become. And the appeal of marquee programming you can't get anywhere else is growing. Some 38% of U.S. Netflix subscribers today, for instance, say at least half of what they watch on the service is original to Netflix, such as House of Cards and Orange Is The New Black. That's up from 24% in early 2014, according to data from RBC Capital Markets.

Another reason for the original programming imperative is a surprising shift by young video viewers back to the television set. Some studies indicate a steady migration away from the TV to mobile devices such as smartphones and tablets, though it remains the single most-watched device among all age groups. But according to a new study by Adobe, which tracks video viewing online, younger viewers are moving back to the TV, thanks to devices such as Apple TV, which saw a 10% rise in users in the second quarter from previous three months. At least among those Gen Z viewers, says Tamara Gaffney, principal analyst for the Adobe Digital Index, "viewing is strongly going away from iPads to connected TV devices" such as Apple TV.

Apple clearly hopes for a broader appeal for Apple TV, and original programming would be a big part of that. But any deals to buy it and certainly any effort to take an active hand in creating it are unlikely to happen soon. Reports indicate that while Apple is hiring executives to staff the operation, it would take at least until early next year to get underway. And as Netflix and Amazon learned, it takes years to get shows produced, let alone produce hits.

Even if the prospects for Apple original programming are remote for now, it may be able to do the next best thing until it can go original: Give people a way to find any content they want wherever it resides. C'mon, it's 2015, and we're still thumbing in searches for shows letter by letter on the remote? Yes, we are.

That's why the rumor that Apple will introduce a new system for finding video wherever it resides is promising, both for viewers and for Apple. The company reportedly will offer the ability to search across both iTunes and other video streaming services to find the shows you're looking for, and to do so via voice using Siri.

What's more, an Apple TV app store could provide a temporary workaround for the lack of content deals. HBO, CBS, and others have shown they're willing to allow people to view their content, for a price. Some might even break ranks to offer free access to some shows to make sure they have a presence on an Apple product. The more sources are available on Apple TV through a growing number of apps, the more indispensable it will look to consumers on the fence.

Still, original programming remains the key piece. And it's not yet clear Apple, a leader in hardware and software design but not a leader in the creation of entertainment itself, can pull it off. "Can Apple play the game? Absolutely," says online TV veteran and serial entrepreneur Jeremy Toeman, a former Sling Media exec who's currently vice president of products at CNET. "Is it in their DNA? Don't know."

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