Is an Apple TV the Next Big Innovation?

NEW YORK (TheStreet) -- Yesterday on TheStreet, I read Rocco Pendola's Apple Must Do a TV. In a nutshell -- or in his words, in the shell of a nut -- Pendola says that Apple (AAPL) would be more likely to succeed by focusing on a TV than the iWatch. 

I couldn't agree more. While I'm not against the iWatch -- because it is likely to account for some revenue -- it won't be the game-changer that investors want. 

It's really hard to introduce blockbuster product after blockbuster product. And growing revenues at a high rate for a company Apple's size isn't exactly a piece of cake either. Apple shares opened today at $530 even, down 5% year to date but up 17.8% over the past year.

I wholeheartedly agree that Apple could revolutionize the living room. But whether that's done solely with a physical TV is the real question. 

My biggest concern has to do with product turnover and the replacement cycle. Unlike smartphones, there's no need to upgrade to a new TV every couple of years. Once a consumer buys a TV, the product generally lasts a long time.

For example, I've had at least three or four different smartphones in the same time that I've had one TV. As Apple is known for its superior, high quality products, why would I need to replace an Apple TV five or 10 years after I buy one? 

Second, as television prices continue to sink, how will Apple be able to maintain its typical expensive prices? I don't know that Apple could. It would result in a direct hit to margins if the price of the company's TV set declined. 

Still, the living room has a lot of potential. It's not really being tapped by Netflix (NFLX), nor by Google (GOOG) with its Chromecast. Slingbox and Roku have made a few advances, as has the current Apple TV, but nothing that should be a considered a blockbuster revolution by any means. 

Nearly all of our devices -- smartphones, tablets, computers, MP3 players -- have advanced incredibly over the past decade. But with the exception of quality, the TV, and more broadly, the living room, has hardly changed at all in the last 20 years. 

Apple needs more than a TV set. Incorporating Siri, along with the iPhone and iPad as a remote would be nice. But there needs to be a way to turn the TV into something more. 

And I don't mean connecting to Netflix, Hulu or Amazon (AMZN) Prime video either. 

I imagine a sophisticated yet easy to use software product, not just a hardware product: a "Home Hub," rather than just a nice-looking TV. 

Smart homes are part of a new wave of innovation. As the younger generation moves into their own homes, they'll install smart home features. Technology continues to grow, and smart home features are just too convenient and provide too much comfort to be ignored. 

One public company that's focused on this up-and-coming trend is Control4 (CTRL). With a small $500 million market cap, Control4 could even be an acquisition target for Apple, which rarely spends much on M&A. But if Apple did acquire the company -- or built out its own similar platform -- it could create a "Home Hub" for all of a customer's needs. 

Turn off the lights. Lock the front door. Arm the security system. Turn on the outside flood lights. Adjust the thermostat. Argh -- I left and forgot to record my favorite shows. Well, now you could do that too. Other features, and far better ones, could be added over time. Apple's deep ecosystem could also allow for a large adoption rate. (Google appears to be going down this road too, with their recent purchase of Nest.)

Combined with iCloud, customers could sync more than just their iPhone, iPad and Mac together. They could sync their homes. Literally, everything in one place, on one screen. 

Apple's got to innovate. I'm not saying it has to be with home control. But it needs to do something besides a TV or a smart TV. The living room is such a wide open target for the next big thing to happen. It's one of the few areas or focal points that millions of people utilize on a daily basis, but has yet to have a true technological transformation in decades. 

And if we've learned anything in the past ten years about Apple, it's that the underdeveloped, untapped and very popular technology products that we use on an everyday basis are in its innovative crosshairs. 

In the words of CEO Tim Cook, the TV "continues to be an area of great interest." 

Let's hope so.

-- Written by Bret Kenwell in Petoskey, Mich.

At the time of publication, the author was long AAPL but held no positions in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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