Apple unveiled its latest iteration of Apple TV this week to much fanfare, however this current version of Apple TV may face a far more challenging market than its predecessors. Previous versions had difficulties gaining significant traction with the public, and according to Paul Erickson, Senior Analyst at IMS Research, the new and improved Apple TV may encounter a similar fate.

Apple has struggled with Apple TV’s appeal to consumers. The newest version debuted with a sub-$100 price, a smaller form factor, a move to streaming-only, and the addition of YouTube, Netflix, and Flickr access to what was primarily an iTunes-based device. According to Erickson, this might not be enough: “Today’s competitors are the devices that are already in, or going into consumer households – Blu-ray Disc players, game consoles, and connected TVs. These devices already integrate similar access to paid and free content. Of these, the most dangerous competitors are game consoles and BD players – both of which arguably trump Apple TV in terms of must-buy priority for consumers.” Erickson also cites the following potential disruptors to the Apple TV strategy:

• Domestically, pay-TV penetration is very high, and HD VOD and DVR services are well-adopted and already available from all major pay-TV providers.
• Netflix supports Playstation 3 (PS3), Xbox 360, and Wii, and Hulu will support PS3 and Xbox 360. BD players and connected TVs already typically offer access to a larger, more diverse mix of online media services like Netflix, Hulu, Vudu, YouTube, Pandora, Slacker, Picasa, and Flickr. These devices already reside in many households and continue to sell well.
• Playback of media on the home network is included in midrange BD players, PS3 and Xbox 360, and some connected TVs. The capability is expected in sub-$100 BD players and in mainstream-priced connected TVs by the holidays. Additionally, these products support more versatile video playback than Apple TV, with support for DivX, AVI, and DLNA-compatible devices. This may be significant given the mix of content and devices on a typical home network.

Erickson concludes, “Apple TV faces the strongest competitive environment for over-the-top video to date. As such, it does not seem to address a sufficient enough value gap in the market to entice people to buy it en masse, due to the near-similar functionality that is already integrated into the Blu-ray Disc players, game consoles, and connected TVs they’ve already bought or are buying today.”