You may have heard that Apple announced a new Apple TV box this past week. Apple TV has been around for a few years but the previous model didn't do so well in terms of sales so many people predicted that this new model would eventually appear. The main differences between the old and the new one comes down to size and general approach to the experience. The old box was big whereas this one is very small. The old box had a hard drive whereas the new Apple TV does not. There have been a lot of questions about what this new approach means for content and the possibilities for cutting the cord with cable. Of course I have my own opinions.

First of all I think that the move towards a box without a hard drive recognizes the challenges related to local storage on these boxes. A local hard drive basically means that the box is a mini-computer with all of the power and processor needs of a mini-computer. The previous Apple TV was considered to be under-powered and thus it did not perform well. By removing the hard drive and adding a new processing chip Apple is leaving the heavy lifting to their servers or your home computer. It's an approach that makes sense because it allows you to get more out of your existing technology while also saving you money. You see the new Apple TV box only costs $99. The old Apple TV with all the bells and whistles cost $250. I think that Apple is right to think that if you're going to add this type of box to your television you probably have the computing power on other boxes to stream content to the new Apple TV.

Unlike the old box the new box is connected to Netflix which means that you have access to the Netflix streaming video library. This is Apple taking a pragmatic approach to this product. The fact is that if you want to sell a TV connected box it better have Netflix as an option. Without Netflix you're done. So this is another win for Netflix, but it also doesn't hurt Apple other video streaming option which is iTunes. Why not? The Netflix streaming catalog is severely limited and while there is a lot of good content on there you won't find a lot of new content. On the other hand iTunes has first run videos to rent or buy even before Netflix has the DVDs available. So Netflix and iTunes are complimentary, not competing with each other. Apple knows that content access is key and with the Netflix/iTunes combo they have a strong proposition. They have made the proposition even stronger by offering ninety-nine cent "HD" video rentals from ABC and Fox. Here's where the real future potential exists. If they can convince other TV networks to join this rental scheme then it could change the economics of TV in a way that the cable companies will not like. That's a big "if" though because the cable companies have their own plans.

The final aspect of this new Apple TV that really means something involves what Apple is now calling AirPlay. This creates real synergy with the iPhone, iPod Touch and iPad. It allows you to beam content from those devices to your television via Apple TV at the tap of a button. That is a big deal and it is meant to make this box a must have for people who have one or more of those other iOS devices. It makes the new Apple TV the cherry on top if you will. And a lot of people have iOS devices now. So once that functionality goes live (sometime in November 2010)  the whole package makes a lot more sense.

So I think that this box is not about trying to create a knockout standalone device. The new Apple TV is about closing the loop on an ecosystem that places Apple devices in every aspect of your life and every room of your house. It's more important for Apple to find a place in your living room via this low cost, low profile device than to sell you a complicated box that does it all. Apple has that advantage over the other internet connected set top box makers. 

While I think that Apple is making yet another smart move with this new Apple TV I do think that there are worthy competitors out there. I'm the owner of a WD TV Live Plus HD box and I have to say that I am very happy with it. It does just about everything the Apple TV box does except integrate with iOS devices or offer iTunes access. Apple TV does have built in wi-fi which the WD TV box doesn't but that can be added to the WD TV box with a $30 USB wi-fi adapter. I'm surprised that other websites have ignored a comparison between the WD TV product and the Apple TV. Instead they have focused on comparisons with the Roku and Boxee boxes. Unlike the Roku or Apple TV the WD TV box allows local storage to be connected via a USB port. Unlike the Boxee box, the WD TV box is actually for sale! Oh and Google has their own play in this space via the forthcoming Logitech Revue which is powered by Google TV software.

As you can see this is a very competitive space right now. I haven't even discussed the fact that Samsung and Sony among others are building applications right into HD television sets. As competitive as it is Apple is the only company that will soon have real synergy across the many devices that people all ready have. That's why I think their strategy will probably be the one that wins out in the end.