Apple released a major update to its little loved (by Apple that is) Apple TV this morning, and despite some nifty new features, it still doesn’t offer nearly as much as it should.

Apple TV 3.0 includes a massively redesigned main menu that offers a vertical menu with subsections below it. Oddly the change only applies to the main menu, but you can’t have everything. The update also offers Genius mixes for the box, and on a positive note (and something I’ve wanted since I purchased mine) internet streaming radio. Support is also included for Apple’s new iTunes Extra album…..yawn….format….yawn.

The update was free and quick on my 40gb nearly two year old Apple TV over a 24mbps ADSL 2+ connection in Australia, although naturally it killed the Boxee hack. It’s hard to qualify with solid numbers, but play for streaming content appears to be noticeably quicker as well.

A quick hands on video with Apple TV 3.0 as follows; did intend to do a longer video, however as is typical someone came to the front door as I was filming it. Video via an iPhone 3GS, although the YouTube quality isn’t great. I’ll try uploading it again, so apologies in advance.

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We last wrote about Boxee in August after I had seen them demo at Gnomedex. It was, and still is a beautiful product with a great use case, but my query today remains as it did back then: I just don’t see a solid business model, least not yet.

The key though is getting Boxee licensed onto set top boxes, despite the fact that the platform is currently offered for free and is open source. The $4 million is to do exactly that, and we can only presume that there will be value adding on top of what is being offered now, and that’s where the money will come in.

Boxee is still in private beta, so you’ll need to put your name down and wait for an invite. You can even use a hack to install it on an Apple TV which I did…only to find 3 days later that the Apple TV auto-updated and wiped the hack. I must get around to reinstalling it.

Here’s their presentation from Gnomedex:

(via VentureBeat)

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We’ve speculated previously what the next generation of Apple TV needs, and top of that list was a DVD/ Bluray player to make the box more appealing. I made the following observation as to why the Apple TV needed to do more:

With most TV manufacturers launching internet enabled TV sets in 2009, the use case for the Apple TV diminishes, after all, why buy a box from Apple when your TV will offer many of the same features built in.

I’d presumed that the problem of Internet enabled televisions (see our full post on the rapid coming of Internet enabled television here) meant that Apple needed to more with the Apple TV box. The problem in that mix though was always going to be Apple’s preference for digital content delivery over support for physical mediums; offering DVD support means customers have a choice other than the iTunes store. But what if the solution to the coming of Internet enabled televisions isn’t an improved Apple TV box, but an actual Apple manufactured HD LCD Television with the functionality of the Apple TV box built in as standard?

New market, new player

Apple entering the television space may seem a little far fetched, after all, it’s a market place with many existing competitors, entrenched brands, and often savage price cutting. Lets swap television with mobile phone, and it’s the same argument we heard prior to the iPhone being launched.

Apple has proven that it can enter new markets and take significant marketshare with the iPhone, and they can do the same here.

Unlike mobile phones though, internet enabled televisions are a new market within a market. There are no established internet enabled televisions on the market today, and Sony, Samsung, Panasonic and Phillips are all slated to launch their sets in 2009.

Clear and present danger

The entry of most of the top television makers into the internet television space presents a clear and present danger to Apple. We don’t know all the details of who will offer what (or how open the sets will be), but we do know that some manufacturers are doing content deals that will see services offered exclusively instead of others. Every internet enabled television sold that offers premium content from stores other than iTunes is a threat to Apple’s leadership position in the future. The market for the Apple TV box will dry up as people buy internet enabled television sets, and don’t need Apple to buy or rent movies from their lounge rooms.

The market today for premium digital content (outside of music) may be small, but once you overcome the delivery issue through internet enabled televisions, the market will boom. It will be the last stake in the death of broadcast television, but who will benefit from this?

Apple wants to maintain its leadership in premium digital content delivery where ever people are in the home. If Apple is not in the lounge room, it doesn’t get its share of the boom to come. Worse still, if a competitor such as Amazon is offered by other players, those customers may not only end up renting movies from Amazon, they become Amazon digital content customers and there may well be a switch away from the iTunes store for music as well…and the flow on affects could also deliver a hit to Apple’s iPod/ iPhone franchise.

Apple needs to be in the lounge room, and the Apple TV box can’t compete against internet enabled television sets. The only way to tackle this risk is for Apple to offer its own range of televisions, tied into the existing Apple content and product ecosystem. Naturally they also need to be better than the competition, but this is one part of the mix Apple is good at.

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The two major changes are support for MobileMe, the dotMac replacement, and support for the iPhone 3G remote application. It was with the latter that I discovered the update, as I tried in vain to find the menu option on the earlier software. Also included in the release is a range of security upgrades.

The iPhone remote application is worth the upgrade alone. Gone is the need to use Apple’s minimalist remote control, and replacing it is a full color touch sensitive remote that would put a Logitec all-in-one unit to shame (although of course it won’t work my TV). For Apple TV fans, bliss.

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CEO Glenn Britt tells Reuters his company is building a new wireless cable modem that’ll let customers hook their whole homes up to the net. He describes it as equipment that will “allow you to network everything in your house.”

“Within a relatively short time … it’s going to be very easy to get Internet TV on your big screen TV,” he explained to Reuters at a conference in New York today.

Britt didn’t elaborate as to exactly how the network would work or when it’d be launched.

Time Warner Cable won’t be the first company trying to bring the net to the tube. Netflix released its Roku Netflix Player earlier this month. The box lets you watch video content from Netflix on your television via a Wi-Fi or cable connection. Apple has a similar service with its Apple TV, letting you rent movies and stream other online content through your TV.

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