Apple

Last year, there was talk that Apple was testing Level 3’s content delivery network and was looking at the CDN to deliver some of their software downloads. Based on traceroute info over the past few weeks, it’s clear that Level 3 has in fact won a contract with Apple to deliver some of their software downloads, including a share of iOS 6 and iTunes updates and installers, in the U.S. and Europe. I don’t know the size of this contract from a revenue standpoint, but I know it’s not nearly as big as the contract Akamai has with Apple and all of the content I have traced from the iTunes store still comes from Akamai, which they appear to still have an exclusive on.

That said, it’s now clear that Apple is looking at a dual-vendor approach to their CDN initiatives and is looking to rely on more than just one content delivery network to get their software updates to consumer devices. iOS 6 and iTunes software updates are now coming from both Akamai and Level 3 and I hear that Apple is looking at using more dual-vendor approaches to their content delivery in the future, as Apple changes code in their software to better utilize a multi-CDN environment.

Level 3 had “no comment” for me when I reached out to them for more details, which I would expect considering Apple is very protective of how they do things on the backend and requires third-party vendors not to talk about what services they provide to them.

Four days ago I bought one of the new 21″ Apple iMac’s in the store and when I tried to purchase another today, they were all sold out. None of the Apple stores around me have them in stock and each store said they did not know exactly when they would get them back in, with one employee saying it would be “at least a few weeks”. My local Apple store said they didn’t get very many in to begin with and while they didn’t give me an exact number they did say they received “less than 50”.

Trying to buy one via Apple.com and the wait is 10 business days before it ships. When I called Apple, they said it takes 7 business days to be delivered after it ships. So if it takes a total of 17 business days to get delivered, the delivery date would be December 27th. And that’s if they ship on time, which the person I spoke to at Apple saying that was a “best case scenario”. Trying to get one of the new iPad mini’s is no better with the shipping time being 14 business days. So that puts the iPad mini delivery date at January 2nd. And if you want the new 27″ iMac, realistically that’s not going to get delivered until the end of January.

I know Apple has acknowledged that they are having some supply chain problems, but one had to imagine this is really going to impact their sales during the holidays. No one wants to get someone a gift that won’t show up until weeks after the holiday.

Apple’s live webcast of the launch of their new iPad mini was a failure today after multiple users, including myself, had problems getting the stream to start or staying connected to the stream once it began. I tried the stream in the Safari browser at 1pm ET and got the spinning wheel with the player trying to load, but it took till 1:14pm for the stream to work. Once it did load, it worked for a few minutes before I lost all audio. When the audio came back, the video looked bad with lots of pixelation and twice the video re-wound and went back to a point in the stream it had already played. At 1:26pm, the stream died for me completely and I could not get it back.

Akamai was delivering the live stream for Apple and clearly had problems. While I hear from customers all the time that Akamai’s HLS delivery is often not reliable, I’ve now experienced it for myself. While I only tested it on Safari, other viewers I was live chatting with during the event also experienced problems on the iPhones and Apple TV. Looking at Akamai’s chart at 1:43pm ET that shows the number of real-time connections to their network for live and on-demand videos showed 943,000 concurrent live video streams, for all of their customers combined. And their 24-hour peak was 1.3M. So either Akamai was not counting Apple’s live stream numbers in their chart, or it shows just how few people were able to get the live stream as Apple’s webcast alone should be in the multiple millions of concurrent connections.

As an industry, we’ve been streaming live events since 1996. This technology has been around for 16 years now and there is no excuse whatsoever for a live webcast not to work. Yet this is the same technology that Akamai and others keep talking about that is supposed to rival broadcast TV in terms of quality and reach? I don’t think so.

I am amazed at what passes for so called “research” these days. This morning, Quixel Research (who?) put out a press release saying that based on a nationwide survey of 1,169 current and potential flat-screen TV owners, Apple’s “highly anticipated Apple connected television platform (iTV) is likely to have a significant and disruptive impact on the consumer electronics and entertainment landscape once it’s introduced.” The reason for their logic? According to their survey, “80% of all current flat-panel TV owners also indicated they would be either extremely, very or somewhat interested in purchasing one of the new Apple televisions.”

Of course what Quixel Research isn’t willing to say is what people are actually willing to pay for an Apple connected TV or how many would be sold. Simply collecting data that shows people are interested in something is completely useless without pricing data. I could survey people all day long asking them if they would like a new car and what features they want it in, but that does not tell me what they would be willing to pay for it and if they would actually spend the money to buy it. Presenting findings without those data points makes all the other results pointless.

In an email exchange with Quixel Research the company did tell me that they had data on pricing, but they are “not able to release specifics on pricing deltas.” Of course they won’t, because that data would show customers are not willing to pay enough for such a device, in any large quantity, (something we saw in this survey) which would make Quixel Research’s data pointless. But that doesn’t stop Quixel Research in their release from making grand statements that such a device from Apple would, “have a dramatic impact on entertainment landscape,” and would, “disrupt the home entertainment industry“. What they classify as “disruption” is anyone’s guess as without even speculating on how many devices Apple could sell or what people would be willing to pay for them, it’s simply lots of buzz words in a press release.

All of this so-called research is simply useless drivel and a ploy by Quixel Research to get their name in the press. Before this release, the company had not been mentioned by anyone in the media since 2009, based on a search in Google News. It seems a week can’t go by without another research firm putting out some sort of broad press release about an all-in-one Apple TV device, simply to try and get their name in the media. Quixel Research won’t be the last company that tries to capitalize on using Apple’s name for their own cause, but it won’t work, we can see right through these ploys.

If you had to pick one person that is the most outspoken advocate of Apple’s (APPL) still non-existent all-in-one Apple TV, it would have to be Piper Jaffray Wall Street analyst Gene Munster. For more than three years now, Gene’s been very vocal in predicting that Apple is getting ready to release an Apple TV set. The moment he says anything about the device, many people in the media make it into their lead story, even though to date, he’s yet to be right about any of his Apple TV predictions. While I don’t know Gene personally, and for all I know he’s one of the nicest guys in the world, I don’t understand why anyone listens to him when he’s been predicting the same thing, year after year, with no results to show for it.

When he predicted in June that Apple could sell 11M TV sets in the next 3-5 years, the media was all over it. Why? What credibility does he have? Anyone can predict something for many years and eventually might be right, but does that really matter? What info is Gene Munster putting out today that’s usable? I never went to college, I have no journalism courses or even writing classes under my belt and I don’t know what they teach journalists these days. But writers should be more focused on what is taking place today, not what might, could, or should happen 3-5 years from now because in nearly every case, what is predicted never comes true. I see more articles talking about Apple TV, a product that does not exist, as opposed to a device, like the Xbox 360, that actually has a real footprint, real user base and real revenue being generated.

In a previous note, Gene said that the size of the 2013 connected TV market is 110M units. I don’t know where that number comes from but even if we all agreed that’s the correct number to use, that 110M number refers to the global size of the market, not the U.S. market. And as we all know, if Apple were to start selling an all-in-one TV, it would not start off by offering it globally. So the 110M number simply isn’t a realistic size of the market that Apple would be entering. Adding some real data to my argument, Vizio, who is one of the best-selling TV manufactures in the market recently told me that they are forecasting to sell a total of 1.2M connected TVs this year.

Gene’s latest data about a product that does not exist comes to use last week where he surveyed 200 consumers in the Minneapolis St. Paul area and asked them what they would pay for an all-in-one Apple TV. Before you get too excited as to their answers, as the Fortune article points out, Gene says the data he’s collected from these 200 consumers is representative of a population of 300M consumers with 95% confidence. That’s absurd. The findings from a sample size of 200 consumers is supposed to represent the kind of data that would be collected if 300M consumers were interviewed? To put that in perspective, those 200 consumers equals 0.00006666666666666667% of the overall market. But the bigger point is that the data he collected shows people would not pay $1,500 for an Apple TV. When asked how much they’d be willing to pay, the average response from the consumers was $530, for a product that Gene is predicting Apple would sell for $1,500. So his own data collection doesn’t match the estimates and guidance he is giving out.

But according to Gene, if Apple was to capture only between 5-10% of his predicted 2013 connected TV market of 110 million units, it would be a big deal for Apple. On the low-end of that prediction, 5% of 110M is 5.5M units. So Gene is predicting that Apple would sell 4x the number of connected TVs that Vizio expects to sell this year, even though his own survey showed that on average people want to spend $530 for the device? None of this makes any sense. Any connected TV by Apple would easily be much more expensive than a Vizio model. Keep in mind as well, this is all taking place at a time when research firm NPD Display Search says total TV sales worldwide will only grow 2% this year and that global TV unit shipments rose only 0.1% in 2011. The price of an average 42″ smart TV, is between $500-$600 and we all know Apple’s TV wouldn’t be anything close to that price.

Last year, Gene predicted that a standalone all-in-one Apple TV would be available in 2011. In June of this year, he said it would come out in 2012, but then said we should expect it to actually ship somewhere around the first half of 2013. If an all-in-one Apple TV actually ships in 2013, that will be a full five years since Gene has been telling us all that an Apple TV was on the way. This of course is the same all-in-one Apple TV that Gene says must ship with Siri to be successful, a product he gave a D grade to only two months ago when he reviewed Siri’s functionality. In 2009 Gene predicted that Apple would sell 6.6M of the $99 Apple TV set-top boxes that year when in reality, three years later, Apple was barely selling even 3M units. In 2010, Gene said Apple would sell 20-25M iPads in 2011, and they sold 40M. He predicted Apple would sell 4.3M iPads in 2010, they sold 7.3M in one quarter. In 2007 Gene said that within two years, Apple would ship 45M phones a year. In reality, Apple shipped 25M. It’s no wonder that in 2010, on the Apple 2.0 blog, which tracks the best and worst Apple analysts, Gene was ranked 23rd out of a total of 32 analysts. But his poor track record doesn’t seem to stop the media who for some reason, continues to interview him and ask him to give his opinion on Apple products. As far as I am concerned, what Gene is doing isn’t what I would call predicting, he’s simply guessing. And so far, he’s pretty bad at it.

I get that some people are excited about an all-in-one Apple TV unit and if you are a money guy on Wall Street, like Gene is, you’re even more excited about it as you spend most of your time trying to figure out how many units of a new product a company can sell and how you can pump a stock. But we have enough real data in the market today to know what smart TVs cost, how many units are actually being sold, what the growth of the market is and what consumers are willing to pay for these devices. Even with that info available for everyone to see, some of these predictions that Wall Street guys like Gene puts out, are simply irrational and fuel expectations on Wall Street that simply can’t be met. And when wrong expectations get set, we know the outcome from that is never good – for the industry, or investors.