Morgan Stanley analyst Katy Huberty reports that Cupertino is developing a "Smart TV prototype" that could provide Apple with an opportunity to meld TV and video programming, gaming, DVR functionality, and even iPhone/iPad-style apps and FaceTime video chat into a single product.
As reported by Apple Insider, Huberty told investors in a Friday note that Morgan Stanley's "checks in Asia" hint that Apple is working on a new entertainment device that might dwarf the capabilities of its Apple TV media streamer, which is already selling well.
Introduced in October 2010, the second-generation Apple TV routes iTunes, Netflix, and other Internet-based content to the living room. The tiny device has proven more popular than its larger and pricier predecessor. By late December 2010, Apple had already sold one million units.
Old Rumor, New Spin
Huberty isn't the first analyst to suggest that an Apple-branded television is in the works. Way back in August 2009, Piper Jaffray analyst Gene Munster predicted that Cupertino would enter the TV market by 2011, according to Fortune's Philip Elmer-DeWitt. Munster later modified his prediction, stating that an Apple HDTV set would arrive as early as 2012.
Indeed, an Apple-branded TV makes sense. Video-streaming services--Netflix in particular--have become hugely popular with consumers. And excluding iTunes movie and TV show rentals, the living room represents a largely untapped market for Apple's well-stocked online store, the App Store in particular. FaceTime, of course, would be a natural for an Apple-branded set with an integrated HD camera.
Another possibility is that Apple's rumored Smart TV won't be an actual television, but rather a standalone device that connects to your HDTV--sort of an Apple TV on steroids. When you consider that millions of consumers have already upgraded to big-screen HD sets, the later approach has its merits.