Rumours that Apple is working on a smart television with a view to taking over the living room are dying down in favour of claim that the company is just working on improving the existing Apple TV set-top box, with better software and deals with broadcasters. But now a report has appeared suggesting that even the Apple TV, for so many years descried by Apple as a hobby, is a dead end.

While the market for set-top boxes is a growing one, according to IHS ISuppli sales of set-top boxes rose 39 percent last year to 8.6 million units globally, that is still a small number of units, notes a Bloomberg report.

The report points to Apple’s 32 million iPad sales in 2011, compared to its 2.8 million Apple TV sales. These devices have been around for some time now but are yet to really take off.

IHS iSuppli analyst Jordan Selburn said: “The question is, ‘Is the time ever going to come?’ And I don’t know if the answer is ever going to be yes.”

The problem appears to be lack of content. CEO of Boxee Avner Ronen told Bloomberg: “It doesn’t matter how beautiful you make the device or user experience if you can’t get access to the thing you want to watch just now. The devices are not able to be competitive at this stage.”

However, reports have claimed that the new Apple TV set-top box Apple is working will offer expanded functionality and programming when compared to the current Apple TV and its competition. Crucially, Apple is said to have been speaking with US cable operators about the possibility of allowing consumers to use an Apple device with set-top-box functionality to watch live television and access other content.

If this is true, analyst Ben Reitzen, who recently suggested that Apple won’t make a television set, rather it will “crack” the television market with its long-term hobby, the Apple TV set-top box, may be correct.

Another reason why the Apple TV set-top box may see success is if Apple continues to sell it for £99 ($99). The cheapest Slingbox costs about $130, while a TiVo DVR will set you back at least $150. If Apple can beat those prices, it just might have a hit on its hands.

That said, with a low price of £99 ($99) the profit margin is among the thinnest of anything Apple makes, and consumers don’t appear willing to pay any more, notes IHS ISuppli analyst Selburn.

Even Google, who unveiled the Nexus Q set-top box earlier this summer, has now delayed it indefinitely, notes Bloomberg, although Google does still ship the Google TV.

Another reason for the lack of popularity of set-top boxes is that more and more smart TVs have the functionality built in. So why buy a separate box. Which brings us back to the idea of an Apple Smart Television.

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