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When news of a second generation of Apple TV  (ATV2) made its debut, tech blogs were alive with the potential for what the set-top box could do. After only a few months, when Apple released the 4.1 software update, the tiny device really started to shine.

Now, users could stream videos, music and photos from their computer or iOS device using AirPlay. Then, Apple upped the ante with update 4.4, which allowed for AirPlay mirroring, which basically turned ATV2 into a gaming console. Now that official sales figures are in, it is no wonder Apple’s “hobby” sold 2.8 million units in 2011. But is that enough to push the company into the television industry?

Based on Apple’s CEO Tim Cook’s comment on yesterday’s quarterly earnings conference call, the company has been pleasantly surprised with how well ATV2 is doing. “The Apple TV product is doing very well, and during the last fiscal year that ended last September, we sold a bit above 2.8 million units,” Cook said. “In the past quarter, we sold over 1.4 million Apple TVs, which is a record. We continue to add things to it.”

Apple still calling the set-top box a hobby though. This begs the question of what is next for Apple’s leap into the television industry. Will ATV2’s ever-expanding arsenal of features become the new way to watch TV, or does the Cupertino-based company have a bigger piece of technology up its sleeve?

It is well known and well documented that Steve Jobs wanted to revolutionize the TV experience. He was famously quoted in Walter Isaacson’s biography “Steve Jobs” as saying, “I’ve finally cracked it,” but what he meant by that is up for debate. Jobs said he wanted television to be “seamlessly synced with all of your devices and with iCloud.” Isn’t that what ATV2 does now (sans iCloud)? The major feature that is missing from the device is the ability to watch live TV and current on-demand shows. How hard would it be to integrate that into ATV2?

Think about this. Apple TV2 already offers access to movies, music, television shows and photos through a computer’s iTunes and local Wi-Fi. It already features live and on-demand access to Major League Baseball and NBA games. The capability is already inside, it is just a matter of getting broadcast and cable networks to make agreements with Apple to allow their content to be watched on it.

Even if the current generation Apple TV could not provide content such as live and on-demand television watching, a third generation that adds those features could still sell for the same low sticker price of $99.

But, what if Steve Jobs had something entirely different in mind when he realized he had cracked it? What if the release of ATV2 was just a way for Apple to monitor how people consume content? By offering the entire iTunes ecosystem, plus AirPlay and mirroring to the device, the company could gather enough data to get a feel for what viewers want from their living room media center.

ATV2 may have just been a first step into the television market by offering a product that does what other companies were already doing with Roku and Boxee, for example. If Apple could come out on top with its set-top box, then the company would know that its consumers would be hungry for more television.

While Apple’s hobby isn’t the biggest seller on their floor- according to their first quarter results report, the company sold 37 million iPhones, 15 million iPads and 5 million Macs- but that doesn’t mean there isn’t a big future for the little guy. He just needs some attention.

The problem with ATV2 is content. Most of what can be watched on it requires payment either through subscription-based services like Netflix and NBA Live or individual download purchases through iTunes. There needs to be more free content, or at least a bigger selection of subscription-based content.

TV watchers don’t need much. They want to have a lot of choices and they want the option to watch what they want, when they want. The rumors of what Apple has in store for a future television set sound amazing, but doesn’t seem like it would satisfy the broader consumer industry. Sure, voice and movement recognition would be a fun feature on a television set, but most people wouldn’t care about that. It would be nice to be able to start watching a show on the TV and finish watching it on the iPad, but it wouldn’t be the tipping point for why a potential customer would choose an Apple television set over a Sony one.

If Apple wants to revolutionize the television industry, it should spend more time developing ways to make ATV2 (or a third generation version) the next big thing. The company’s set-top box already stands out as something special. Throwing their hat into the television set ring just seems like a waste of effort. Let the traditional electronics makers have the market on TV sets and focus on turning Apple TV into a convenient device that would allow streaming of movies, TV shows, games, photos and music (oh wait, it already does that), but add to it live television and cable network access, as well as more choices for subscription-based on-demand services. Now, that would turn Apple TV into more than just a hobby.

Via:Padgadget