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Apple aims to conquer living room with new Apple TV

(Reuters) – With a long-awaited update to its TV set-top box, Apple on Wednesday revealed a glimpse of its plans to conquer the living room, which analysts say the tech giant has neglected as its other gadgets deepen their hold on consumers.

At a San Francisco event in which it also rolled out new iPhones and a larger iPad, Apple gave Apple TV a makeover, complete with a full-fledged App Store, integration with Siri and a new touch-sensitive remote control.

But as it zeroes in on the living room, Apple will face fierce competition from firms such as Amazon and Roku, whose products offer many of the Apple TV’s features at lower price.

The new Apple set top boxes go on sale at the end of October starting at $149.

The iPhone maker has already changed TV viewing, making it easier to watch shows almost anywhere. But the living room remains a coveted destination for tech companies as the site where consumers end their days and gather with their families.

“The holy grail” is how Carolina Milanesi, chief of research and head of U.S. business at Kantar Worldpanel ComTech, a consumer research firm, described it.

Apple is rolling out Apple TV as investors call for the company to lessen its dependence on the iPhone, which drove nearly two-thirds of its sales in the most recent quarter.

Apple TV could become a significant source of profit for the company, analysts say, but revenue from programming and services will be key. Wednesday’s announcement did not include an Apple streaming TV service that bundles cable channels, which industry executives say the company is exploring.

Analyzing the 2012 model of Apple TV, technology research firm IHS estimated that the $99 gadget cost $66.15 to make, making its margins considerably lower than other Apple products. The new box has yet to be analyzed, but Apple’s business model is likely the same, said analyst Kevin Keller of IHS.

“It’s a content-driven model,” he said.

The new App Store opens what had been a mostly closed environment to thousands of developers, said Jason Krikorian, general partner at DCM Ventures and a co-founder of Sling Media, creator of the Slingbox streaming media device.

“If Hollywood’s brightest minds can be put toward delivering content on the many Apple-controlled screens in someone’s home, I think they can make new television viewing experiences,” he said.

Roku also boasts an open platform for developers. But with its loyal base of users, Apple has an edge, said analyst Jan Dawson of Jackdaw Research.

“The key will be helping developers get off the ground quickly,” he said, and then convincing consumers to buy the TV based on the apps available for it.

The new Apple TV tackles one of the most frustrating parts of modern TV viewing – finding what to watch. The Siri voice feature lets people search with simple commands such as “find movies with Jason Bateman,” based on a demonstration at Wednesday’s event.

But Apple is playing catch up in this area. Voice search is already available on the competing Roku and Amazon Fire TV streaming boxes and Comcast Corp’s X1 platform for pay TV subscribers.

And none is yet truly universal in searching all major types of TV content. Apple’s search will initially be limited to content on iTunes and apps from HBO, Showtime, Netflix and Hulu, said Eddy Cue, Apple’s senior vice president of Internet software and services.

The Apple TV will have a special focus on games, aiming to win over casual players as the iPhone has. Apple TV will run the same operating system as the iPad and iPhone, making it easy for developers to bring their games to the device.

But Apple will need more than quantity, said Barbara Kraus, an industry analyst at Parks Associates. “They are going to have to get games that have buzz,” she said.

And Apple TV’s greatest rival may be the traditional television set, which remains the dominant media platform, though usage of streaming devices such as set-top boxes and gaming consoles is on the rise among all age groups, according to Nielsen data.

Use is highest among the millennial generation of 18- to 34-year-olds. About 30 percent of millennials use a streaming device per quarter, Nielsen data show, and they use it for about 23 days on average for 2.5 hours per day.

Smart TV holdouts might find themselves entranced by Apple TV if they give the gadget a chance, Milanesi predicted.

“It draws you in,” she said.

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