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The hardware

Acording to Engadget's sources, the new Apple TV will be based on the same A4 processor currently used in the iPad and expected to appear in the next iPhone. It's also said to be 1080p capable, which is certainly possible if Apple includes a PowerVR VXD core or uses some other video decoding chip. And, since the hardware would essentially be a variation of the iPhone/iPad hardware, it makes sense that Apple would use the iPhone OS—already stripped down and optimized for media playback on ARM hardware—in place of the current Mac OS X variant running a version of Apple's Front Row software.

The hardware is also said to be very slim, bearing only a power in and video-out port. (Our guess is it would have more than this, but given the recent proliferation of HDTVs, Apple could possibly get away with just an HDMI port.) This is certainly feasible if the hardware is based on the tiny logic boards used in the iPad or iPhone, but it also helps that Apple apparently plans to ditch the internal hard drive storage for enough flash—about 16GB—to buffer a couple movies or several TV shows.

If you cut out the battery and display from an iPad and package it in a tiny casing, the rumored $99 pricing seems doable. Essentially cutting the cost of an Apple TV in half, it's a good bet that Apple could sell a lot more of them.

Ditching the internal storage and moving to solely streaming sources would certainly dash the hopes of those that want Apple to add DVR functionality to the Apple TV. However, that may not matter as much if all the shows and movies you watch are either on a computer on your network or in the cloud.

Engadget's sources don't explicitly state this, but it seems likely that a revised Apple TV would still stream media from a local Mac—there's no good reason for Apple to eliminate this integration. Inexplicably, the sources do claim that a Time Capsule could be used for media storage, though a Time Capsule wouldn't make for the best media NAS on the planet.

Streaming only

The suggestion is that a revised Apple TV would also stream content from the cloud. This ties in with a number of rumors that Apple plans to launch a streaming media service connected to iTunes. Such a cloud service, serving as a companion to directly downloading media to your computer from the iTunes Store, would conceivably allow streaming any media you paid for to any Web browser or any convenient device, such as an iPhone, iPod touch, iPad, or yes, an Apple TV.

A recently revealed Apple patent suggests Apple has put some thought into how a streaming media service might work, describing features like clicking on a button while watching a trailer to watch a movie, or pausing a video on one device and picking back up from that same spot on another. Kaufman Bros analyst Shaw Wu is predicting that Apple might be ready to show off a streaming service dubbed "iTunes.com," at WWDC in a couple weeks. The time is certainly ripe for Apple to move in this direction.

There are some problems with this scenario, however. Apple is building a huge data center in North Carolina; little is known about what Apple plans to use it for, but its massive size certainly suggests that it could power a streaming media service. Still, relying on just one massive data center also represents a single point of failure if something were to happen—cables get cut, power goes out, etc.

Furthermore, Apple hasn't been nearly as successful with its own forays into cloud services as its newest nemesis, Google, has been. The launch of MobileMe suffered serious problems with connectivity and a potential for data loss, though it seems those have been overcome. Apple's only other major cloud service, iWork.com, is still in beta and offers nowhere near the kinds of capabilities that Google Docs does. Apple's acquisition of Lala may have put some more knowledgeable engineers that have run a successful cloud service on Apple's payroll, but we're not yet persuaded Apple is ready to become a major player in this space.

For the sake of argument, however, let's say that that Apple can launch a successful cloud-based version of iTunes with the NC data center combined with a content delivery network partnership like Apple already has with Akamai and Limelight and the cloud know-how of former Lala engineers. If the Apple TV merely switches to streaming iTunes content directly to the device from the cloud, it wouldn't address one of the major complaints that most Apple TV users have, which is access to additional sources of content outside the iTunes Store.

One of the big reasons I have personally stuck with my Roku streaming player instead of opting for an Apple TV is that I can stream a rather large library of TV and movie titles from Netflix. Most of what I can't get from Netflix, I can buy from Amazon Video on Demand. When neither of those options work, I can always watch something on Hulu (though it would be even better if I could do that directly on my Roku box—are you paying attention, Hulu?).

With affordable, multisource devices like Roku and now GoogleTV to compete with, Apple needs to get serious about enabling more content sources for its set-top box. With an iPad/iPhone-based architecture, services like Netflix or ABC could build plug-ins to access content based on the successful iPad apps already available in the App Store. Such a move might mean lower sales for the iTunes Store from current Apple TV users, but Apple has always suggested that the iTunes Store helps sell hardware, not the other way around. And having more sources for more content will absolutely move more Apple TV hardware.

So, if Apple makes slimmer, iPad or iPhone-based Apple TV hardware? That sounds good. And sells it for a sensible $99 price? That definitely sweetens the deal. Continues to limit it to iTunes Store content only? We'll pass.

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